Resilience and growth: Munich Re remains upbeat on LatAm but eyes many challenges

This, combined with the low insurance penetration rates in most countries, is likely to drive increasing demand for insurance and reinsurance solutions. That is the prediction of Maura Freiwald, chief executive for Spain, Portugal, Latin America and the Caribbean at Munich Re. Speaking to Miami Reinsurance Week Today, she said Munich Re is optimistic about the region. 

“Over the past few years, Munich Re has experienced sustained and profitable growth in Latin America, and we expect this to endure. The rising presence of international insurers in leading markets, including Brazil, Mexico, Colombia, and Chile confirms the region’s appeal. We see several factors driving insurance and reinsurance demand in Latin America, such as climate change management, new insurance solutions, growing middle class and urbanisation, infrastructure development, sustainability efforts and microinsurance,” Freiwald said. 

For Munich Re as a broader company, she said the reinsurer remains well positioned in the markets with its international set-up. “This allows us to continuously follow market development and assess adequacy of terms and conditions. Markets are very dynamic and key challenges remain prosperity of the economies, digitisation of products and processes to cater for consumer access and efficiency.” But Freiwald also describes some of the unique challenges in the region. 

She added that, to cater to a broader population, products need to be made more affordable, which is where concepts like usage-based insurance come into play. “By leveraging digitalisation, the industry can develop innovative products that are both affordable and appealing to a wider audience,” she said.

Resilience and diversity 

Her optimism on the region is well placed for other reasons. She notes that Latin America has demonstrated remarkable resilience in recovering from the COVID crisis, outperforming other regions in terms of the speed and extent of recovery. She said a combination of effective monetary policy, favourable commodity prices and renewed investor confidence has contributed to stable inflation and exchange rates. From an economic perspective, she stated that Chile and Peru stand out as the most stable countries, followed by Colombia and Mexico, all of which are poised to remain key markets for Munich Re with promising growth prospects.

“However, after a robust rebound, economic activity in the region has softened as of 2023, due in part to Brazil’s and Mexico’s slowdown, while other countries have stagnated or faced weather-related shocks. Argentina is expected to make a strong economic recovery in 2025 and 2026, potentially offering opportunities if ongoing reforms yield a sustainable growth trajectory,” Freiwald said.

Multiple tests ahead 

But there are also many challenges for reinsurers operating in the region. The first she highlights is climate change, which manifests in both primary and secondary hazards. “Climate change poses significant risks to Latin America, with stronger hurricanes in the Caribbean, Mexico and Central America both from the Atlantic as well as the Pacific being a major concern,” she stated. “However, secondary natural hazards such as wildfires, heavy rains, drought and floods also pose a substantial threat to the region’s economy and society. 

To address this, Munich Re regularly updates its natural catastrophe models to account for climate change, and its risk assessments consider both primary and secondary perils in determining reinsurance prices.” The next challenge she flags is the insurance or penetration gap – low levels of insurance penetration. She said the basic requirement for reducing the insurance gap is economic growth, which boosts disposable income and subsequently drives demand for insurance products. “In emerging markets, insurers must offer innovative products that are tailored to the needs of a broader population.” 

The third challenge she highlights is the regulatory environment. “We consider it vital for the region to establish clear and stable regulatory frameworks, aligning with developed markets’ standards on solvency and ESG. This will enable the insurance sector to thrive and provide solutions that meet the needs of various clients,” Freiwald said.

Innovation is key 

Commenting on Miami Reinsurance Week this year, she suggested the use of technology and innovation will be big themes. “In order to access markets and segments that are not currently being served, we will need good information to be able to price and correctly assess the risks. Here is where technology and innovation are set to play an important role in the reinsurance industry going forward in Latin America.” She stresses that the region has already begun the digitalisation process. 

Pilot projects with AI have accelerated the necessary process of data organisation. “To take advantage of the digital transformation, organised, quality and up-to-date data is a priority. This will enhance the user and customer experience can be improved at the time of pricing, subscription and claims (fraud detection).” In addition, she stressed that the use of advanced analytics models shows benefits when assessing and pricing risks. “At Munich Re we have been working for more than 10 years on the use of advanced analytics to monitor our portfolio and to enrich our risk models successfully.”

Scale, shape, succeed 

She said Munich Re’s strategy mirrors that in other parts of the world – scale, shape, succeed. She said the reinsurer will look to develop client specific strategies that “respond to unique market needs, enhance our market position, and generate additional revenue streams”. Overall, she said Munich Re has a fairly positive outlook on the development of the region. “The real GDP growth is expected to improve as outlined above and we expect to see a long-term steady increase of GDP per capita. 

This will translate into an increase in disposable income for the population, which in turn will boost the demand for insurance products. “Client centricity is the cornerstone of Munich Re’s enduring success, and we will continue to prioritise it by our strong local presence in Latin America. As a testament to our commitment to client centricity, we will continue to operate from our hubs in São Paulo, Bogotá, and Mexico City, ensuring a strong, local presence in Latin America.”

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