Brazil: Latin American Insurance And Reinsurance 2009 In Review: Liberalization, Development And "Reform" In The Face Of The Global Economic Downturn

Last Updated: 12 February 2010
Article by M. Machua Millett

2009 was an eventful year for the Latin American (re)insurance markets, with local factors and varying exposures to the global economic downturn leading to tremendously different results, trends and regulatory initiatives in the various countries. The most-developed Latin American markets experienced relatively flat growth or even contraction due to their closer ties to foreign economic trends, while several less-developed markets experienced impressive growth despite the broader economic problems. At the same time, several countries initiated or continued the development of significant regulatory reforms tied to the particular nations' prevailing economic and political philosophies.

Brazil

The influx of foreign reinsurance companies continued in 2009, with foreign companies beginning to make inroads in challenging the nation's former reinsurance monopoly holder for a larger share of the market. Whether because of the tightening economy or the explosion of the country's reinsurance industry, Brazil also saw a boom in mergers and acquisition activity in its direct insurance market. In sum, given its size and further development, Brazil remains an attractive target for foreign insurance and reinsurance companies.

Mexico

Despite a challenging year economically due to its close ties with the United States, the Mexican insurance market continued to grow and develop in 2009. Mexico's insurance regulator, la Comision Nacional de Seguros y Fianzas, reported that the total premiums for the market increased 8.8% when comparing the first two quarters of 2009 to the first two quarters of 2008. Liability insurance premiums reportedly grew by 17.8% and life insurance premiums reportedly grew by 3.5%.

Chile

Perhaps the starkest example of a developed marketing experiencing growing pains due to the global economic downturn was Chile. Due largely to lower life annuity sales, total premiums in the Chilean insurance market fell 12.3% for the first half of 2009 when compared to the first half of 2008. Total premiums for the first half of 2009 were US$ 2.89 billion. Life insurance premiums decreased by 16.5% (US$ 1.87 billion), with life annuity sales contracting by 37.9% (US$ 631 million). The downturn was not limited to the life sector, however, as the national and global economic downturn resulted in a 3.7% decrease in P&C premiums (US$ 1.02 billion), pulled down in part by a 32.4% decrease in engineering premiums. In a sign of the times, theft premiums rose 19.2%. Mikel Uriarte, the Chairman of Chile's insurance company association, did reportedly comment that he expects to see improvement in the life insurance and other areas in the rest of 2009 and into 2010.

Chile also began to contemplate Solvency II-type reform. Osvaldo Macias, a spokesman for Chile's insurance regulator, the Superintendencia de Valores y Seguros, recently stated that the agency believes that "very important and profound regulatory changes" should be made in the nation's insurance market, particularly as to valuation and calculation of minimum surplus capital. When asked about the feasibility of implementing Solvency II in Chile and the rest of Latin American, Mr. Macias expressed support for the project but noted that significant time and resources would be necessary to implement such a project in Latin America and certain adaptations would likely be necessary.

Argentina

Despite government interference with the nation's pension industry, Argentina's insurance regulator, la Superintendencia de Seguros de la Nacion reported that total premiums for the twelve months ending June 2009 were 6.2% higher than the previous 12 month period. In absolute terms, total premiums for the twelve months ending June 2009 were US$ 7.53 billion. June numbers also reflected 6% growth when compared to the prior June and 4.4% growth over May 2009. The advances were led by the automobile insurance sector, which grew 16.4% year over year.

Venezuela

Venezuela's protectionist economic and political attitude continued to counsel caution for foreign companies, but its impressive insurance market growth also provided significant temptation. Venezuela moved forward on a broad initiative to "reform" its insurance laws, including a proposal to place in the regulator's hands decisions about permissible terms and premiums for individual policies. The year also saw London insurers react to Venezuela's government appropriation of private petroleum operations by excluding the nation from their policies' war-risk coverage. Despite this, Venezuela's insurance market continued to rapidly grow, seeing total premiums increase 38% year over year.

Costa Rica

Opened to private and foreign competition in Fall 2008, the Costa Rican insurance market began in 2009 to see, in fits and starts, the entry of competitors for the nation's former monopoly holder. Local company Seguros del Magisterio obtained authorization in February 2009, Panamanian company Aseguradora Mundial received preliminary authorization in July 2009 and at least five other foreign companies are engaged in seeking the required regulatory approvals. However, high local minimum capital requirements and other barriers to market entry continued to temper foreign interest in the nation's insurance industry.

Peru/Ecuador

Smaller, less-developed nations, such as Peru, saw impressive market growth in 2009. Peruvian insurance association Apeseg released figures indicating that the nation's insurance industry grew by 24.9% when comparing the first five months of 2009 to the same period in 2008, while the Ecuadorian general insurance market grew 16.08% when comparing June 2009 to June 2008.

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.

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