Gladimir Adriani Poletto, Sócio do Poletto & Possamai Advogados, está entre os “Power 50” profissionais mais influentes do mercado de seguros e risco da revista “LatAm Insurance Review”
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#42 March 2015 www.insurancelatam.com COUNTRY PROFILE LINES: AGRICULTURE LatAm IR lists the top insurance professionals and risk managers in Latin America 09 Dry times in Brazil Extreme weather event tests the (re)insurance market 20 Total uncertainty Challenges for (re)insurers in Venezuela 22 NEWS INSIDE 04 Brazil lacking cyber risk protection Dramatic rise in cybercrime exposes vulnerability 05 Budget cuts imperil insurers Effects of new austerity measures cause of concern for Mexico’s (re)insurers 06 Venezuelan tax raises issues New tax on collected premiums causes confusion 08 Optimism rises in Colombia Global (re)insurers flock to growing Colombian market For more up-to-the-minute news visit www.insurancelatam.com NEWS ANALYSIS POWER 50 BEST IN INDUSTRY
Transcript
#42
March 2015 www.insurancelatam.com
COUNTRY PROFILELINES: AGRICULTURE
LatAm IR lists the top insurance professionals and risk managers in Latin America 09
Eff ects of new austerity measures cause of concernfor Mexico’s (re)insurers
06 Venezuelan tax raises issues
New tax on collected premiums causes confusion
08 Optimism risesin Colombia
Global (re)insurers fl ock to growing Colombian market
For more up-to-the-minute news visit www.insurancelatam.com
NEWS ANALYSIS
POWER 50BEST IN INDUSTRY
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WELCOME 3
V enezuela remains in a state of chaos. The collapse in oil prices, combined with currency volatility, are not only scaring off foreign companies but also
interfering with the lives of all Venezuelans.
Investment in the country is a risky business, not least for global and local (re)insurers who are facing up to a re-strictive and confusing regime (p18). Nevertheless, hopes of better days to come leave (re)insurance companies reluctant to give up on the market.
Parts of the Brazilian (re)insurance market are also undergoing a period of strain due to a severe drought. Depleted water reserves and damaged coff ee, cocoa and sugarcane crops have tested the mettle of agricultural specialists (p16).
Although the Latin American market presents consider-able challenges, insurers, reinsurers, brokers, risk manag-ers and specialised lawyers are ready to face the test and make the most of the region’s potential.
Some of those names are now part of this year’s Power 50, Latam Insurance Review’s assessment of the con-tinent’s top market experts and rising stars in the (re)insurance business across Latin America (p9).
With all of the Power 50 voted for by our subscribers, this issue is dedicated to the nominees and their eff orts to develop and strengthen the Latin American (re)insur-ance market through both good and challenging times.
Direct insurance premiums grew 2.4% in Mexico last year, a slowdown from the 4.9% growth registered in 2013.
According to Comisión Nacional de Seguros y Fianzas (the Mexican insurance market regulator) property lines increased 36.8%, agricultural lines grew 48.7% and the maritime and transport segment had a 14.8% increase.
Credit insurance in Mexico went up 13.9% last year and surety direct premiums registered an increase of 10.3%.
In the surety segment, performance bonds generated the biggest share of direct premiums, with a 75% market share.
Fidelity bonds accounted for 18.9% of surety direct premiums, credit surety bonds had a 3.3% share and judicial surety bonds 2.8%.
CHILE
Five-year low for Chile’s insurers
Chile’s insurance market registered a 1.7% growth in 2014, the lowest increase since 2009. However, non-life business continues to make progress.
According to Asociación de Aseguradores de Chile (the country’s insurance industry trade body), last year the non-life insurance sector grew by 3.6% – an increase on the sub-1% growth levels seen by the sector in 2013.
Non-life business continued to out-perform life lines, which only increased 0.8% last year.
Despite the weak performance last year, 2015 brings a more posi-
tive outlook for the Chile-an insurance market, with Fitch Rat-ings, the rat-ing agency, p r e d i c t i n g growth of circa 6.5%.
Businesses in Brazil are being underserved by the insurance market when it comes to purchasing cyber liability coverage.
The XL Group claim to be the only insurer providing coverage for cyber liability in the country.
Despite a 48% increase in cyber-attacks around the globe in 2014, in Brazil this risk is still overlooked.
Brazil has an online population of 120 million people (more than 60% of the population) and this “makes technology companies a huge target for data breach” according to Silvia Gadelha, international financial lines underwriter for XL Group’s insurance operation in Brazil.
“The combination of more sophisticated criminals and stricter data breach laws leave these businesses facing increasing financial and reputational exposure,” she told LatAm Insurance Review.
“As one of the fastest growing internet user communities in the world, Brazil has experienced a dramatic increase in cybercrime.”
The region’s economic powerhouse ranks in the top ten of all the reports’ studies of malicious cyber activities, including spam zombies, phishing hosts and bot-infected computers.
“Poor internet usage habits, unsafe web practices as well as a thriving underground market have turned the online market into a harvesting hub for cybercriminals,” Gadelha added.
When asked why cyber-risk is still underestimated in the country, Gadelha said she believes Brazil still needs to develop a better risk management culture.
The underwriter is optimistic about upcoming changes however, and gives the example of the new Marco Civil da Internet regulation which was recently added to the Brazilian Civil Rights
Framework for the internet.“Also, many Brazilian companies
have exposure in the US or other countries where local laws place greater liability them. Such factors help increase the awareness of cyber risks and the demand for adequate coverage,” she said.
Gadelha added that, in June 2014, The XL Group launched two new products, to cover against cyber attacks: Cyber Liability Pro, which offers professional indemnity coverage for technology companies, and a more general cyber risks insurance solution serving mid- and large-sized companies, called Cyber Liability.
There were 117,339 new cyber-attacks every day, a total of 42.8 million incidents in 2014, generating a 34% increase in financial losses for companies all over the globe, according to Symantec’s Internet Security Threat Report 2014.
CYBER LIABILITY COVERAGE
Brazil lacking cyber risk protection
NEWS 5
PERU
Peru’s insurance market grows 11%
The insurance market in Peru grew 11.96% in 2014, compared to 2013, Superintendencia de Banca, Seg-uros y AFP (Peruvian banks and insurers regulator) reported.
The insurance company Interse-guro is Peru’s market leader, with a 25.28% share of all the premiums written in the country last year.
The insurance industry in Peru contributes around 1.5% to the country’s GDP.
The regulator said in a statement that “the growing opportunities for the insurance sector in Peru are extremely positive…The insurance market in Peru has been growing considerably more than the coun-try’s economy for the past years.”
