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Q3 Global Marketplace Insights – Latin America

2023 Market Insights

October 17, 2023

Roman Mesuraca, Head of Broking Latin America, discusses the market dynamics in Latin America from a capacity and coverage perspective.
Latin America insurance marketplace update

Hear from our experts and learn more about the latest insurance marketplace trends


Latin America insurance marketplace update

Welcome to WTW's Global Marketplace Insights series, where our experts bring you the latest risk and insurance perspectives.

Hello, my name is Roman Mesuraca and I'm the Latin American broken leader for WTW.

While there is a sense that the market is in general less volatile during the first half of 2023, in most Latin American markets we are continuing to see rate increase. Feedback from the 1st July Reinsurance Treaty Renewals was much more orderly than on January 1st.

However, increases were still significant even for Cat exposed countries.

Although the headlines are less sensational than at a new year, domestic insurance carriers are usually leading the markets in most of the countries in the town in general represented by companies that support their business strategy through solid financials, reinsurance support and alliances, strong distribution channels and balanced portfolio distribution.

Despite the restrictions in the terms and conditions assumed during the last for the renewals, most of the carriers found a way to dilute such additional cost and retention effects into the domestic market.

The only main exception is for Cat exposed treaties, which capacity has constraint, meaning that some carriers in several exposed markets are controlling its deployment, particularly on new business and less profitable accounts.

Insurance carriers are leveraging their underwriting and commercialization strategy taking into consideration a competitive environment for local and domestic products, the power of their distribution channels, major retentions and restricted occupancies.

Inflation scenarios have been reduced in many Latin American markets and the macroeconomic environment start to be more stable in order to let carries predict rising costs and claims.

With some exceptions like Argentina, Venezuela and Peru, we are starting to see a difference in renewal results between pure domestic and combined reinsurance placements.

While domestic renewals are more likely to achieve a single digit increase or occasionally a small rate reduction, combined retail plus facultative renewals continue to experience higher rate increases.

Moreover, where there are large Cat exposures or risk challenges, markets are taking advantage of the pure domestic capacity to explore major participation of coinsurance instead of approaching international reinsurance markets.

Facultative reinsurance markets are trying to leverage their exposed portfolios with higher rate increases in order to cover the additional expenses assumed globally originally for their reinsurance or retrocession and Cat capacity purchase.

In that sense clients and brokers are trying to maximize the capacity available in the local markets to achieve better renewal results.

But they have to be cautious of the major expenses administrating a major coinsurance even though when claims will arrive.

Talking about property for non catastrophe exposed risks with minimal losses, we are seeing flat renewal or one digit rate increases.

Occasional rate reductions may be achieved for the stress renewals and challenge occupancies where there is a heavy Cat footprint or the incumbent market are realigning their portfolio.

We are seeing rates increases starting at 5 to 20%.

Operational risk capacity remains a stable as there are no newcomers in the Latin American market.

However, these will be driven by Cat footprint and profitability.

We expect several markets to focus on risk, quality and establishing long term profitable relationships as well at Cat aggregates. New capacity is limited and replacing lost domestic capacity often comes at an increased cost year over year.

Demonstrating progress on risk recommendations can be a differentiator in the market.

ESG and reputation is increasingly part of the underwriting review process and the areas in scope can be very broad.

Replacement cost valuations are still under scrutiny due to significant increases in building material and transportation labor costs, but more rating with new less inflation scenarios.

On casualty, there's a clear regional variation in rating with Latin American liability renewals typically seeing rate increases of between flat to 10% depending upon industry and loss experience.

While these increases can be mitigated in geographies with the strong lack local markets, there are more challenge occupancies or frequency losses that are seeing rate increases between 10 to 20% or maybe upwards.

While reinsurance treaty renewals with throw some short term uncertainty in relation to the rating environment, it is unlikely to create sustained upwards pressure.

Latin America market capacity remains stable and for some well performing occupancies is increasing.

Though insurers continue to manage their participations through ventilation or renewals.

Insurers are also looking to manage retentions to protect their portfolios from future inflated claim costs. On financial lines in general, the market in Latin America has softened in 2023.

Cyber policies are the ones that have benefited the most from this softening as they have been substantial of improvements in terms and conditions and even accounts that were not placeable a year ago they could be placed with very good terms in 2023. Crime and D&O have also benefited positively, but not to the same extent as the cyber.

The London insurance markets have shown a lot of interest in the region, increasing their appetite and proposing more aggressive conditions than those of the regional reinsurance markets.

Most likely this trend will continue in the medium term since there are great possibilities for growth in this line in the region.

At the regional level, we see new players in financial lines that have deployed capacity and when seeking to build the portfolio, they are being aggressive in the market.

We see interest from companies in cyber policies and much of this driven by contractual obligations which specify having a cyber policy to be able to work together.

Likewise, repeated cyber attacks in the region have let companies to be more aware of this policy and perceive it as an obligation within their risk program.

Finally, marine business and the writing discipline persists.

LATAM insurers remain focused on bottom line profitability with continuous scrutiny of insuring terms, conditions and capacity deployed.

There is plenty capacity in most of LATAM countries for marine cargo and it's easier for buyers to resort to competition for better renewal results being Mexico, the exception where the capacity is being constrained due to very bad underwriting results.

Other particular exceptions are buyers with frequency events, large concentration of goods over single vessels or stocks on particular occupancies sensitive to the theft and or damage such as electronics food.

Between others there's restricted capacity for STP programs.

The hard market cycle has engine premiums closer to the technical pricing requirements and tighten coverage terms.

These actions have positively impacted underwriting results seeing flat rates or even small rate reductions.

Thank you.


Roman Mesuraca
Head of Broking, Latin America

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