Brazil, Colombia, Argentina top LatAm growth locations

While reasons for it may differ, Brazil, Colombia and Argentina are among top growth locations for re/insurance in Latin America.

In Brazil, further liberalisation of the reinsurance market offers growth opportunities for the sector.

Under legislation passed in 2015, Brazil has now in place a five-year time frame for scaling down the intra-group prohibition and the mandatory cession rule.

According to the legislation, the maximum limit for intra-group transfers, namely from an insurer or local reinsurer to a company belonging to the same financial conglomerate, will gradually be increased to 75 percent by 2020 from 20 percent, law firm Holman Fenwick Willan (HFW) explained in a report titled Brazilian Regulatory Changes good for International Reinsurers.

Also, applicable percentage of each facultative or treaty reinsurance cession to be placed by insurers with local reinsurers is to be gradually reduced to 15 percent from 40 percent, allowing foreign reinsurers to underwrite more business.

“It’s a gradual drive to a much freer market. This has been very well received by international markets,” said Carlos Caputo, CEO of Markel Latin America.

Demand for re/insurance in Brazil is likely to come from financial lines such as directors and officers (D&O) liability insurance, professional indemnity liability insurance and errors and omissions insurance liabilities, driven by cases such as the investigations involving a corruption scandal around the country’s state owned oil company Petrobras, Caputo said.

Markel itself is looking into ways to expand its insurance operations in Brazil. Specialised in niche products, Markel is exploring which products are most suitable for the Brazilian market and for Latin America in general.

When looking for re/insurance growth elsewhere in Latin America, Colombia is also in the sights of the industry. For Caputo, this is largely due to a peace agreement signed between the Colombian government and the country’s largest rebel group, ending five decades of fighting which resulted in some 220,000 lives lost and more than five million displaced, according to news reports.

“It’s hoped that the agreement will boost economic growth in Colombia which will reflect on the insurance market,” Caputo says. Already prior to the agreement, international groups have started investing in Colombia, he noted.

Argentina is another country where expected economic growth is likely to boost insurance and reinsurance demand. This is due to structural reforms by the new government under Mauricio Macri, who came to power in last year’s elections, Caputo said.

Macri’s government lifted controls on currency exchange and transfer rules, providing a degree of welcomed certainty by foreign re/insurers involved in Argentina, Hernán Cipriotti and Daniel Baron from US law firm Zelle LLP argued in Argentina’s New Leadership and How it Affects Insurance.

An easier operating environment, increased demand for re/insurance, and an improving regulatory climate make Argentina an insurance location to watch, Cipriotti and Baron wrote.

In light of the new government’s approach to open markets, local insurers and onlooking international reinsurers are expecting a gradual transition towards a free reinsurance market, the authors said.

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