Peru’s economy overall grew by 2.35% in 2014, according to the regulator.
MEXICO
Budget cuts imperil insurance market
Mexico’s insurance trade body, Asociación Mexicana de Institu-ciones de Seguros (AMIS), has warned that government budget cuts will have a negative impact on the country’s insurance market.
The Mexican finance ministry has announced budget cuts worth 0.7% of GDP, “as a preventive move in the face of a more adverse interna-tional economic environment.”
AMIS has predicted that insur-ance premiums would grow in the 7 to 10% range in 2014, but the planned austerity measures might force the association to review these predictions.
“Reduced spending on infra-structure is part of the austerity
measures, and this will have a negative impact on the insur-ance industry’s growth,” Recare-do Arias, head of AMIS said.
Barclays Capi-tal has released a statement es-timating that the announced budget cuts will reduce public investment by 11% in real terms this year and could slow down economic growth in the country.
CHILE
Patria Re to open first agency in South America
The reinsurance firm Patria S.A. will open Patria Re Servicios S.A., a new representing agency in Chile.
Patria Re Servicios S.A. will be the firm’s first branch in South America.
“This new location is integrated with our strategic plans and will support the growth we have expe-rienced over the last 60 years,” said Ingrid Carlou, Patria Re’s CEO.
Carlou also pointed out that the new location will reinforce the rein-surer’s credibility in the region.
CHILE
Talanx takes over Aseguradora Magallanes
Talanx, the global (re)insurance company, has acquired full control of Aseguradora Magallanes, one of Chile’s main insurance groups.
Talanx launched a public tender offer last December to buy the minority shareholders’ part in the Chilean insurance group.
The process has now been con-cluded with more than 95% of the insurance group shareholders ac-cepting the offer.
In a statement, Talanx said that the purchase of Magallanes is part of the group’s ongoing investment strategy in Latin America.
The (re)insurer now operates in Argentina, Brazil, Chile, Colombia, Mexico and Uruguay.
Even before the purchase, the (re)insurance company was al-ready present in the Chilean mar-ket, through HDI Seguros Chile.
OUTLOOK
Euler Hermes forecasts slower growth for Brazil
Euler Hermes, the global credit in-surance company, expects Brazil’s GDP to grow only 0.5% in 2015, af-ter stagnating in 2014.
This outlook contradicts the Bra-zilian government’s target to reach a primary GDP surplus of 1.3% this year and 2% in 2016 and 2017.
Euler Hermes estimates that the investment deficit accumulated by the Brazilian economy over the past 10 years has now reached $1.1bn.
The insurer’s ‘Economic Outlook’ report anticipates a global eco-nomic growth of 2.8% for 2015.
Despite the growth prediction, Ludovic Subran, chief economist at Euler Hermes, has warned that “we continue to see political hotspots in the emerging world. Political risk can reverse investment flows and hit the pause button on private sector development for quite some time.”
The report also states that the oil price drop will provide relief to many countries but export-ers, such as Venezuela and the Gulf countries, will have to adapt to lower revenues and be selec-tive about investments and public spending.
“Reduced spending on infrastructure is part of the austerity measures, and this will have a negative impact on the insurance industry’s growth”Recaredo Arias, head of AMIS
6 NEWS
LATAMIR
Pública) has been published in the Government’s gazette.
The new levy will go towards funding the industry’s regulator (Superintendencia de la Actividad Aseguradora).
However, Adolfo Paolini, DAC Beachcroft’s consultant for Vene-zuela, told LatAm Insurance Review that the law is not clear and “will probably be amended soon”.
“The Ministry expects (re)insur-ance companies to pay the 2.5% before they even close their year books,” Paolini said. “So how will the insurers know exactly how much to pay?”
The new regulation, published in Gaceta Oficial No 40.594, states that this “legal contribution will be expected from all insurance com-panies, reinsurers, private health clinics with health plans for the public and any entity that sells in-surance premiums”.
“How will the insurers know exactly how much to pay?”Adolfo Paolini, DAC Beachcroft
EXPANSION
Partner Re targeting SMEs in Chile and Colombia
Partner Re wholesale is looking to expand partnerships and increase its distribution network in Latin America.
Marc Van der Veer, general man-ager of Partner Re’s wholesale arm, told LatAm IR the company has studied the region’s market and is particularly interested in doing business in Colombia and Chile.
Partner Re wholesale builds strategic partnerships with small and medium sized enterprises (SMEs). The specialty (re)insurer helps property and casualty insur-ance companies to manage their distribution network, build robust IT infrastructure and access expert product knowledge.
“This allows SMEs to adapt to the market expansion, offering new and improved products, without having to invest in more people and know-how,” Van der Veer said.
Partner Re wholesale is focused on the “rapidly growing SME mar-ket”, which the firm believes is usu-ally ignored.
“There is a huge gap between saturation and growth and here is where we try to benefit,” said Van der Veer.
He added that competitors are “so focused on the large companies that they miss the fact that the SME market is growing”.
In fact, a large percentage of SMEs globally are still to insure. This is particularly significant in “less mature countries”, where many smaller companies do not have any insurance coverage.
TAX
Questions raised over new Venezuelan insurer tax
A new 2.5% tax on premiums col-lected by (re)insurers is to be levied by Venezuela’s Economy, Finance and State Bank Ministry (Ministerio para Economía, Finanzas y Banca
Brazilian insurer SulAmérica registered a 14.2% growth in net profit during 2014, reaching $193m. According to the company’s latest earnings release, SulAmérica’s written premiums increased 10.7%, to $4.76bn. Brazilian reinsurer IRB-Brasil Re (IRB) registered a 72.5% net profits growth to $209m in 2014. According to the company’s latest earnings release, IRB’s written premiums increased 18.6% and earned premiums stretched 34%. Additionally, the reinsurer’s claims ratio fell to 58% in 2014 from 63% the year before. Lower retrocession levels in the company’s P&C portfolio gave IRB a retention rate of 67.6%. Global reinsurance company Swiss Re is betting on the Colombian reinsurance market,
as the company’s profits decrease worldwide. “Colombia is a market where you can meet some of the most well educated people in the insurance business,” Michel Liès, Swiss Re’s CEO said. “The country is not on top of everybody’s list when it comes to doing business, but it is definitely on the top of industry expertise.” Swiss Re registered a profit of US$245m on the last quarter of 2014, representing a fall of 79.5% from the $1.2bn profit registered in 2013. Brazilian insurer Pan Seguros registered a 24.21% growth in written premiums during 2014, reaching $70m. According to the company’s latest earnings release, the positive result is due to the insurance company’s investment in new technology and a change in its main shareholders.
