14 November 2017 News

Guy Carp: where will rates, capacity and T&Cs land?

The main issue for the Latin American market at FIDES will be where rates, capacity and terms and conditions land, according to Aidan Pope, chief executive officer of Latin America & Caribbean at Guy Carpenter.

He explained: “The exit or downsizing of some large multinationals and the arrival of new players, combined with potential economic growth following elections in Chile and improved national indicators, are also creating a new regional dynamic.”

Insureds are still feeling the effects of the “economic malaise” throughout Latin America, according to Pope, and they’re more inclined to shop around for their insurance needs.

This is hitting re/insurers by creating “fierce competition and, at times, underpriced risks”.

“If the market turns, it may be difficult for some buyers to absorb the higher premiums resulting from increased discipline and higher costs,” he warned.

Re/insurers are seeking growth opportunities in the region and Pope believes that one of these opportunities, cyber, will be a popular topic at the FIDES conference.

“As the physical and virtual worlds continue to merge, we sometimes find coverage gaps in traditional property policies between affirmative and silent cyber coverages that can complicate business interruption losses.”

Guy Carpenter is using lessons learned from pandemic risks, Pope explained, to increase understanding.

The broker has also partnered with cybersecurity experts and firms as it works with clients to find opportunities through new modelling approaches such as the “kill-chain” methodology.

Hand-in-hand with cyber is new technology and, according to Pope, re/insurers recognised that technology investments can improve their distribution, back office, underwriting and claims servicing.

“They are leveraging the interconnections between data, analytics and technology—such as the use of property sensors or mobile devices to collect real time information for risk-specific modelling—to support cost efficiencies and increase client value,” he concluded.

Guy Carpenter is doing the same: it is “constantly scanning and evaluating the insurtech landscape”. The broker has established relationships with insurtech startups such as Sure, and accelerators such as Plug & Play, and it’s part of two industry blockchain initiatives, the Institutes RiskBlock and B3i.

Focusing on Latin America, Guy Carpenter sees growth in areas supporting the region’s development, including infrastructure, public sector investment, life and health and microfinance.

“Although recent catastrophes could make the third quarter one of the costliest in the industry’s history, the market remains vibrant,” said Pope.

For the class A notes exposed to earthquakes affecting Mexico, AIR Worldwide confirmed that the M8.2 September 8, 2017 earthquake has caused a 100 percent original principal amount loss to investors and corresponding full event payment to Fonden 2017, the World Bank-supported catastrophe bond.

“The full principal loss will occur on November 13, 2017, making it one of the fastest cat bond payouts in the industry’s history, demonstrating the effectiveness of insurance-linked securities,” explained Pope.

On renewals, he said that many reinsurers must wait to renegotiate their own retrocession programs before releasing capacity, so Latin American renewals will be later than elsewhere as buyers and sellers consider new strategies.

“Only a quarter of our accounts renew in January, so we expect to have a clearer view of the market by the time many placements renew later in the year,” he concluded.

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More storeis from the FIDES Day Two Newsletter

Reinsurers must step in to close protection gap: Lloyd’s

Blockchain will be a catalyst for innovation

How governments can leverage reinsurers’ expertise on public healthcare schemes

Cyber solutions are evolving

Insurers worry on pricing and excess capacity

Chile more than doubles written premium in 10 years

A period of rapid growth in LatAm

Industry ‘needs to reinvent the wheel’

A different dynamic for renewals

Relationships are key in LatAm

Global players face regional competition in LatAm

Ed: new name; stronger game?

Top three insurtech trends to look out for: Crawford

The impact of Mexico’s recent quakes

Hand in hand with an evolving landscape

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