More reinsurance capacity increases LatAm cedants’ options: Aon

On the back of buoyant global reinsurance market, with reinsurers reporting strong earnings in recent years, Latin American insurers are also benefitting – more capacity is available and competing for business in the region, meaning an easing of rates and more growth options for insurers that are willing to innovate.

That is the view of Jaime Pineda, head of treaty Latin America at Aon’s Reinsurance Solutions. Speaking to Miami Reinsurance Week Today, Pineda described a stable 1/1 renewal with some softening in certain lines. This was driven by global reinsurers eyeing growth in Latin America, buoyed by plentiful capacity on their balance sheets and the opportunity presented by the region’s large protection gap.

“We saw an increased appetite from several players in the January renewal, driven by the state of the global reinsurance markets,” Pineda said. “Reinsurers enjoyed good results in 2024, so they're ready to deploy more capacity. That is compounded by the fact that insurers in Latin America have also had a period of posting good results.

“That has also prompted established players in the region to consider growth. It was a stable renewal, with rate-adjusted reductions in price. But that was also dependent on the performance of individual treaties. 

Pineda stressed that, unlike many other parts of the world, the 1/1 renewal is not the largest for Latin America. But it does offer a good indication of what insurers and reinsurers should expect in further renewals – on April 1, May 1, and July 1 – the last being the largest for the region.

One significant trend he noted was more willingness on the part of reinsurers to offer proportional capacity. While largely driven by the growth aspirations of both insurers and reinsurers, an additional reason for this is that cedants will typically only offer their excess-of-loss business to reinsurers that also support them in this way. 

As more capacity competes in the region, he also notes that this dynamic allows some insurers to explore more innovative risk-transfer solutions, including structured solutions designed to protect their capital position, and/or earnings. There is also growth in the use of parametric solutions, he adds, sometimes backed by third-party capital. “Often, this might be used to complement a traditional treaty, but the adoption of these types of solutions will grow as companies understand them better.”

In terms of wider trends and talking points in the region, he said there is a growing emphasis on trying better to understand, and price, some of its catastrophe risks. As in many other parts of the world, so-called secondary perils are a growing challenge for insurers and reinsurers alike.

“Secondary perils remain an important topic, particularly in the context of some recent events, such as floods,” Pineda said. “As an intermediary, we are always trying to better understand such risks. We continue to develop and evolve flood models, for example, to help us do that, and bring clarity and confidence to the broader risk evaluation process.  ERN has this as a priority.

“We have also invested heavily in data and analytics to improve our understanding of such perils, and to help shape better decisions for our clients. Advancements in technology, including AI, are also helping with that journey.” ENR for instance is helping insurers in the region to improve their data to better assess their portfolios.

He also notes, in line with the global markets, a growing regional interest in cyber risk. “There is more risk awareness from corporate clients, and from the risk-transfer industry. As such, insurance companies are researching and looking for solutions to build on that.”

Across all perils, however, Latin America still has a very large protection gap. This presents a concern in some ways – but also a big opportunity for growth.

“There is always an emphasis and a debate on how to increase insurance penetration,” he said. “Local insurers continue to define their strategies around how to increase penetration. Brokers, insurers and reinsurers are also trying to work with governments and private sector on solutions to find ways to penetrate parts of the population which, in the past, have simply not acquired insurance. There are many initiatives on how to make insurance less complex and more accessible.”

He also noted that Latin America as a region is not immune to the wider geopolitical volatility. But he highlights the resilience of insurers in the region in the way they cope with economic and political uncertainty. “They are very resilient because it's not the first time that they have experienced these dynamics. They have learned how to manage volatility – particularly, economic uncertainty – and also political change and are able to view a changing landscape as an opportunity to assess where business growth could occur. 

“They seek to continue to grow in such an environment.”

Jaime Pineda is the strategic growth leader and head of Treaty Latin America at Aon’s Reinsurance Solutions. He can be contacted at jaime.pineda@aon.com

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