Demand for reinsurance is expected to grow in certain Latin American countries, providing opportunities for both local and global players.
Aon Benfield identified a number of trends that could drive increased demand for reinsurance in Argentina, Brazil and Chile, in its latest Evolving Criteria report on regulatory and rating agency trends, all potentially set to benefit companies looking to deploy more capacity to the region.
In Argentina, the broker explains that the Superintendencia de Seguros has raised minimum capital requirements for insurers and local reinsurers. The Argentinian reinsurance market is also likely to return to a partial or totally open market, as it had been previously, Aon Benfield says. These factors are likely to lead to increased reinsurance demand and supply, they believe.
In Brazil, changes to the rules that enforce local cessions are expected over the coming years. The introduction of resolution CSN 322/2015 will reduce the obligatory local reinsurer cession from 40% to 30%, opening up more risk to foreign reinsurers and hence likely to increase demand.
Another development in Brazil, rating agency A.M. Best’s lowering of Brazil’s country risk tier assessment from ‘3’ to ‘4’, will lead to higher capital charges for local re/insurers, which could stimulate some more reinsurance buying as well.
Finally, in Chile new regulations are due which will make it mandatory for all insurers to have a written reinsurance policy, that has been properly supervised and approved by their boards.
Chile is also assessing the way catastrophe reserving for earthquakes is undertaken, currently using CRESTA zone exposures, and any change in how this is achieved could impact demand for reinsurance as well, Aon Benfield explains.
