CARLOS ROMERO: Hello, Claudio. Thank you and delighted to be here to share what we are seeing today in the market in the region.
CLAUDIO PAZO: Thank you, Carlos. Let's start with a broad vision. How would you describe the state of the construction insurance market in Latin America today?
CARLOS ROMERO: Well, Claudio, I would say that the market is going through a moment of stability. The region continues to show dynamic construction activity and driven mainly by renewable energy projects, electricity distribution and transmission, the construction of logistics and infrastructure centers and a very relevant issue is that of data centers.
In terms of capacity, between 70 and 80% of projects can be absorbed within the insurance and reinsurance capacities available in the region. And in terms of terms and conditions, these vary according to the type of project, the exposures to catastrophic risks and the associated loss rate in each case.
CLAUDIO PAZO: OK, so this diversification has generated healthy competition, especially in projects of medium complexity. What can you tell us about it?
CARLOS ROMERO: When projects are well structured, with reasonable work schedules, with the participation of contractors with recognized experience in the sector and a Good claims performance, both in the insurance and reinsurance markets, usually responds with competitive terms.
However, if we are talking about exposures in disaster areas, such as an earthquake or hurricane, an underwriting policy aligned with the specific risk appetite for each of these areas.
CLAUDIO PAZO: Thank you, Carlos. Let's move on to a market reading towards 2026. What can you tell us about it?
CARLOS ROMERO: Well, Claudio, the region is shaping up to be stable in 2026, with moderate growth that is going to be around 3% or 5%. However, that performance will depend on the conditions of each country, that is, the economic conditions, the inflationary processes. In some countries we have electoral cycles and, well, the institutional stability of each of these countries.
In the midmarket segment, it continues to gain relevance and we will see growth that will vary from country to country, driven by various sectors of high activity. For example, the issue of renewable energies continues to be a key driver in the region. And this not only drives the construction of new solar or wind farms, but also the strengthening of distribution and transmission networks and the general modernization of the infrastructure.
It is also important to highlight the phenomenon of nearshoring in Mexico, where industrial and logistics growth is promoted and also the growth of the issues of datacenters associated with the growth or boom of artificial intelligence around the world. So we see projects of these characteristics in Mexico, Chile, Brazil and Colombia.
In Argentina, you know, there is the issue of Vaca Muerta, so there are many projects that are being generated around it, the potential of Vaca Dead. And there are also many mining projects associated with the lithium issue . And finally, with all the changes that have been generated at the beginning of this year in Venezuela, we are very attentive and monitoring how it goes economic reactivation in this country, which could boost oil, gas and infrastructure projects.
CLAUDIO PAZO: Very interesting, Carlos, your comments. I believe that this generates greater competition between insurers and reinsurers, which opens up more alternatives for our clients, who can choose between different coverage, pricing and support levels offered between local, regional and global company options.
CARLOS ROMERO: That's right, Claudio, that's right.
CLAUDIO PAZO: Continuing, we can go to a new question, which refers to, what would be the main challenges that you consider the industry faces today and its insurability?
CARLOS ROMERO: I would say that today the industry faces several challenges that directly affect insurability. Aspects such as the issue of the supply chain, tensions around the supply chain, the increase in input prices critical materials such as metals, concrete, the limited availability of skilled labor, the presence of increasingly tight schedules make subscribers of the different markets must carry out an exhaustive analysis of each of these topics in the project.
It is important to evaluate in greater detail the critical routes, the replacement times of equipment and materials, possible bottlenecks and the different delays that could affect the execution of the project, as well as possible significant increases in the sums insured associated with cost volatility. All these elements require a more rigorous review of risks and greater precision in the structuring of coverage.
CLAUDIO PAZO: Thank you very much. And in this sense and in line with what you say, the challenge of managing the risks associated with catastrophic exposures persists, especially in energy where incidents such as wildfires at solar and wind farms have increased pressure on insurers and reinsurers to adjust underwriting and protection requirements .
For example, in the case of systems, their expansion becomes increasingly necessary to ensure the stability of the electricity grids of our region. A clear example was what happened this week in Paraguay, where an unexpected increase in demand exceeded the available and installed supply capacity. causing a total interruption of the supply.
At the same time, these developments represent a challenge for the insurance and reinsurance market due to the limited historical experience with this type of technologies, the complexity of the associated risks and the potential for accumulated losses within the electrical infrastructure. Continuing with our podcast, what can we expect in capacity and appetite and prices for 2026?
CARLOS ROMERO: Well, Claudio, speaking initially about prices, we are not going to expect great variations. In general terms, if we talk about construction and assembly, let's say that each region and each geography has a different behavior. We can see in some cases reductions of up to 15% in the markets that are more competitive, but also some increases in some geographies that are more competitive, have catastrophic exposure or the projects are more complex, these increases can reach around 10%.
On the issue of civil liability, we also see some interesting movements in the region, where we can find some reductions that go up to 15%, but also increases of up to 5% depending on the country and which are closely associated with the behavior of losses, history and pressure competitive market.
Finally, on the subject of professional civil liability, I believe that it is the sector where, or the branch, in which we are seeing greater competitiveness between the different markets. Although most policies are being renewed with discounts of around 15%, in some cases we can find even more discounts large. In terms of capacity and appetite, I think both remain stable.
We see increased interest from several insurance and reinsurance markets to strengthen their presence in the construction and assembly market. This is mainly reinforced by what I was telling you a moment ago that there are other lines of business, such as Property or Phoenix, where markets are very soft. So reinsurers and insurers are tending to move into other markets that are a little more stable, such as construction and assembly.
CLAUDIO PAZO: That's right. Last week, during Insurance Week in Miami, I spoke with several markets and was able to identify operators that are beginning to show greater interest in construction and assembly, precisely because of the softening they are seeing in other lines of business.
This is leading to greater capacity availability and a more proactive attitude towards construction-in-assembly projects for our region. Well, that's how we come to the end. Carlos, thank you very much for this conversation and thank you also to those who are listening to us for joining us in this episode. See you in the next one.
