LatAm legacy update.

A proactive approach to 2020's challenges

Martin Smith, Pro’s Head of Latin America, shines a spotlight on the regional challenges and opportunities for 2020 and beyond

There is no one size fits all approach to Latin America’s re/insurance markets – each country has different regulations and cultural approaches to conducting insurance business, as well as their own macroeconomic challenges that make having local expertise critical to supporting clients on the ground.

 

Of course this has been made all the more challenging by the COVID-19 pandemic and ensuing lockdowns, which for many in the region have heralded the first widespread shift to and acceptance of remote working.

 

After initial skepticism and an adjustment period, we are now seeing some clients find real efficiency improvements with the new remote working normal and even reconsider their overheads in terms of real estate investments as a result. But it’s not been a smooth transition for everyone, and in particular legal proceedings have faced delays due to the lockdown conditions and understandable struggle to adapt to remote court proceedings.

 

Economic challenges

 

At the same time that the industry is adapting to lockdown, wider economic challenges persist across the region. In Argentina, a debt crisis and Coronavirus have coincided in 2020, while Brazil has fared the worst of the region’s emerging economies, with the full impacts of the pandemic still playing out unfortunately.

 

And the impact of natural catastrophes is still being felt – smaller economies such as Puerto Rico are still in the process of recovering from the impacts of hurricanes Irma and Maria, and while proactive and orderly claims management is possible, the additional pandemic impacts on an already struggling economy will be wide-ranging.

 

Renewals pricing

 

June was a busy renewal season for reinsurance, made harder this year by Coronavirus lockdowns. Some initial trepidation about using video conferencing while working from home has given way to acceptance at new ways of working, however for some clients a reliance on paper and manual processes has meant the remote working normal has come at a cost to productivity.

 

However, this has not just been a tough renewal because of Covid-19, but also because reinsurance market pricing has hardened significantly compared to a year ago, leaving insurers frustrated at rising rates while facing unprofitability in their own business.

 

Nowhere is this more true than in motor business, which makes up the bulk of local insurers’ books, and for which combined ratios commonly stray above 100% and into unprofitability. However, motor insurers can look to one benefit from the pandemic: with few cars on the roads, the usual flow of claims have plummeted to offset their increased reinsurance costs.

 

For their part, reinsurers point to pricing inadequacy on their own side as the necessity for higher rates after more than a decade of soft pricing. Even in a catastrophe-exposed business, rate rises after 2010’s Chilean earthquake were temporary and pricing never recovered.

 

Courts and claims

 

However, one crucial aspect to processing claims across the region from an insurance perspective is whether the courts have stayed open – as in the case of Puerto Rico, or are firmly closed – as in the case of Argentina.

 

Now, more than ever, mediation is proving to be a useful tool – and some clients are accepting settlements more readily as a result, particularly where negotiations had already started pre-lockdown.

 

Around forty percent of our staff in Argentina alone are dedicated to handling live claims for workers’ compensation and motor liability for insurance companies, and we are keenly anticipating the reopening of the courts in order to move these claims forwards.

 

We’ve been talking and listening to companies throughout the region and helping them manage this new way of working. Change is happening and business is moving, and if there is one positive that can come from the pandemic challenge it is an improvement to processes, workflows and productivity thanks to more electronic and digital processing.

 

We are here to help and support – if you need any advice please do not hesitate to contact us: Martin.smith@pro-global.com