LATIN AMERICA
Seizing the opportunity in LatAm: digitisation and skills key to unlocking the potential
COVID-19 has ravaged much of South and Central America, but it is just the latest in a long line of setbacks the region has suffered over recent decades. But there are still opportunities if re/insurers take steps to realise them.
Latin America has seen its fair share of trouble in recent years. The early 1980s debt crisis in the region came to be known as the lost decade. Some say that the stagnation of the 10 years following 2010 was the second. Now, with the pandemic hitting some of its biggest economies hardest, in human and economic terms, there are fears it could be at the start of a third crisis.
To discuss whether the region is still a land of opportunity, Intelligent Insurer’s Re/insurance Lounge, the online, on-demand platform for interviews and panel discussions, brought together a range of experts:
- Florian Kummer, managing director for Latin American Markets at reinsurer Deutsche Rück since last year and former head of Swiss Re’s reinsurance P&C Underwriting Hub for Latin America
- Martin Smith, head of Latin America for insurance industry consultant Pro Global; and
- Andrea Baer, senior vice president and head of innovative risk solutions for Latin America for Swiss Re Corporate Solutions.
Together they explored the prospects for the region and how the industry could capitalise on the opportunities, as well as mitigating the risks.
Looking up in the long term
As the panellists noted, even before the crisis, political instability—never far away in Latin America—was making a determined comeback, with social unrest in Ecuador and Chile threatening to topple governments in the months leading up to the pandemic, and protests in Peru beginning, too. Growth in 2019 for the region, meanwhile, was just 0.1 percent.
The first thing that those coming to the region should bring is probably a longer-term perspective. If they do that, things seem far less bleak, according to Kummer.
“It’s 22 countries with very diverse cultures, so you need to see how to approach each of them.”
Martin Smith, Pro Global
“If you look beyond the current crisis, take a step back and look more at the longer-term growth path of the region, then you will see that since the 1990s when Latin America opened up and integrated into the international economy, its countries have been winners from globalisation,” he said.
It has been volatile, he conceded, but growth has also been steeper than in developed markets.
“The insurance and reinsurance markets have also outpaced GDP growth,” he added.
Baer agreed that it’s not a market insurers should avoid. “It’s quite a sizeable market, and as a global insurer or reinsurer, the diversification benefits mean it makes sense to be present,” she said.
Although it might lag some others, commercial insurance rates in the market are rising, she added, up 5 percent in the first quarter of the year. Longer-term, with a massive protection gap in the country, there remain significant further opportunities.
“When it comes to alternative risk transfer, there is definitely potential here,” she said.
Even so, a discerning approach to the markets will be needed.
“The effects on premiums are uneven across lines of business, across segments of the population and even across countries,” Kummer pointed out.
Insurers need to reflect that in their approach, said Smith. “It’s 22 countries with very diverse cultures, so you need to see how to approach each of them. It’s different doing business in Mexico than in Chile, Colombia or Argentina—completely different in some cases.”
Digitisation and discipline
A few factors are likely to prove important across the region.
One is the increasing use of technology, following the rapid move by businesses online due to the pandemic and lockdowns.
“Digitisation is another opportunity and looking some years ahead, I see a far larger insurance and reinsurance market space for us in there,” said Smith.
“A disciplined underwriting approach is key, especially facing the pandemic.”
Andrea Baer, Swiss Re Corporate Solutions
Baer pointed out: “As an industry going forward, we should be fostering data-driven, automated solutions to gain economies of scale and increase customer-centricity.
“It’s another whole aspect of optimisation, artificial intelligence, data-driven solutions that we need to investigate further.”
The industry can’t rely only on technology: it also needs talent. Insurers need to reflect both the dangers and the diversity in the region when it comes to their HR strategies, said Kummer.
“Latin America has an extreme risk landscape and a developing one, so you need employees with different skillsets, different backgrounds and different cultures,” he said.
“There is very strong talent in the region, and it’s important to bring people together who have a mix of experience.”
Baer agreed, adding: “We need people from Latin America who speak the language and have a cultural background here as part of diverse teams.”
There is one other thing insurers will need, she added: caution. For all its opportunities, the region is still highly volatile and uncertain, particularly while it remains in the midst of a pandemic. Care in the short term could be the best way to ensure long-term success.
“A disciplined underwriting approach is key, especially facing the pandemic and the claims the industry faces.
“You need to keep your risk appetite in check, to focus on terms and conditions, and continue to drive sufficient rate increases to manage the portfolio’s profitably in the long term,” Baer concluded.
To view the full Re/insurance Lounge session click here
Images, from top: Shutterstock / Sergey Nivens, estudio Maia
