Stability a key question for LatAm markets
Political and economic instability are the most important challenges in Latin America, according to Carlos Caputo, CEO, Latin America for Markel. “These instabilities have always been there but it is important that they don’t derail us from our long-term business strategy,” he said.
The growth potential in Latin America is clearly there, he added: the expenditure per capita on insurance products and market penetration is still less than a third of that in developed countries and therefore will continue to grow in the next two decades.
“For example, in Brazil insurance premiums are in double digits in 2015, yet the economy is expected to have negative growth this year,” he said.
Caputo predicts that the devaluation of the Brazilian real and the Colombian peso in the last 12 months will also offer great business opportunities.
“This is evidenced by the number of local independent insurance companies who have recently been purchased by foreign investors,” he said.
Recent changes in the Brazilian reinsurance market, which were not discussed with the market, and forthcoming presidential elections in Argentina, may drive changes in the market and stimulate foreign investment, he said.
“In Venezuela, political interference and the instability of the local currency are affecting the re/insurance market. This is why it is the only territory in the region where we are not doing business.”
He added that the role of insurance-linked securities (ILS) funds in the Latin American market is unlikely to change in the near future, especially if Brazil is further downgraded.
“Capital markets in some Latin American countries are less sophisticated than in established economies and some local regulators may take more time to get comfortable with the ILS concept.”
The impact of September’s earthquake in Chile will be a hot topic at Fides, said Caputo. “Others will probably be the recent acquisition of RSA’s companies by Sura (Columbiana) in the region, and the initial public offering of IRB—if it happens.”
Meanwhile, it is business as usual for Markel: “We remain committed to developing a successful, profitable business in this region,” he said.
