Cat events and economic challenges key LatAm themes
The recent increased intensity of cat events, mainly due to the effect of the El Niño phenomenon, is one of the major challenges facing the Latin American markets, says Cristian Velasco, general manager of THB Chile Re.
Other challenges include falling commodity prices and low levels of investment in mining, infrastructure and real estate, which will continue to affect engineering and construction insurance.
“In addition, political issues have caused a strong depreciation on our currencies, starting from Brazil and Chile, two of the most relevant economies for our industries in Latin America,” he said.
Another important factor is the fact that capital surplus worldwide has led rates to drop, leading to a much softer domestic market, especially with the recent arrival of new Miami-based players, he said.
“Reinsurers also have to deal with constant changes to the local legal requirements of each country, and compliance issues specific to each country,” he added.
Other important factors include the fact that the economies in Latin America have been weak since 2014, starting with Brazil, Argentina and Venezuela, and there is some uncertainty surrounding political issues there, including presidential elections in Argentina and Venezuela this year, and also regulatory/tax changes in Chile and some other countries.
“Popularity levels for presidents in Brazil, Argentina, Venezuela, Ecuador, Peru and Chile are in the 20 to 25 percent region. This situation obviously limits the interest of foreign investment in these countries, hence reducing insurance buying and premium levels,” Velascosaid.
He sees new trends such as financial lines, especially D&O, E&O and Cyber, as presenting major opportunities, as does the demand for higher limits in liability policies, especially environmental liability insurance.
He noted that there is a trend towards stock-throughput policies instead of standard property stocks policies.
“We can also see growth potential in property and, despite the economical constrictions, construction/engineering insurance for cat zones such as in Chile, where earthquakes have been active lately,” he added.
He expects the hot topics at FIDES to include new trends in the insurance industry such as cyber, bancassurance and cat solutions; new cat modelling; and responses to recent earthquakes and flood events. Climate change will also be a hot topic.
Over the coming year, THB’s plans will focus on enhancing and strengthening its global network, he said.
“We will also strengthen our regional Latin American operations to better serve our clients,” he added. “Today we have a presence in Chile, Argentina, Peru, Ecuador, Brazil, Colombia and Mexico. We will grow inorganically in those countries, and in the future we will offer both retail and reinsurance operations.
“We expect the market will concentrate on multinational players or big regional companies,” he added, anticipating a continuing trend for mergers and acquisitions creating space for newcomers to enter.
