danielrevilla_lloyd-s-
Daniel Revilla, head of Latin America at Lloyd’s
10 September 2019 Insurance

Lloyd’s is not underestimating challenges: LatAm chief

“The whole market wants Lloyd’s to succeed and it is widely recognised that Lloyd’s unique attributes are more relevant than ever today. We are not underestimating the size of the challenge ahead of us,” Daniel Revilla, head of Latin America at Lloyd’s, told FIDES Today.

Lloyd’s has undertaken a wide-ranging consultation exercise—including more than 4,000 insights from various stakeholder groups. The insurance market plans to build solutions gradually, with some parts operational by the end of the year (2019) and more complex systems ready in 2020 and beyond.

Lloyd’s is focusing attention on the emerging markets where it sees the best returns on investment and naturally, this includes Latin America. In the region, Lloyd’s is focused on developing market access, by encouraging managing agents and coverholders to participate in the region.

“We believe that the combination of low insurance penetration and strong economic growth should create the conditions for high demand for insurance in Latin America over the coming years,” Revilla claims.

Approximately 95 percent of Lloyd’s premium in Latin America is reinsurance business, with an emphasis on specialty classes such as aviation, casualty, energy, marine and property. Lloyd’s is seeing growth opportunities and strong demand in other lines too, such as cyber risk and parametric insurance for natural catastrophes and agribusiness.

Risk and resilience

Latin American cities account for 8 percent of the total global gross domestic product (GDP) at risk, according to “Lloyd’s City Risk Index”, published last year.

“This is in part due to the region’s lower GDP levels. However, the continent still stands to lose on average $44.73 billion each year across all the risk categories in the study,” says Revilla.

Similar to North America and Europe, the largest single threat is market crash, with earthquakes serving as Latin America’s second biggest risk.

“Earthquakes reflect the geophysical vulnerabilities of the continent. A fault line running under the Andes affects several cities in the region. While the continent has relatively low GDP at risk for most geopolitical and security threats, it is vulnerable to civil conflict,” he adds.

Manmade risks, particularly a market crash, civil conflict and sovereign debt, account for 65 percent of the region’s risk exposure, says the Lloyd’s executive. The remaining 35 percent of the region’s exposure comes from natural causes, such as earthquakes.

“Because climate risks account for $6.02 billion, the prospect of more extreme weather events caused by climate change need to be carefully managed by Latin American societies. Brazil and Mexico, the two economic powerhouses of the region, account for 58 percent of the continent’s overall GDP at risk,” Revilla explains.

He hopes the report will educate cities and businesses about the necessity of building resilience.

“As new risks continue to emerge and risk landscapes change, it is important for leaders to stay aware so that they can look into the best ways to address those risks and protect their cities and their citizens,” he says.

Insurance is not the only answer—it’s just a small piece of the broader effort to build greater resilience.

Revilla adds: “Ultimately, we want insurers, local and national governments and businesses, as well as communities, to partner and help protect against the perils that threaten cities globally.”

To protect cities in Latin America, Revilla suggests heavier investment in resilient infrastructure.

Many cities have seen an explosion in their population, he explains. Brazil’s population has grown from 72 million in 1960, with 44.8 percent in living in cities, to more than 200 million today. By the turn of the millennium, 80 percent of the population lived in cities.

“This rapid population growth has put a strain on infrastructure and led to heightened risk of flood, drought and landslide as well as contributed to increased unrest as cities expand to more marginal building land,” Revilla says.

Although investment in infrastructure won’t eliminate or reduce every risk, he says, the Lloyd’s index shows policymakers could factor the benefits of greater resilience into the cost justification for greater infrastructure expenditure.

He concludes: “Business, governments and insurers have a collective responsibility to build resilience. Cities are composed of a diverse and complex mix of institutions, ecosystems, assets and infrastructure that are connected and mutually interdependent.”

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