Although insurance penetration in Latin America remains low, the demand for reinsurance capacity is strengthening owing to a wide variety of natural perils

The Best’s Market Segment Report, “Latin American Reinsurers Reposition as Demand Strengthens”, is part of AM Best’s look at the global reinsurance industry around the Rendez-Vous de Septembre in Monte Carlo. Other reports, including AM Best’s ranking of top global reinsurance groups and in-depth looks at the insurance-linked securities, Lloyd’s, life/annuity, health and regional reinsurance markets, have been published in August and September.

According to this report, the Latin America region saw 82 natural hazard-related disasters occurring in 2024, of which 26 were natural catastrophe events. While losses amounted to USD 11.6 billion, just USD 1.5 billion was insured as insurance penetration remains very low. Global reinsurers have rekindled their interest in the region, following a shift from a risk-averse position seen in 2022-2023. At the same time, local participants aim to continue growing while strengthening their brands, taking advantage of the spaces created by the past hard market.

“While catastrophe-exposed lines involve more complex negotiations, especially in countries with major exposure such as Mexico, Guatemala, Costa Rica, Peru and Chile, pricing has been very competitive, with conditions flexible overall,” said Inger Rodriguez, financial analyst, AM Best. “Loss experience and enterprise risk management capabilities remain key elements in the negotiation of reinsurance contracts.”

Although Brazil’s primary insurance industry is more profitable than its reinsurance industry, the country’s leading insurer is dedicated exclusively to reinsurance. However, the report notes that the company has begun to reduce its underwriting volume by carefully selecting its risks, and consequently, has provided other players in the market an opportunity to diversify the risks among different companies.

“Although the volume of reinsurance accepted by Brazil’s reinsurers has grown, the share of Brazil’s reinsurers among the total premium ceded by local insurers has decreased, indicating that local insurers are ceding significantly more to reinsurers offshore,” said Ricardo Rodriguez Perez, senior financial analyst, AM Best.

The report also notes that use of managing general agents (MGAs) to provide capacity to the Latin American market or to take risks by regional reinsurers from abroad continues to gain popularity. As global interest rates move downward, the attractiveness of the region may create more demand for delegated underwriting authority enterprises (DUAEs) focused on the region.

 

Fuente: AM Best

Enlace: www.ambest.com.