Brazilian insurance company Porto Seguro has registered a 24% net profit increase in 2014. In total, the insurer had a net profit of $311m last year. Profits grew 19% on the last quarter of 2014 and 16% compared to the final quarter of 2013. Over the course of the whole of 2014, Seguro’s premium values increased 13%, when compared to 2013. Liberty Seguros, Liberty Mutual’s Brazilian arm, grew 7% in 2014. The insurer returned a profit of more than $30m and by the end of the year had 1.3 million clients in Brazil. “It’s a record for the company in Brazil, regarding profitability,” Carlos Magnarelli, CEO for Liberty Seguros Brasil, said. The company’s lines for small and medium enterprises (SMEs) increased 9.4%, compared to 2013.
N E W S I N B R I E F (MARKET RESULTS 2014)
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8 NEWS
LATAMIR
Optimism for Colombia’s (re)insurance market
There are good prospects for the Colombian (re)insurance industry,
participants and speakers agreed, at the Colombia Insurance Market Seminar, held by the international law fi rm Clyde & Co in London last month.
“We expect the Colombian insurance market to grow around 9% this year,” said Juan David Escobar, vice-president of insurance for Suramericana S.A., the largest insurance company in Colombia.
Currently, the insurance industry is worth $7.93bn in the country and, according to the Colombian insurance federation, has increased 8.9% since 2013.
In 2013 the total gross written premium in the country was worth $9.036m and Escobar believes “the insurance market in Colombia still has plenty of room to grow, due to the increase of the country’s middle class.”
In fact, the insurance penetra-tion rate in the South American country is 2.7%. This number is below the Latin America region average, which has a penetration rate of 3.2%.
This potential for growth, is supported by regulation, Raquel Rubio, an associate at Clyde & Co, explained, “the Colombian legal system has undergone a very substantial process of improvement in order to satisfy the growing de-mand from the insurance sector.”
“A revised regime of fi nancial regulation has been designed
to lower the barriers for foreign insurers and brokers entering the market,” Rubio added.
However, there are still some challenges insurers have to face in the country, as there is a need for innovative solutions to face the emergence of new risks. Colombia also requires new infrastructures and the improvement of the mining and agriculture sectors, according to Escobar.
Despite these challenges, Suramericana’s VP remains optimis-tic about future growth.
Escobar describes a “continuous investment in science and technol-ogy”, as well as a major plan for new infrastructures all over the country, investments in mining and agriculture (particularly reforesta-tion).
Regarding foreign (re)insurance companies operating in the country, Escobar said they need to adapt themselves to the Colombian mar-ket and understand its nuances.
“If a company sells the same standardized product everywhere, without positively diff erentiating it, then clients will always choose the company that off ers the lowest price,” he said.
Andrés Cárdenas, assistant vice-president at Marsh Ltd, also re-ferred the language diff erences and the problems caused by document translations. He also highlighted Miami’s transcendence as an im-portant hub for the Latin American (re)insurance market because of its large number of Spanish speakers.
Overall, the seminar speakers agreed that the Colombian insur-ance market is benefi ting from the country’s economic surge.
Colombia is considered “one of the most dynamic economies in the world,” Neil Beresford, partner for Clyde & Co, explained. In fact, the country’s GDP increased 4.2% last year, higher than the Latin Ameri-can average of 1.3% growth.
Other indicators, such as a fall-ing unemployment rate (8.6%), low infl ation (3.3%) and an increase in the country’s per capita income, also testify for the country’s good business environment.
Future prospects also seem bright, as Juan Manuel Uribe, deputy head of mission of the Colombian Embassy to the United Kingdom, predicts Colombia’s GDP might increase from 3.6% to 4% in 2015 and infl ation should be around 3.5%.
Andrés Sarmiento, business analyst for ProColombia UK, a Colombian agency for international investment and export, revealed that the country’s $25bn infra-structure program “is the biggest infrastructure plan Colombia ever had – never in our country’s history have we invested so much.”
Andrew Wright, chief executive of UK Colombia Trade, a business consultancy, in Bogotá, said “the biggest challenge is to get investors to come here [Colombia]. Once they are here, they are astonished by Colombia’s way of business.”
NEWSANALYSIS
By Alicia Dimas
INDUSTRY GROSS WRITTEN PREMIUM BY LINE (SOURCE: FASECOLDA)
Workers comp. - annuities 25%Life 17%Motor 12%Compulsory Motor Liab. 9%Fire 7%Accident & health 6%Bonds 4%Other 20%
COLOMBIAN INSURANCE MARKET (SOURCE: FASECOLDA)
POWER 50 9
2 0 1 5 P O W E R
LatAm Insurance Review once again shines a spotlight on the region’s brightest and best in its annual Power 50 roundup.With nominations received from our audience of risk and insurance professionals, LatAm IR highlights how insurers, reinsurers, brokers, risk managers, law fi rms, regulators andtrade associations have gained infl uence, grown in statureand outperformed over the last 12 months BY ALICIA DIMAS
10 POWER 50
LATAMIR
INSURERSJORGE LUIS CAZAR SENIOR VICE PRESIDENT, ACE GROUP
As well as holding the post of senior vice president, Cazar is also Latin Amer-ica’s regional president for ACE. His main duties include general manage-ment and strategy for all operations in the region. Last year, Cazar was re-sponsible for overseeing the successful acquisition of Itaú Seguros’ corporate P&C business.
He is an experienced in-ternational executive with more than 25 years in the insurance industry, includ-ing senior underwriting and general management positions in Latin America and Asia Pacific.
RAFAEL CASAS GUTIÉRREZCHAIRMAN OF MAPFRE AMÉRICA SA; FIRST VICE-CHAIRMAN OF THE INTER-NATIONAL INSURANCE DIVISION FOR MAPFRE SAGutiérrez holds several significant positions within the group’s companies. His main focus is on Mapfre’s operations in South Amer-ica. His experience in over-seeing the Latin American market has contributed to Mapfre’s position as one of the key insurers in the region, with Latin America representing over 40% of the group’s revenue.
In fact, Mapfre’s sig-
nificant business growth in Brazil and other Latin American countries has contributed to the group’s recent positive results, with overall reported rev-enues of $24.53m in the first nine months of 2014, up 1.6% year-on-year.
BRUNO LAVALREGIONAL MANAGER FOR IBERIA AND LATIN AMERICA, XL GROUPLaval planned and im-plemented XL’s Group’s strategy to enter the Latin American insurance mar-ket. Now he is successfully establishing the group’s presence in the region as a global programme partner and specialist insurer for complex risks.
Early this year, the XL group confirmed the ac-quisition of Catlin Group’s total capital stock, for $4.1bn. According to the group, the deal will cre-ate “a global specialty insurance and reinsurance player with a total capital of US$17bn and net premi-ums of $10bn”.
