LatAm: insurance cover growing rapidly in ‘land of opportunity’

The demand for new and different types of insurance coverage is growing in Latin America, presenting a real opportunity for forward-thinking insurance companies, according to Eduardo Betancourt, chief underwriting officer at Patria Re.

Betancourt said there was growing insurance demand from businesses and consumers coming out of the COVID-19 pandemic, citing the example of home working. This meant insurance companies were working on new products and solutions to cater for the change in the work-life balance.

He believed that direct insurance was growing, so insurance companies have an opportunity to shape how they distribute products.

He said: “The dynamics of the market in the coming years will be about trying to find solutions, trying to find a way if customers require agents. I am convinced that agents are required for certain coverages, but in others, maybe you can go direct to be insured in a more efficient way.

“We will be looking in the following years at different solutions, not only regarding distribution, but also operations of the companies. Hopefully, we will find a way as a sector to be client-orientated. We lack that in Latin America.

“We are slower than other industries such as banks, for instance. We need to accelerate the pace to consider the client-facing operations.”Co-panellist Angel Martinez Roig, associate director at UIB, agreed with Betancourt on the product and coverage opportunity.

“There is huge demand. Not only in the political violence sector, but also the cat perils. All the countries in Latin America and the Caribbean, except Brazil and Argentina, are very cat-exposed.

“There are 15 countries, with many windstorms each year, and demand for insurance is growing massively. It is very attractive that you have a cat continent.”

More broadly, there are a number of reasons behind this growing demand for insurance.

Roig said rising inflation, the COVID-19 pandemic and the knock-on effects of the war in Ukraine meant there was “massive discontent” in Latin American populations, increasing the need for political violence insurance. Furthermore, the population was growing fast, meaning there was simply more demand for insurance cover.

“One of the main factors is that the economies in Latin America, in the last 10 years, have been growing faster than in any other continent in the world. For example, the average birth per country in Latin America reaches 8 percent, whereas in European it is just 5 percent, similar to the US,” he said.

There is a “sophisticated” reinsurance market in Latin America, making it attractive for reinsurers to invest and support primary insurance partners.

“LatAm is considered a sophisticated insurance market, with market research standards. It makes it attractive to reinsurance. Also, the entities of the regulators, called superintendencies in our contracts, are incorporating more capital-based solvency and that will require more demand for reinsurance.

“There are a few factors that make carriers, worldwide, want to be in Latin America.”

Betancourt highlighted the low insurance penetration as an attraction for the region.

“We are still an area where the low penetration of insurance among society means there is an opportunity for insurance to grow. In the life side of business, they are growing very fast in the different countries. Motor insurers think there’s still room to grow,” he said.

“Many specialty lines are highly demanded in Latin America, such as cyber. Everyone is looking for different kinds of solutions for catastrophe perils, such as the parametric side of coverages.”

The regulators had played a major role in transforming the region and making it more competitive.

Roig used the example of Brazil: it was monopolised by one corporation, but this barrier was eventually broken down and the country is now competitive. Costa Rica had monopolies for more than 70 years before competition arrived.

Betancourt believes regulators are onside in wanting insurance firms to succeed.

“The regulators across all the nations are very understanding that insurance companies are required to be modern and have more efficient processes to register new products,” he said.

Pandemic effects

The COVID-19 pandemic has caused major losses to the economies and in loss of life in the region, hitting it harder than developed countries which have had the resources to cope better.

Roig said: “Life insurance had important losses during the pandemic, but now they’re recovering in 2022 with premium rate increases. Health insurers had low loss ratios during the pandemic, but then high loss ratios after the pandemic. They are trying to accommodate bringing in rate increases.”

Betancourt added: “The life insurance and reinsurance were affected because of the increase in the loss ratio during the pandemic. Unfortunately, because of the low insurance penetration, most of the people affected did not have any insurance coverage.

“It’s a pity for those that didn’t have any insurance, but for those that had insurance, life or health, they were really using their insurance.”

He said new opportunities had emerged in Latin America due to the pandemic.

“New opportunities emerged, for instance, with people using medical appliances and other medical equipment that was needed during the pandemic.”

The world is on the road to recovery from the pandemic, but Roig stressed that there was another major challenge now for businesses and consumers: inflation.

“The high inflation rate, as well as the logistical difficulties, will be an important challenge for retailers during the next couple of years. What can they do to overcome this?

“It’s a difficult question. Another big challenge I see is capacity in the regions. Take Chile for example: we have a lack of capacity there,” he concluded.