Stable renewals will drive growth opportunities

“LatAm continues to be a very interesting market for reinsurers, for diversification purposes and also because insurance premiums have been growing faster than GDP,” said Paula Ferreira, CEO of Latin America at Aon’s Reinsurance Solutions. 

“We’re seeing globally, and in the region, an excess of capacity that allows us to expect more stable renewals, with positive impacts on pricing and reinsurers eager to increase their shares,” she continued. 

Ferreira sees a resilient and evolving landscape in the region’s reinsurance market and believes that despite economic and climate-related volatility, Latin America’s January 1 reinsurance renewals were “extremely positive”. With “stable and healthy renewals” throughout the year, 

Ferreira is confident reinsurers are eager to expand their presence. She emphasised that “there were no shortfalls in any placement”, even in challenging markets such as Chile and Puerto Rico. Even the facultative market is expected to be “softer than treaty”, allowing insurers to diversify in property, financial lines and power.

“Secondary perils like floods are reshaping pricing.”

Nat-cat and market adaptations 

While recent natural catastrophes haven’t drastically altered reinsurers’ appetite, they have led to shifts in underwriting behaviour. “Hurricane Otis in Mexico moved quickly to a Category 5. Even though it was a $2 billion event, it reinforced the need for companies to improve data quality to prevent unexpected losses,” Ferreria explained. 

She then pointed to “concerns over excessive use of coinsurance in the region,” leading reinsurers to “limit the number of co-insured companies in programmes.” Secondary perils such as flooding are also gaining attention in the region. “It is clear that secondary perils are now an important phenomenon to consider in the pricing of original policies,” she said.

“Brazil was once thought to be a low catastrophe country, but reinsurers are now implementing event limits similar to those in Chile and Mexico.” Reinsurers, Ferreria felt, were “favouring companies that invest in technology, modelling, and exposure monitoring.” Including Aon. “We are launching the flood model in Brazil and the regulatory flood model in Peru,” Ferreira stated. 

“That’s why we acquired ERN (Evaluación de Riesgos Naturales), which works within our Impact Forecasting platform to drive clarity and confidence in risk placements and improve our clients’ understanding of not just hurricanes and earthquakes, but also flood risk.”

Beyond catastrophe modelling, Aon is “investing in software to help insurers optimise capital, protect results and support growth”, and Ferreira highlighted Aon’s consulting strategy that aligns with its global strategy and technology group to help clients improve margins and manage capital effectively.

ESG: a work in progress 

The integration of environmental, social and governance (ESG) principles in Latin America’s insurance sector is progressing at a measured pace. “A few years ago, ESG was a more impactful topic,” Ferreira explained, adding that today, it had stabilised due to a lack of clear local regulation.

She noted that some insurers were proactively embracing ESG, “developing products to reduce the insurability gap and promote equity, while also incorporating ESG into their talent agendas”. However, Ferreira is adamant that broader, industry-wide changes will likely “only accelerate when required” by regulators or reinsurers. She urged the sector to address the region’s insurance penetration gap.

“In Brazil’s floods, only 10 per cent of the economic losses were insured – meaning 90 per cent was absorbed by the government, businesses, and people. That represents a huge opportunity for our industry.” She compared this to global markets: “In developed countries, insurance often covers more than 50 per cent of economic losses. Latin America has just a third of that penetration.” But Aon is tackling this challenge. “We supported Puerto Rico’s government in implementing a parametric programme, and we’re doing the same for the Bahamas. “We also developed parametric solutions for utilities in the Caribbean and hotel chains.” 

Beyond government initiatives, Ferreira sees opportunities in cyber risk protection. “Insurance penetration remains low, so we must raise awareness, offer affordable solutions and attract capital to enhance cyber protection. This will help our clients to navigate volatility and build resilience in this area.” 

For Ferreira, four key areas for growth in Latin America stand out the most: specialised expertise, natural catastrophe solutions, pension risk solutions and cross-solution collaboration. Ferreira summed up Aon’s broader mission in the region: “Aon is in the business of better decisions. “In reinsurance, that means equipping our clients with the best tools to grow, manage risk, and optimise capital,” she concluded. 

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