JAMES DWANEPRESIDENT & CEO, LATIN AMERICA AND THE CARIBBEAN, AIG
Dwane is responsible for overseeing AIG’s property casualty insurance opera-tions and business strate-gies in the 15 countries in which AIG operates in the Latin American region. A remit that represent $1.5bn in revenues for the group.
Under his leadership, the group is developing more than 100 products, as part of a strategy to double its revenues in the next four years. Dwane’s ability to provide direction will be pivotal as AIG continues placing a tremendous amount of focus on Brazil, Colombia and Mexico as strategic business expan-sion countries.
In 2014, AIG opened its fourth office in Brazil.
GONZALO PÉREZCEO FOR SURAMERICANA“We had an exceptional 2014, closing the year with 7 billion sales, 103% of our target,” Pérez commented on the insurance compa-ny’s performance last year. The Colombian insurance company made a profit of $247.5m in 2014.
Pérez’s directorship of the division (part of re-gional financial holding company Sura) has pro-pelled its internationalisa-tion process, establishing a presence in the Domini-can Republic, El Salvador and Panama. Pérez aims to turn Suramericana into a multi-service, multi-channel and multi-country company, with a focus on integral risk management. Pérez played a fundamen-tal role in establishing Suramericana as the fifth largest insurer in Latin America, with 1.9% of mar-ket share, and as the mar-ket leader in Colombia.
JACQUES BERGMAN CEO, FAIRFAX BRASILBergman’s experience has been the guiding force of Fairfax’s strategy in the Brazilian market, since the inception of Fairfax Brasil, in
2009. Bergman is regarded as an insurance industry statesman by the Brazilian industry, having established his name in the market as managing director of Itaú Seguros Corporativos.
JOSÉ ADALBERTO FERRARA PRESIDENT, TOKIO MARINE SEGURADORA, TOKIO MARINEFerrara is currently work-ing on creating a reinsur-ance presence in Brazil. He commented recently that this operation will “make it significantly easier for the company to grow in one of its main business areas: the large risk segment.” Ferrara add-ed that the insurer wants to double its 5.3% market share, in the large risk seg-ment, where it sees “lots of growth potential because of Brazil’s big pipeline of infrastructure projects.”
Ferrara has been part of the Tokio Marine group since 2009 and was ap-pointed president of Tokio Marine Seguradora in 2013. His goal in his present role is to double the number of premiums by 2016. Already, Tokio Marine’s transportation portfolio in-creased by 25% in Brazil in 2014 compared to 2013.
ALEJANDRO BAILLÈRES CEO, GRUPO NACIONAL PROVINCIAL (GNP)Baillères has more than a decade of experience in the largest multi-line insur-ance company in Mexico and has been the insurer’s CEO since 2006. Baillères is focused on building a close relationship between the insurance company and its clients, proudly stating that “our custom-ers are accustomed to the very best.”
POWER 50 11
ANDRÉ GREGORI CEO, BANCO BTG PACTUAL SEGURADORA E RESSEGURADORA, BTG PACTUALGregori has been respon-sible for BTG’s reinsurance and insurance department in Brazil since 2013.Last month, SUSEP (the Brazilian Superintendency of Private Insurance) ap-proved the transfer of the direct share control of Pan Insurance, from Brazil’s Banco Pan, to BTG Pactual Seguradora. BTG Pactual Seguradora now owns an 100% stake in Pan Seguros. BTG Pactual is also report-edly planning to expand its insurance business to Chile, Colombia, and Mexico.
RAFAEL VENEGAS CEO, RIMAC SEGUROSVenegas is responsible for Peru’s largest insurance company, with over 33% of market share in the country. Venegas has been CEO of Rimac Seguros for five years and is proud of the insurance company’s contri-bution to Peru’s economy
“Rimac broadened the market by offering for the first time very affordable, very simple car theft, prop-erty and health insurance for low-income sectors through non-traditional channels,” he said.
ALVARO CORREA MALACHOWSKI CEO, PACIFICOMalachowski has been lead-ing the Peruvian insurance company on the path of success. The chief executive was responsible for Pa-cifico’s good results last year – the insurer registered a net income rise of 55% in 2014, compared to 2013. Malachowski was appointed Pacifico’s CEO in 2013. The
insurance company is part of Credicorp, Peru’s biggest financial holding company.
VINCENT VANDENDAEL DIRECTOR, GLOBAL MARKETS, LLOYD’SWhile promoting and pro-tecting Lloyd’s across the globe, one of Vandendael’s main tasks is to implement the market’s Vision 2025 – a strategy that aims to sub-stantially grow Lloyd’s busi-ness in emerging markets, with a specific focus on Latin America.
GABRIEL ANGUIANOHEAD, MEXICO DESK AND SPANISH LATIN AMERICA, LLOYD’SAnguiano established the Lloyd’s Mexico desk and is responsible for its new ini-tiatives and wider strategy in Latin America through a focus on analysis of local markets and the formula-tion of new strategies.
VICTOR A. MEINTJES EXECUTIVE VICE-PRESIDENT AND COO LATIN AMERICA, LIBERTY MUTUAL GROUPMeintjes’s successful steer-ing of the Latin America di-vision of Liberty Mutual has helped to make the region a key focus for the global insurance group. Meintjes joined Liberty Mutual in 1995 and has supervised several acquisitions and ex-pansion in Latin America.
ALEXANDER MONTOYAMANAGING DIRECTOR, LATIN AMERICA, LIBERTY INTERNATIONAL UNDERWRITERSWith a career of more than 20 years so far, Montoya has a vast experience in specialty lines insurance in Latin America. He has performed a variety of roles throughout his career, in-cluding local and regional product underwriting, dis-tribution head and country
CEO. Montoya has proven himself as a results-driven executive with extensive experience implementing innovative business prac-tices that maximize growth and strengthen company operations across multiple business lines. While over-seeing the strategic direc-tion of LIU’s Latin American operations, Montoya stated, “I look forward to further developing LIU’s business throughout our region. LIU has solid relationships with brokers and the businesses we insure and reinsure here. The LIU Latin America team is strong and talented and has built an excellent foun-dation. Together we will ad-vance LIU’s standing in the marketplace as a premier specialty lines insurer.”
PHILIPPE JOUVELOTPRESIDENT, CEO BRASIL E AMÉRICA LATINA, AXA CORPORATE SOLUTIONS/AXA SEGUROSJouvelot was appointed AXA Brasil’s president and CEO early this year, as the global insurer entered the Latin American market. Jouvelot has been a mem-ber of AXA’s executive committee since 2003.
