0:20
Hello, my name is Roman Mesuraca and I am the P&C and Broking leader for Latin America at WTW based in Buenos Aires, Argentina.
0:29
While the global insurance and reinsurance market is beginning to shift from hard to stable or soft due to strong financial results, existing players are willing to deploy additional capacity than in previous years.
0:42
There is no many new joiners in the market.
0:45
It is just unused capacity that market would like to deploy due to an overall rebound in capital levels.
0:52
January 1st renewals were generally described as orderly, being far smoothly than a year ago when nat cat insurance was considered unpredictable and volatile resulting in capacity reductions, changes in coverage, attachment points and more important, increases in pricing.
1:10
This year capacity, supply and demand has turned into a better balance considering exceptional returns during 2023, exceeding reinsurers cost of capital resulting in a much calmer renewal period and an improved alignment between students and reinsurers.
1:27
Despite the analysis of these changes in our global market, the trends in Latin America may differ depending on portfolio concentration and results.
1:36
We still have seen reinsurers to push for year on year risk adjusted price increases and maintaining restrictions in coverage and retentions during recent renewals.
1:47
In contrast to last year January 1st, Renewal's price increase for loss free programs resulted in a range of flat to 10%.
1:57
Challenges were found on C&S which required large program capacity and proximity to expose catastrophe zones.
2:03
Even though the reinsurance cut capacity was sufficient to meet CNN demands reinsurance privileged carriers that could leverage catastrophe capacity with other lines of business in order to balance the nat exposure to reinsurance markets.
2:20
Latin American domestic carriers are usually leading the insurance business in every country in a town. In general, represented by companies that support their business strategy through solid financials, a strong distribution channels and balanced portfolio distribution.
2:42
In order to keep their market share and navigate in a constant competitive environment, most of the hardening suffered during 2023 reinsurance treaty renewals were absorbed by these carriers, impacting in their net results on major redemptions with only a few carrier exceptions in Mexico due to Hurricane Otis in Acapulco.
2:57
In the rest of the Latin American region, the financial results were good enough to leverage the reinsurance hardening.
3:04
In that sense, recently insurance renewals are providing more stability to to carriers in the region and better predictability to anticipate more a major commercial strategies in the domestic market and recover from such 2023 financial and exposure pressures.
3:23
We will also see international carriers pushing for competition as they have set a strong and aggressive growth strategies even doubling or triplicating GDP’s LatAm growth expectations. Inflation scenarios have softened below 5% on an average in the region with clear exceptions like Argentina and Venezuela.
3:43
As a combination of factors where major investments are expected to be limited, there is a potential pressure for carriers to keep or gain market share in such challenging economic environment.
3:55
As a result, there is a high probability to set the basis of a new software market period, which is always subject to the development of the global catalyst supreme market. Property cat and risk for insurance may benefit insurance market from recent reinsurance renewals in LATAM.
4:12
With capacity pressure easing, many carriers have successfully managed to buy more coverage including CAT aggregates.
4:20
Renewal pricing has been squeezed and capacity deployment suggests that there is sufficient capital available for carriers renewing during the rest of the year in Latin America
4:30
The risk coverage is still under scrutiny for challenging occupancies as for insurers are still asking for risk mutilation improvements to address many years of under performance in several class of industries.
4:45
We may expect regional reinsurance markets to behave less aggressive than international reinsurance trying to calibrate their regional financial results through a deeper portfolio leverage where international capacity may put pressure on pricing due to competitiveness and market penetration and strategy.
5:04
This situation may allow a large insureds to benefit from 1 digit rate reduction or at least flat renewals depending on their occupancy and loss experience.
5:16
On casualty product, confidence has diminished despite very significant increases in primary market pricing and limit reductions since the hardening of the market that took place since 2019.
5:28
There are still concerns over the impact of elevated loss inflation and the impact on current and future rated equity.
5:36
Nevertheless, there is a still adequate capacity for clash and casualty cat cover for good quality buyers who show sufficient pricing adequacy and detailed data in Latin America. Major interest from international players in both frequency and separate accounts.
5:53
From an industry perspective, Latin America's energy sector is taking a remarkable transformation driven by a growing regulatory awareness of environmental issues and a gift towards renewable energy sources.
