Page 23

Bermuda:Re+ILS Spring 2016

23 Spring 2016 Bermuda:Re/insurance+ILS The reinsurance markets of Latin America have often danced to a different tune but global reinsurance firms are now doing the quickstep to gain what are seen by some as among the most robust and lucrative portfolios in the region. “Despite sluggish economic growth and troubling inflation in key markets, the 2016 insurance market outlook for Latin America remains relatively bright,” reads the opening sentence in the 2016 EY Latin American Handbook. The last 20 years for Latin America as a whole have been punctuated by the economic and financial crises of the 1990s and, more recently, by political upheaval. But GDP of the region has grown year on year since 2003, and crucially, economic development seems based on firmer foundations. The LatAm market is currently in a state of flux. New opportunities and increasingly favourable conditions in the largely untapped reinsurance market are anticipated to drive strong growth for insurers, and 2016 is likely to see a scramble among global investors seeking to build a strong portfolio in the region. “As markets develop in Latin America, commercial demand is increasing for new forms of insurance coverage, such as environmental liability. The opening of the oil industry in Mexico to the private sector, for example, is exposing new oil exploration and production entrants to potential losses from environmental damages. But market capacity is still restrained in key markets, such as Brazil,” states EY. New streams of business In the UK, reinsurance broker Aon Benfield is preparing to go live on its cross-class LatAm facultative facility this year, which will give Londonbased reinsurers access to a new stream of income in 2016. Wider competition across this diverse land bloc comes in the wake of a general loosening of protectionist industry regulation which has previously stymied the reach and potential of international brokers in the region. “The liberalisation of industry regulation across Latin America has opened insurance markets to wider competition,” states EY. “The abundance of insurance capital has intensified competition from various directions: from global insurers seeking a foothold in the region, to local insurers looking to expand cross-country, to entrenched insurers defending their turf. “These competitive trends are keeping insurance rates flat through much of the region and, in some cases, pushing them lower. The most substantial rate decreases have been in non-catastrophe property,” explains EY. During recent years, insurance regulators in Latin America have also been working to transform their solvency requirements—reflecting a worldwide trend towards more robust rules governing insurance solvency. Across the region, countries are at different stages within this process. Mexico was the first to introduce a Solvency II capital framework, making it one of the leading LatAm countries in this respect. Some players see opportunities in this. “The intention to increase the solvency margin requirements for insurance companies will increase the need for locally owned insurers to seek partnerships and/or joint venture arrangements with strong international companies,” says Carlos Caputo, chief executive officer at AXSTOKES / SHUTTERSTOCK.COM


Bermuda:Re+ILS Spring 2016
To see the actual publication please follow the link above