26 October 2015 Insurance

Pacific Alliance presents new opportunities

The Pacific Alliance Latin American trade bloc presents great opportunities which Guy Carpenter fully intends to pursue over the coming year, says Aidan Pope, CEO, Latin America and Caribbean Operations at Guy Carpenter.

“The Pacific Alliance is an exemplary trade agreement and we want to take advantage of the benefits that will come from it,” he said. “We are looking to tap into that wider product offering, and to develop specialties in areas like agriculture, because food security will be a key issue for all governments.”

Guy Carpenter is also looking to diversify its portfolio into other areas that show growth, including the whole area of infrastructure and surety business.

“Even though it’s a bit stagnant at the moment I think it will increase,” Pope said. “We want to work with our multinational clients: there are lots of companies from the US and Europe that have expanded and also multilatinas such as Sura in Colombia that has just bought RSA’s portfolio.

“Clients like that need advice on how to expand, they need advice about products, they need advice about capacity markets or cat exposures. Those are the things we really want to focus on.”

He added that these areas require some sort of regulatory intervention, whether it is advising clients on Solvency II and how to prepare for that and boost their capital efficiently or addressing cyber issues.

“Both within Marsh and Guy Carpenter we have strong knowledge and experience of cyber products and so we see that developing over the next few years,” he said.

Pope believes that some of the best opportunities for industry growth in Latin America centre around new purchasers of insurance, namely the burgeoning middle classes who are discovering insurance for the first time in an area where penetration is very low, insurance buying per capita is low and insurance as a percentage of the GDP is low.

“Those things combined lead to good opportunities for growth for insurers. I think the challenge for reinsurers is how they can tap into that kind of market, which is not necessarily reinsured outside of mortgage portfolios and catastrophe territories.

“This means there is probably more growth potential for insurers than for reinsurers, who face the challenge of developing policies that they believe are attractive to a fairly unsophisticated buying class — those new entrants that have not bought insurance previously.

There is still a challenge in making products that are palatable and attractive, and in explaining the benefit of insurance to new entrants.

“That’s a responsibility not only of the insurance market but also of governments to make sure they sell these things in an easily digestible way,” he said.

This is happening at a time when new products are gradually entering the Latin American market.

“There is greater awareness now of people’s liability,” he said. “Products such as cyber, D&O, E&O, medical malpractice and innovative products like environmental liability—all of those things are gradually beginning to come into the Latin American scene. A lot of this now depends on the regulatory environment. A greater degree of certainty in regulation will facilitate development of these products. ”

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