IVÁN GONZÁLESHEAD, LATIN AMERICA, SWISS RE CORPORATE SOLUTIONS, SWISS REIn 2014, Gonzáles was responsible for Swiss Re Corporate Solutions’ ac-quisition of a 51% stake in Compañía Aseguradora de Fianzas Confianza, a lead-ing Colombian specialty insurer. Under Gonzáles’s leadership, the corporate solutions provider of Swiss Re has gone from an insurer with two lines of business, to a multi-line player with an expanding presence in Latin America.
MICHAEL RANEY CEO, GLOBAL CORPORATE, ZURICH LATIN AMERICA, ZURICH
Raney was appointed CEO of Global Corporate, Zurich Latin America in 2011. He is responsible for driving global corporate growth in the region and has suc-cessfully outperformed on development targets.
REINSURERSMATTHIAS MARWEGE SENIOR EXECUTIVE MANAGER, LATIN AMERICA, SPAIN, PORTUGAL AND THE CARIBBEAN, MUNICH REWith seven years’ experi-ence as a senior executive manager, Marwege repre-sents Munich Re’s noted regional experience and re-insurance expertise. He has a detailed understanding of its markets and has fur-thered the reinsurer’s strat-egy of sustainable growth.
LEONARDO PAIXÃO CEO, IRB BRASIL REIRB’s CEO for the past five years, Paixão has main-tained the status and rel-evance of the former state monopoly, not least by pushing its participation in markets outside Brazil. “The company’s strategy is to follow the expansion of Brazilian multi-nationals. If there are opportunities to become involved in foreign markets through acquisi-tions, they will be consid-ered,” said Paixão.
12 POWER 50
LATAMIR
JOSÉ FARIAS DE SOUSACHIEF UNDERWRITING OFFICER, IRB BRASIL RE
With more than 30 years of experience, José Farias de Sousa is a respected name in the industry. Re-garded by his peers as a seasoned underwriter with a broad understanding of economics, he has shown adaptability in a number of roles within one of Latin America’s largest reinsurers.
JAMES GRIEVECOO AND REGIONAL MANAGER, LATIN AMERICA AND THE CARIBBEAN, SCOR REGrieve recently spoke to LatAm Insurance Review about the softening of the insurance market in Latin America.“We are in that part of the (re) insurance market cycle when people are blindly reducing premi-ums…and that’s a scenario that seldom ends happily,” he said.
Grieve has overall re-sponsibility for the under-writing strategy and policy in Latin America drawing on his experience in the London and Miami markets, and displays a real dedica-tion to success in emerging markets.
PHILIPPE ROCHAIX PRESIDENT AND COO OF XL RE LATIN AMERICA, XL RERochaix has 27 years of experience in the interna-tional insurance industry,
primarily in reinsurance. He was appointed presi-dent and COO for XL Re Latin America in 2010. Some of his main achieve-ments in XL Re include the establishment of support teams in Bue-nos Aires, São Paulo and Bogotá, increasing the capital of XL Reasseguros Brasil S.A. and, through the promotion of data quality, he has refocused the company’s portfolio, differentiating it through a technical approach to reinsurance.
MARGO BLACKHEAD OF REINSURANCE, LATIN AMERICA SOUTH AND PRESIDENT OF SWISS RE BRASIL REASSEGUROS
Margo Black has recently talked to LatAm Insurance Review about Swiss Re’s expansion in Brazil
“Brazil is one of the five countries selected by Swiss Re for its High Growth Markets Strategy, together with Mexico, China, India and Indonesia. The Group has been re-directing capital and talent towards those countries to further enhance its pres-ence, client service and operations.”
Black has 34 years of industry experience. She oversees Swiss Re’s rein-surance programmes for Brazil, Chile, Colombia and other key markets in South America.
ALEJANDRO PADILLA HEAD OF REINSURANCE LATIN AMERICA NORTH AND PRESIDENT OF SWISS BROKERS MEXICO, SWISS RE
Extensive experience in the P&C space has given Padilla the necessary understanding of a wide range of markets including Mexico, Central America and Venezuela, for his ef-fective leadership of Swiss Re’s northern Latin Ameri-ca region.
INGRID CARLOUCEO, PATRIA RE
Carlou has been Patria Re’s CEO since 2012 and is responsible for the compa-ny’s strategy and general performance.
Carlou told LatAm In-surance Review that the Mexican reinsurance com-pany has been “mainly dedicated to the medium sized companies of the region. We have devoted ourselves to serving na-tional and regional com-panies that are experts in their own locality. It does not mean that we will not reinsure large international groups. However, we do expect our clients to treat us as their partners and
look after us in the same way we look after them.”With a view to strengthen its position in the interna-tional market, Carlou was also responsible for open-ing a marketing office in London.
PAULO BOTTI CEO, TERRA BRASISBotti is now planning Terra Brasis’ operating strategy in a new territory, Colombia, after the coun-try’s national insurance regulator, Superfinanciera, approved the reinsurance company’s request to operate in the Colombian reinsurance market, early this year. The company is now registered as a foreign reinsurer in the Colombian Registry of Foreign Reinsurers and Reinsurance Brokers, and it is certified to operate in all reinsurance lines.
After holding several key roles in the insurance industry, including a stint as executive vice president of Itaú Group, Botti was instrumental in the estab-lishment of Terra Brasis. He has established himself as a main player in the highly competitive Brazil-ian market. In 2014, Botti won a lifetime achieve-ment award at the LatAm Insurance Review Brazilian Insurance Awards.
BRUNO FREIRE CEO, AUSTRAL REFreire believes local reinsur-ers, such as Austral Re, “en-joy certain advantages over their larger competitors.” He explains, “this is because Austral Re lacks the bureau-cracy that slows decision-making in larger companies, especially multinationals.
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There is less distance be-tween the decision-maker and the client. This allows us to give quick answers.”
Freire worked for more than 10 years at Aon Ben-field, the world’s largest reinsurance broker. He has acted in several areas, such as placement of facultative business, account manage-ment and claims, and the placement of retrocession contracts. Since 2008 Freire has been involved in the structuring, pricing and placement of several reinsurance contracts from major insurance companies in Brazil.
GERARDO GARCÍAGENERAL DIRECTOR, BARENTS REAs adviser for both insur-ers and brokers across the region, García’s 19 years in the industry have contrib-uted to Barent Re’s ambi-tious growth strategy, as the Panamanian reinsurer looks to expand it foot-print globally, with a focus on niche markets, faculta-tive and treaty businesses.
