Argentina: Argentina: Major Insurance And Reinsurance Developments In 2008

Last Updated: 22 January 2009
Article by M. Machua Millett

Although all of the Latin American jurisdictions had notable regulatory and market developments in 2008, Argentina stands out as particularly significant given the size of the market involved and the fundamental nature of the developments seen there in the past year.

Consolidation And Uncertainty Despite Promise

By most measures, Argentina is considered Latin America's fourth largest insurance market. The market has continued on a path of steady growth and consolidation in 2007 and 2008. The total number of insurers operating in the jurisdiction declined to 184 in 2007, from 189 the previous year and 266 in 1998. Meanwhile, average insurance market growth has topped 12.8% over the last four years and insurance penetration remains relatively low. That being said, however, Argentina's high sovereign risk and the government's recent nationalization of the nation's private pension funds has caused many, including Moody's, to express concern about the coming year for the Argentinean economy generally and the insurance market specifically.

On October 21, 2008, Argentina's president, Cristina Fernandez de Kirchner, announced a plan to nationalize the country's 30 billion dollars in private pension funds (a number of which were managed by affiliates of international banks and insurance companies), ostensibly in a effort to protect retirees' savings during the current global economic turmoil. The announcement, however, rather than stabilizing Argentina's economy, resulted in greater uncertainty and tremendous economic and social turmoil. Argentina's stock market subsequently lost more than half of its value, the bond market plummeted and the value of the Argentine peso dropped dramatically. The Argentinean government publicly blamed the markets' performance on the ten companies in charge of the pension funds, but much of the losses were attributable to declines in the value of government bonds. After the announcement, the Buenos Aires police raided the pension system's offices and a judge prohibited the companies from trading on the Buenos Aires exchange for a week. The private pension funds then proposed a series of reforms as an alternative to nationalization.

Despite significant domestic and international concerns, the Argentine government moved forward with its elimination of the country's private pension system later in the year. A nationalization bill was passed by Argentina's lower house of Congress on November 7th and by the Senate on November 20th, and President Kirchner signed the law on December 4, 2008, establishing an Argentine Integrated Pension System (SIPA) to replace the current capitalization regime as of January 1, 2009.

The new system provides that two commissions will be created to function within the existing national social security system (ANSES): a bicameral one containing members of the majority and opposition parties, and another with representatives from the country's labor unions, businesses, private banks, and retiree groups. Under the new law, the System will be financed through distributions to affiliates and beneficiaries, and it guarantees terms equal to or better than those previously existing under the private system.

Annuity payments will continue being paid through participants' existing retirement insurance companies. Affiliates' voluntary contributions to individual capital accounts may be transferred to ANSES accounts if it is determined that such a move would be beneficial.  The new law, however, prohibits compensation corresponding to retirement and pension administrators from exceeding certain levels. Steps will be taken to ensure employment for certain medical, technical, and administrative workers affected by the change. The law also provides for a SIPA Sustainability Guarantee Fund to create structures for sustainable economic expansion of the national economy, the growth of remedial funds set aside for SIPA, and the preservation of the Fund's assets.

Proponents of the plan maintain that nationalization will protect the pension funds' assets from risky investments and pump enough cash into the state treasury to finance infrastructure projects and pay off considerable amounts of national debt, although the government has publicly denied that the funds will be used to pay off or refinance debt. Opponents of the plan, however, both within Argentina and in the national community, have expressed little faith in the Argentinean government's intentions or in its ability to maintain appropriate fiscal oversight of the funds. A United States court has also frozen American assets owned by Argentinean pension funds, a major roadblock to the effectiveness of the fund nationalization.

Commentators have also cautioned that the pension fund nationalization may have broader ramifications for the Argentinean economy. Standard & Poor's lowered Argentina's debt ratings due to the nationalization and Fitch released a report calling the outlook for Argentinean companies "dismal" for 2009, due in part to the pension fund nationalization:

Local liquidity is scarce, the banks are working to preserve capital and the international capital markets are closed to Argentine corporates. This situation has led blue chip companies to seek financing in the local bond market, which has become increasingly dormant during 2008. The [nationalization] threatens to eliminate the local bond market as a source of liquidity. While the asset allocation of corporate debt in the Argentine pension system is small, the pension funds' participation in the local debt market is essential. Without them, there are not enough investors to absorb the huge financing needs.

Nonetheless, the legislation was widely supported by both the Peronist party and the opposition, and many local commentators disagree with these gloomy predictions.

Conclusion: Cautious Optimism

Trends in the Latin American economies generally and insurance markets specifically indicate that insurance and reinsurance companies with a dedicated strategy and experienced advisors can take advantage of tremendous opportunities in the region. On the other hand, however, the undertaking of activities in the region without a coherent plan or full understanding of the local regulations and markets can lead to unprofitable operations and significant potential enforcement issues with local regulators.

Given the sorts of local idiosyncrasies that exist in many of the Latin American markets, and the frequent fundamental changes such as those seen in the past year in regulatory requirements, failure to understand and closely monitor market and regulatory developments can impact both a company's profitability and its continuing right to conduct business in the region's jurisdictions. It is therefore imperative that insurance and reinsurance companies operating or considering expansion into the region obtain the assistance of experienced and knowledgeable advisors.

If you would be interested in learning more about these issues and/or insurance and reinsurance developments in other Latin American countries in 2008, we would like to invite you to our free webinar on January 21, 2009 entitled "(Re)emerging Mercados: Significant Recent Developments in the Latin American Insurance and Reinsurance Markets." To view an invitation and register for this event, please click here:

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
Email Address
Company Name
Confirm Password
Mondaq Newsalert
Select Topics
Select Regions
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions