Influx of new reinsurers target Latin America

The potential growth prospects of the economies of Latin America combined with weak growth in more mature economies around the world has prompted many reinsurers to target Latin America, according to Sergio Montoya, managing director, Willis Re Latin America & Caribbean.

“We are seeing an influx of new reinsurers to the region setting up local operations driven by opportunities being offered by emerging markets and weak growth prospects elsewhere,” he said. He believes the county most likely to be at the forefront of growth in the region will be Mexico.

He also believes the region is feeling the effect of the influx of alternative capital into the global reinsurance markets. He believes some of this capacity is being put to worth through traditional reinsurance vehicles and this is, in turn, having an effect on pricing.

But he adds: “We have not yet seen a direct effect of alternative risk transfer products such as cat bonds and other insurance linked securities, due to the competitiveness of terms and conditions from traditional reinsurance capacity, and the sophistication and costs associated with the design and execution of these sorts of risk transfer/finance vehicles.”

He believes that there will be a number of different talking points at FIDES in Guatemala this year. These will include the 2014 1/1 renewals, mergers & acquisitions, government investments in infrastructure improvements, the economic outlook for FIDES member states and the foreseeable devaluation of local currencies.

Some of the wider trends in reinsurance will also be discussed in the context of the way in which they could influence the markets in Latin America.

“Due to the global nature of reinsurance, there will always be an influence. Some good examples are Risk Based Solvency initiatives and Governance Standards required by regulators,” Montoya said.