ANGELO COLOMBO CEO, REGIONAL UNIT, ALLIANZ GLOBAL CORPORATE & SPECIALTY RE (AGCS)Colombo has been leading Allianz Global Corporate and Specialty in Brazil for almost 16 years. He has em-ployed an ambitious strat-egy to expand its footprint in the region, with plans to enter Peru and Bolivia. Colombo was responsible for AGCS obtaining a re-
insurance licence in Brazil and the regulatory approv-als to operate in Chile and Colombia.
ALEXANDRE MALUCELLI CHAIRMAN, GRUPO SEGURADOR JMALUCELLIMalucelli continues to play a key role in the firm, which has became a leader in surety bonds in Latin Amer-ica, since his appointment in 1991.
CARLOS CAPUTO CEO, LATIN AMERICA, MARKELCaputo started his role as CEO for Latin America in 2009. Caputo has 38 years of underwriting and management experience in Latin America and, in particular, Brazil. Prior to Markel, he served as regional director and op-erating officer for XL Re Latin America. Markel has been expanding the firm’s products and last year it launched a broad liabil-ity insurance solution for companies in the informa-tion and communication technology (ICT) sector, and a standalone cyber product designed for com-panies across all industries.
BROKERSALEJANDRO GALIZIA CEO FOR LATIN AMERICA, AON BENFIELDRecently appointed as CEO for Aon Benfield Lat-in America, Galizia’s duties
include driving business growth, managing client teams, and creating and maintaining a business environment that is sup-portive to optimising Latin America-based client’s results. After his promo-tion, Galizia stated, “being promoted to this role is an honour, and represents an amazing opportunity to lead the firm’s Latin American team. Working with our colleagues across the region, we will contin-ue to deliver unmatched services and value to our clients.”
FERNANDO ANTONIO PEREIRA DA SILVA LATIN AMERICA CEO, AON RISK SOLUTIONSManaging offices in more than 10 countries in Latin America, besides representative firms in the Caribbean, Silva has applied an innovative approach to the way Aon has established its presence in the region. Focusing efforts on pro-moting organic growth by expanding physically into new markets, da Silva has proven his worth in the region which represents the highest global growth rate for the broker.
RICARDO BROCKMAN CEO OF LATIN AMERICA, MARSH
Brockman has success-fully led Marsh’s regional operation, with key acqui-
sitions in Brazil, Panama, Peru and the Dominican Republic. By focusing on delivering industry-leading global resources to both local and multina-tional clients, Brockman has strengthened the bro-ker’s regional corporate footprint.
MIKE METHLEY GROUP COO, AND CEO LATIN AMERICA, JLTMethley supervised Jar-dine Lloyd Thompson’s acquisitions in Brazil and Argentina last year. Com-menting on the establish-ment of a reinsurance bro-king arm in Buenos Aires, Methley said, “We view Argentina as a strategical-ly very important and dy-namic economy. This new operation is another step forward in our strategy of further building our strong presence in the region and deepening our spe-cialty capabilities. JLT Re Argentina will help drive the continued growth and momentum of JLT’s very successful Latin American operations.”
Last year Methley was also appointed as chair-man of JLT Canada and JLT Insurance Manage-ment, combining these roles with his existing role as CEO of the Group’s Latin American busi-ness, “which will provide a significant opportunity to further develop col-laboration and capabilities across the Americas”, the group said.
Methley has more than 30 years’ experience in the insurance industry with a background in construc-tion, power, utilities and infrastructure projects.
“WE VIEW ARGENTINA AS A STRATEGICALLY VERY IMPORTANT AND DYNAMIC ECONOMY. [OUR] NEW OPERATION IS ANOTHER STEP FORWARD IN OUR STRATEGY OF FURTHER BUILDING OUR STRONG PRESENCE IN THE REGION”Mike Methley, JLT
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LUIS MAURETTE REGIONAL CEO OF LATIN AMERICAN OPERATIONS, WILLIS
Since taking this role in 2011, Maurette has been responsible for the com-pany’s expansion into un-explored Latin American markets, while also mak-ing significant changes to the leadership of Willis Latin America with new senior appointments and consolidation of high-per-formance operations.
Last year strong results in Brazil drove organic growth in commissions and fees in Latin America during H1 2014 for the group. With over 30 years’ experience in the insurance and financial markets, Maurette led sev-eral important companies including CIGNA, La Caja and Liberty Brazil and looks set to continue pav-ing the way to sustainable profitable growth in the long term for the broker.
JOSE H. ASTORQUI MANAGING DIRECTOR, HOWDEN LATIN AMERICAAstorqui’s experience and understanding of markets in the Iberian Peninsula and Latin America are a key asset for Howden Brok-ing Group as it builds its Iberoamerican broking platform. Just last month, Howden Latin America has begun operating a Cargo Binding Authority in the re-gion, with a limit of $25m,
supported by various Lloyds’ syndicates. With plans to continue to build its presence in Latin Amer-ica, adding to 11 offices in six countries, Astorqui’s knowledge will only benefit the company further.
AIDAN POPECEO OF LATIN AMERICA AND THE CARIBBEAN OPERATIONS, GUY CARPENTER
Last year, as part of the company’s growth initiative in the English-speaking Caribbean, Guy Carpenter’s GC Securities wing completed the first catastrophe bond issued by the World Bank on be-half of the Caribbean Ca-tastrophe Risk Insurance Facility (CCRIF). Guy Car-penter also expanded in two countries last year. In Colombia, Guy Carpenter hired a new leader for its strategy there. Secondly, Guy Carpenter expanded its presence in Peru to reach that country’s large reinsurance market. These moves ensure the broker is well represented in all key strategic regions through-out Latin America and the Caribbean.
Pope is leading Guy Carpenter’s strategy to expand its presence in the Latin American re-gion. He is responsible for establishing strategic investments in Peru and Colombia, and heading ef-forts to diversify the firm’s product offerings in both
treaty and facultative lines. Pope is also spearheading Guy Carpenter’s initiative to protect residual insur-ance loss for governments and institutions by helping them access alternative markets.
JUDI NEWSAM COUNTRY HEAD, GUY CARPENTER BRAZIL, GUY CARPENTER
Newsam runs the firm’s two offices in Rio de Janeiro and São Paulo where she is in charge of strategic planning across all business lines and cat-egories. Newsam develops and maintains strong client and colleague relation-ships and has increased revenues significantly through more effective sales efforts. Newsam is also responsible for the building and retention of both treaty and facultative teams in Brazil. She has been involved personally in arranging the reinsur-ance treaties for numerous multinational “start-up” operations.
Newsam has built a cross-continent network of contacts to ensure that Brazil is seen as a place for investment, while creating new local revenue generat-ing business opportunities
She is part of the Brazil CEO Champions (Women’s Forum for the Economy & Society) group, and estab-lished the chapter in Rio de Janeiro. She is commit-
ted to mentoring young talent and ensuring equal opportunity in hiring. She is also a member of ABE-COR Re – the Reinsurance Brokers Association in Brazil, which sets market standards for all partici-pating members.
FRANCISCO XAVIER CASANUEVA PÉREZCEO, INTERPROTECCIÓN, GROUPO CPCasanueva Pérez is a lead-ing figure in the Mexican market, transforming the first generation company into a leading insurance brokerage firm in Latin America. Specialising in commercial retail P&C, risk management services and reinsurance solutions, Grupo CP’s operations are now expanding regionally, an achievement down to Casanueva Pérez’s efforts to drive the company for-ward.
STEVE JACKSON LATIN AMERICA REGIONAL CEO, COOPER GAYJackson has more than 25 years insurance experi-ence, all of which have been spent working at Cooper Gay. He is re-sponsible for the broker’s extensive Latin American network of offices, and leads Cooper Gay’s Latin Executive Committee.
Jackson’s main area of expertise is property facultative reinsurance, oil and gas, power and mining to general prop-erty. Jackson is a highly respected Latin American reinsurance expert with a market-leading pro-gramme placement and claims settlement record, his contacts in the region are also second to none.
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HÉLIO NOVAESCOUNTRY GENERAL MANAGER, BRAZIL, MDSNovaes was appointed country general manager for Brazil in 2010. He says that “speed in attending customers’ needs, total availability and giving a good example are key in-gredients for success.”
Novaes brings his vast experience in risk manage-ment to the role of general manager in MDS Brazil, operating across the whole domestic territory and managing over $452m in premium from 90,000 cor-porate clients. With a focus on providing solutions for industries including tel-ecoms, petrochemicals, energy generation and large construction projects, Novaes brings a wealth of knowledge from previ-ous roles (including at Sul America Seguros, where he led the integration of the local insurer with ING).
SANTIAGO CASANUEVA CEO, REASINTERCasanueva has been re-sponsible for Reasinter, the Mexico based reinsur-ance brokerage company, since 2001. Casanueva is in charge of the production areas and is responsible for strengthening relations with insurance companies and reinsurers.
LAWYERSALEX GUILLAMONTDIRECTOR OF MIAMI OFFICE FOR LATIN AMERICA & CARIBBEAN, KENNEDYSGuillamont leads the Latin American and Caribbean practice at Kennedys. He handles disputes on behalf of leading international (re)insurers, having repre-
sented clients across the region. With 15 years of experience, Guillamont is an acknowledged leading expert on insurance and reinsurance matters.
He is involved in com-plex losses on major en-vironmental and natural disasters. He is specialised in contractors all risk, fi-nancial institutions and D&O claims. He is also recognised as an expert on energy losses, regu-latory compliance and third-party administration schemes. He is a political risk and trade expert for the entire Latin American region.
JOÃO MARCELO SANTOSHEAD PARTNER, INSURANCE AND REINSURANCE DEPARTMENT, DEMAREST & ALMEIDA ADVOGADOSSantos recently talked to LatAm Insurance Review about the Brazilian reinsur-ance market, stating “look-ing back on the develop-ment of Brazil’s reinsurance market, the quality of the rules applicable to the rein-surance industry – enabling the market to be opened up – are undeniable.”
Santos was formerly a director and deputy superintendent of Bra-zil’s insurance watchdog, Susep, working on the drafting, discussion and approval of supplementary Law 126/2007, which first opened the Brazilian re-insurance market. Santos currently advises clients on regulatory, contractual and M&A matters, includ-ing AXA on its return to the Brazilian market through the incorporation of a corporate (re)insurer in the country, and other global companies like
AON, General Re, Lloyd’s, Mapfre, Munich Re, RGA and RSA.
ARY OSWALDO MATTOS FILHOFOUNDING PARTNER, MATTOS FILHOMattos Filho has a vast ex-perience across a number of legal areas. Prior to his position at Mattos, he was chairman of the Securities and Exchange Commission of Brazil, served as Adminis-trative Court Justice of Tax-es and Duties of the State of São Paulo, was a mem-ber of the National Mon-etary Council, and president of the Federal Commission for Tax Reform. Mattos Filho currently serves on the board of Getulio Vargas and the Brazilian Institute of Capital Markets.
Torres has been involved with the insurance indus-try for many years and has particular knowledge of reinsurance. Torres has broad experience of insur-ance and reinsurance law, as well as commercial and civil law. She advises for-eign investors and business corporations, and national and international insurance and reinsurance entities. Torres is a member of the Colombian Association of Insurance Law, a litigation attorney, and an arbitra-tor at the Arbitration and Conciliation Centre of the
Bogotá Chamber of Com-merce, Colombia’s main arbitration centre. She has participated in a significant number of arbitrations. She is ranked in tier 1 for insur-ance in both the Chambers Latin America 2015 Guide and in the latest Legal 500 Latin America Directory.
FRANCISCO FERNANDEZ FLETES PARTNER, DAC BEACHCROFT MEXICO, DAC BEACHCROFT
Fletes heads DAC Beachcroft’s Mexican office, which was established over 10 years ago. Fletes repre-sents insurance and reinsur-ance companies, brokers and Lloyd’s syndicates’ interests in a domestic and international context. His core practice areas are en-vironmental liability, profes-sional liability, fraud, fidelity bonds, construction liability and defending professional negligence claims on behalf of insurers. Fletes is ranked in tier 1 for insurance in Chambers and Partners Di-rectory and recognised as a leading lawyer in Mexico in the latest Legal 500 Latin America Directory.
GLADIMIR ADRIANI POLETTOOWNER, POLETTO & POSSAMAIPoletto is the founding owner of the Brazilian law firm and is committed to “providing effective legal solutions, innovative, sus-tainable and customer sat-isfaction.” Poletto is also a
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member of the Internation-al Association of Insurance Law (AIDA), a member of the Legal Affairs Commis-sion of Fenaseg (National Federation of Security and Capitalization Companies) and author of the book In-surance Guaranteein search of its legal nature.
REGULATORS & ASSOCIATIONS
ROBERTO WESTENBERGER SUPERINTENDENT, SUSEP, BRAZIL
Westenberger was recently appointed to supervise the Brazilian private insurance watchdog. He specialises in mergers & acquisitions, capital evaluation (regula-tory and economic), pric-ing, technical reserves evaluation, outsourcing pension funds liabilities and enterprise risk manage-ment for insurance com-panies and corporations in general.