6:07
As a consequence, clients are increasingly focused on transitioning to renewables and associated opportunities and risks.
6:16
The emergence of new exploration and production opportunities in and conventional resources and offshore fields presents both opportunities and challenges for clients in under understanding regulatory frameworks, environmental considerations and geopolitical risks and trends.
6:34
Furthermore, reinsurers are closely monitoring the energy market in Latin America recognizing both the challenges and opportunities it presents.
6:43
Working closely with the clients, insurers and reinsurance should develop customized coverage options that address specific challenges.
6:52
Environmental liability, renewable energy, parametric insurance, ESG integration, supply chain resilience and carbon emission liability policies will change the dynamics and environmental consciousness providing proactive risk management tools.
7:10
By embracing sustainability and innovation, insurers can provide their clients with a comprehensive coverage and proactive risk management solutions they need to navigate the complex and rapidly changing energy market.
7:23
As the region continues to transition towards renewable energy sources, insurers must remain agile and adaptable to meet evolving needs of their clients and ensure a sustainable future for the energy sector in Latin America.
7:39
Financial lines suffer a very hard market in 2021 and 2022 and after softening in 2023, we anticipate further improvements in terms and conditions for 2024.
7:50
In Latin America, there are currently many new entrants in the region, especially MGAs willing to offer new capacity.
8:00
Mexico Mercy continue to have sufficient local capacity.
8:03
Chile and Colombia are growing their local capacity.
8:06
Also traditional products continue to be marketed and bought.
8:11
D&O policies have profited it immensely from the softening of the market, presenting discounts of even 25% in some cases, but the average being around 10%.
8:21
BBB and crime policies are being renewed at better rates, but not with discounts as big as they are in the D&O market.
8:29
for financial lines, there are significant improvements in the technical conditions of the policies which benefits the clients.
8:35
Cyber continues to grow at a very accelerated base in the region and insurance are currently very interested in cyber solutions.
8:43
Improved value propositions that help clients be better prepared for acquiring a cyber policy are in the map.
8:50
Emerging opportunities in terms of private equity and M&A continue to grow as well with a bigger focus on Mexico, Brazil and Chile.
8:59
In regard to the trade credit market, the capacity was affected during the last year since most of countries reduced in retail sector due to a big claim in Brazil in 2023 and in some other countries.
9:17
For sectors like pharmaceutical, food and beverage, chemical and all, we have great capacities for most of countries as Mexico, Colombia, Chile and Brazil.
9:23
For Peru, Paramount, Central America in general, we have new entrance insurance to support us in extra capacity as well as an international carrier in faculty.
9:34
For political risk, we are emerging market as the product was designed to.
9:37
So we are continuing our strategy aligned with international market with appetite for companies like oil and gas, manufacturing, supply chain and all other sectors which have cross-border transactions.
9:50
LatAm economic uncertainty is creating increased opportunities for surety business.
9:56
The demand for commercial surety bonding is experiencing upward pressure especially in the performance bonds.
10:02
Commercial surety pricing remains flat.
10:05
[Inaudible] feelings and recapitalizations are drawing attention in the surety marketplace as companies try to identify trends and reduce exposure.
10:14
Digitization remains a major trend in the industry with greater regulatory impact as governments and insurance companies attempt to minimize costs, improve operational efficiencies, minimize fraud and ensure inclusive access.
10:30
Finally, marine business underwriting have been flat to soft, especially for clients with good loss ratio.
10:37
We are also counting with plenty capacity in most of Latin American countries for marine cargo.
10:43
However, for a stock throughput exposures, there's a still restricted capacity available on regional markets even considering the increase of interesting from the clients.
10:53
As an alternative, international markets could be a good option to offer a stock throughput capacity, but they used to request very detailed data.
11:02
Project cargo is a risk with better terms and conditions available when comparing with previous years, but there's still few markets with the correct specialization to lead a quote and most of them act as followers nowadays.
11:16
The main challenges in the region remains on fine good terms to yachts and [inaudible] and markets with appetite and adequate wording for perishable goods.
11:26
And our attention point is increasing of theft or currencies in Mexico with the markets applying 25% of rate increasing at least.
11:35
Many thanks.
