The growth opportunities within Latin America that many in the re/insurance industry have championed in recent years have materialised to a certain degree, but at the same time, the region appears beset by problems that mean the market has become less attractive to some.
There is little doubt that the insurance industry in Latin America continues to grow. As quoted in our special Latin America report in this issue, figures from Swiss Re’s World Insurance in 2014 report found that premium volume in the region remains on the rise.
According to the reinsurance giant’s study, premium volume in Latin America and the Caribbean increased to more than $188bn in 2014, up from almost $179bn in the previous year. Of that, $75.2bn related to life insurance, a marginal 0.4% increase from the prior year.
A far greater level of growth was witnessed in Latin America’s non-life insurance market with the close-to $113bn of premium volume generated in 2014 representing an increase of 8.9% year on year.
So the market is growing, although with the economic troubles that numerous countries in the region are experiencing, the strength of this growth is expected to wane over the coming years.
That Latin America is no longer producing the sort of growth that various firms had expected is presumably one of the reasons why companies such as RSA and AIG have either withdrawn their operations in the region, or at least sold off part of them.
It is interesting to see that AIG has decided to cut back its participation in Latin America. Just over three years ago, AIG’s then president for Latin America and the Caribbean, Sanjay Godhwani, announced the business was looking to double its $1.5bn Latin America revenues within five years.
Obviously a lot has changed since then. For a start, Godhwani, along with a host of his other former colleagues, has swapped AIG for Berkshire Hathaway Specialty Insurance. But the other major move saw AIG sell off its Central American operations to Panamanian company ASSA.
The business has obviously experienced some difficulties in recent years, and the firm is now in the process of trimming its operations and reducing its costs by limiting its staff.
At the same time, AIG is withdrawing from markets that it no longer views as core.
Despite selling off the Central American business, AIG remains active in Latin America, with the insurance behemoth having businesses in countries such as Brazil, Argentina, Colombia and Chile among others.
Another potential growth limiter will be the introduction of new solvency regulation across the region. Countries like Mexico have been quick to implement new legislation similar to the European Union’s Solvency II regime.
However, it remains to be seen whether this regulation can actually be introduced. As some of those who spoke at the Reactions and Euromoney Seminars co-hosted Latin American Insurance and Reinsurance Forum noted, the countries within Latin America may not be ready to implement such regulation.
Another potential issue is whether the regulators actually have it within themselves to be able to monitor and police such rules.
That is because many are unaccustomed to the level of scrutiny they would be required to undertake on the companies they are monitoring.
But the biggest limiter of growth in Latin America would appear to be that the culture of buying insurance in the first place is not one that is prevalent in the region.
Numerous panel discussions during the event highlighted that the products on offer do meet the needs of Latin America’s consumers, it is just the people who reside in the region do not have the mindset of buying insurance.
Until that changes, then the much-hoped for high levels of growth within Latin America’s insurance industry will remain elusive.
By Christopher Munro - firstname.lastname@example.org