27 October 2015 News

Claims consciousness accelerating in Latin America

Emerging liability requirements as a result of international investors’ involvement in many of the large Latin American businesses is accelerating claims consciousness in the region, says John Blake, managing partner of Hemispheric Reinsurance Group.

“We feel that our innovative liability underwriting strategies as a Lloyd’s Coverholder will allow us to take advantage of the opportunities which are arising there,” he said. “It is in this area that we feel the largest growth potential lies. We fully expect to take advantage of this, and our development of liability-based programme business will enhance this.”

Blake divides the challenges facing reinsurers in Latin America into three key areas: first, they face restrictions on payment, particularly Argentina and Venezuela, but this is also spreading to many of the socialist-minded countries.

A second challenge is coinsurance providing terms that are technically unfounded, which international reinsurers and reinsurance brokers cannot compete with, said Blake. Third, they have to contend with rapidly changing exchange rates.

In the face of these challenges, Hemispheric is endeavouring to provide more imaginative strategies and placement initiatives to offer more competitive structured placements, which can be more competitive with the local reinsurance markets.

“We are also actively developing new types of programmes which are exclusive to us and our clients, and all our placements are made in US dollars at the exchange rates which are existent at the time premium payment is made and at the times where claims payments are made,” he said.

“Our new underwriting facilities as a Lloyd’s Coverholder allow us to be more imaginative in our approach towards underwriting a client’s interests.

“New innovative programmes, creative underwriting practices and exceptional brokerage services will be key to our growth in the Latin American, Spanish and Portuguese markets. We will look to increase our binding authorities to add additional lines to our offering, and we hope to position ourselves as one of the ‘go-to’ boutique brokers/MGU’s operating in the Latin American markets.”

Blakeexpects that the market will continue to improve in Latin America but he expects to see softness in the overall reinsurance market for at least 12 to 18 months. He added that Hemispheric hopes to take advantage of this to build up its underwriting platform during that period in order to be a viable underwriting facility for the market when hardening commences, and going forward for many years.

“We think general liability products will continue to surge over the foreseeable future as foreign investment increases,” he said.

“We also expect that major changes will take place in the socialist countries. In extreme situations such as Venezuela, we expect this will take a more violent form, but expect to see a more conservative transition going forward.

“This will enhance foreign investment, and require much higher demand for insurance and reinsurance within the region. Hemispheric is poised to take advantage of these phenomena.”

John Blake can be contacted at:  jhblake@hemisphericre.com.

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