Penultimate meeting with The Reinsurance Tutorials, episode #8 - Season 4
Hi everybody 👋
Today is the launch of the 8th episode of the Reinsurance Tutorials season 4!
We will talk about "LATAM Non-Life Reinsurance: A 24-Market Masterclass".
This topic will be addressed by our Arundo Re experts Emmanuel JACQUEMIN and José-Luis CAMPOS.
Let’s start! ⏬
[José-Luis]: Hello, everyone. I’m José Luis Campos, senior underwriter for Non-Life contracts in Latin America. Today, I’m going to talk about the interesting world of Non-Life reinsurance in Latin America. A dynamic and diverse market full of opportunities.
[Emmanuel]: Hello, I am Emmanuel Jacquemin, Director for Southern Europe and Latin America. We will divide our presentation into five main themes:
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The diversity of the insurance markets in Latin America.
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The traditional structures and new trends in reinsurance.
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Management of major catastrophe exposures.
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The predominance of the fire risk and the low cession in automotive and civil liability.
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The importance of personal relations in the reinsurance business.
[José-Luis]: Latin America is a mosaic of 24 insurance markets with unique characteristics. In countries like Peru, the concentration in a few companies is significant, while other markets like Ecuador and Paraguay are much more dispersed. Similarly, the presence of international insurance groups is high in countries like Mexico and Brazil, but less marked in countries like Argentina or Bolivia.
As there are so many differences between the 24 markets in Latin America, it’s impossible to generalise. However, there are common themes in the different non-life insurance markets and that’s what we want to talk about today.
[Emmanuel]: The vast majority of companies buy their reinsurance through traditional structures, or rather one proportional and one non-proportional to cover the retention. Sometimes, companies buy a temp excess that protects the retentions of various lines. It is relatively uncommon to see excess on gross structures, i.e. without proportional, for fire, engineering or bond portfolios. Retentions are usually low compared with international standards. The penetration of non-traditional products is still marginal. Some reinsurers promote parametric protection, but there are relatively few of them and they are almost exclusively in agro or in CART.
[José-Luis]: The region is susceptible to disasters such as earthquakes, hurricanes and flooding. Exposure to earthquakes is concentrated in Mexico, Central America and throughout the Andes. Furthermore, Mexico, Central America and the Caribbean are threatened by hurricanes. The whole region is exposed to flooding risk. The intensity of the exposure varies from country to country
and is much more of a concern in Chile or Mexico than in Brazil or Argentina. However, the recent flooding in Mato Grosso do Sul reminds us that all countries are exposed to disasters. The effects of climate change are particularly severe in the region. Brazil had the worst drought in its history in 2021, and in 2024, the worst flooding in its history. The severity observed in agricultural insurance has been extreme and raises questions about its insurability. Reinsurance plays a vital role in the protection of insurance companies faced with these huge losses.
[Emmanuel]: The main Non-Life insurance lines are automotive and property. In contrast, the weight of other sectors, including civil liability, is relatively low. Contract compliance insurance is very important in countries like Colombia, Mexico, Argentina and Brazil,
as a result of local legislation that demands this cover. The business lines that call for a lot of capital are usually disposed of by companies, which explains why the fire risk and associated lines has historically dominated reinsurance in the region. On the other hand, many companies are retaining the automotive business. The difference in distribution by line between Latin America and the more mature markets is explained by both the low penetration and the difference in indemnities. Both factors represent an opportunity for development of the market. Development of new products and the expansion to new market segments
like micro-insurance and PME insurance are some of the strategies that can help to grow insurance penetration.
[José-Luis]: The reinsurance business is built on confidence and solid personal relationships. Closeness with clients, in-depth knowledge of the market, and effective communication are the keys to success. It is often said that reinsurance is a personal business, but on no continent are personal relations more important than in Latin America. This is why Emmanuel and I will never swap our Latino markets for any other.
[Emmanuel and José-Luis]: Go Latin America!
See you soon for the next (and last) episode 👋
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