MANUEL AGUILERA PRESIDENT, CNSF, MEXICOAguilera has been presi-dent of the Insurance and Surety National Commis-sion (CNSF) since 1998. Aguilera is responsible for the Mexican insurance and surety markets’ supervi-sion, and has participated in the development and implementation of the main reforms that have led to the modernisation of the
regulatory and supervisory frameworks that rule these markets in Mexico. Since 1998, Aguilera has been a member of the Board of the Banking and Securi-ties National Commission, as well as of the National Commission for the Retire-ment Savings System, and since 1999, of the National Commission for the Pro-tection of the Financial Services’ Users. Likewise, as President of the CNSF, he is part of the Mexican Financial Stability Council.
Aguilera was also chair-man of the International Association of Insurance Supervisors, chairman of the Latin American Asso-ciation of Insurance Super-visors. Since 2007, Aguilera has been the chairman of the Insurance and Private Pensions Committee of the Organisation for Economic Co-operation and Develop-ment.
JORGE HUMBERTO BOTERO, PRESIDENT, FASECOLDA, COLOMBIABotero was appointed president of the Colom-bian insurer’s association in 2013. Since this time, Botero has facilitated the promotion of the indus-try’s interests by meeting some of its main chal-lenges head on, including addressing barriers to implementation of manda-tory coverage for floods and fire damage.
JOSÉ MANUEL CAMPOSANO LARRAECHEA, PRESIDENT, AACH, CHILECamposano has been an active member of the Chil-ean insurers association for more than 30 years. He is a key voice for the industry domestically and regionally,
not least during the enact-ment of Chile’s new risk based capital regulation.
MARCO ANTONIO ROSSI PRESIDENT, FIDES AND CNSEGRossi was appointed CNSeg’s president in 2013 and has brought to the directorship of CNSeg and Fides a vast amount of ex-perience, accumulated over 30 years in the industry and as CEO of Grupo Bradesco de Seguros e Previdência, the insurance arm of one of Brazil’s largest financial groups. Recently taking over as head of the Inter-American insurance asso-ciation, FIDES, representing around 1,600 insurers and reinsurers, Rossi’s goal is to encourage debate on a range of regulation, as well as to address the main trends in the industry.
RISK MANAGERSLatAm Insurance Review is also highlighting 11 Latin American risk managers for their efforts in driving for-ward innovative risk man-agement strategies at their companies and in the wider Latin American region.
CRISTIANE ALVES HEAD OF INSURANCE, COMPANHIA SIDER-UGICA NACIONAL (CNS)Alves’ career started with an internship at Pirelli. A position in the insurance department at the global tire producer followed in the early 1990s, after which Alves took on a role at the firm’s captive broker.
“I had to hit the ground running,” Alves told LatAm Insurance Review recently. “I started managing life in-surance, then worked with
import and export insur-ance solutions. Only then did I graduate to opera-tional risk and civil liability.”
Alves was then invited to manage Latin America risks for telecommunica-tions group Telecom Italia in 2002, before returning to Pirelli as Latin America risk manager and then embarking on a new chal-lenge at CSN.
“It is great being in a company where risk man-agement is recognised as an important area, where people stop what they are doing to pick up the phone and discuss risk-related in-formation,” she told LatAm Insurance Review. “I was lucky enough to experi-ence this at Pirelli and Tel-ecom Italia. Now at CSN, I couldn’t be happier with the way the company’s risk perception is ingrained in the firm’s culture.”
Alves has become a leading name in the Bra-zilian risk management space. She is perhaps most recognised for her work as head of the Brazilian Association of Risk Man-agement (ABGR) where she continuously works to advance the culture of risk management by shedding light in the main barriers to the implementation of effective insurance solu-tions, as well as encourag-ing debate on effective risk transfer methods.
Alves was awarded Risk Manager of the Year at the LatAm IR 2014 Brazilian Insurance Awards.
CARLOS TESSAROLLO GLOBAL INSURANCE MANAGER, PETROBRASTessarollo is responsible for insuring assets of around
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$160bn and managing the oil giant’s largest engi-neering risk facilities. He recently told LatAm Insur-ance Review about how his role at Petrobras, stating that, “You come to work in the morning knowing that there will be something new to tackle, a new challenge.”
RENÉ MARTINEZ GLOBAL DIRECTOR OF INSURANCE & RISK MANAGEMENT, CEMEXMartinez has an extensive knowledge of global insur-ance programmes and the insurance market place. With 13 years in the indus-try, Martinez has designed, evaluated and implement-ed strategic, innovative and creative solutions at global building material supplier CEMEX.
CRISTÓBAL MENA AMIGOEMERGENCY AND SAFETY MANAGER, METROGASThis month, Mena Amigo was invited to participate in a UN-UNISDR pro-gramme for risk reduction as a world expert, where he will be answering questions about the role of corporate social responsibility (CSR) in risk reduction.
Mena Amigo has more than 10 years of experience in risk and emergency man-agement, working in areas such as CSR and public policy. He is currently re-sponsible for implementing a CSR program at Metro-gas, Chile’s leading com-pany in gas distribution.
Mena Amigo was re-cently summoned by the Chilean Senate to give ad-vice about the bill to create a new national system for disaster risk management. He has also been a volun-teer firefighter for more
than 11 years in the Santia-go Fire Brigade, perform-ing the roles of training of-ficer and second lieutenant. He was a member of the Chilean USAR Team that responded to the Haiti and Chile earthquakes of 2010. This month, Mena Amigo writes for LatAm IR about the 2010 Chile earthquake (see Comment p34).
CARLOS ALBERTO RIBEIRO OLIVEIRA PINTORISK MANAGER FOR PATRIMONIAL AND INSURANCE, CEMIGOliveira Pinto has more than 10 years experience at Ce-mig, one of the largest en-ergy companies in Brazil. He is responsible for Cemig’s risk assessment and risk prevention and negotiating Cemig’s contracts with (re)insurers. Oliveira Pinto is also taking part in Cemig’s com-mitment to research and de-velop new technologies to explore renewable energies. (see Profile, pp28-29).
DANTE TAPIOCARISK MANAGER, NEOENERGIATapioca has more than 20 years of experience in the industry, a period that has made him a well-respect-ed figure in the Brazilian risk management space.
“I receive weekly calls from people in the industry. There is always someone who will ask for an opinion or advice. I am proud of my commitment to risk man-agement and the admira-tion the Brazilian market has for me,” Tapioca told LatAm Insurance Review..
SALVADOR ORTIZCORPORATE RISK MANAGER, SERVICIOS ADMINISTRATIVOS, GRUPO PEÑOLESIn a recent interview with LatAm Insurance Review,
Ortiz commented that it is a risk manager’s respon-sibility to “translate the sales pitches into financial jargon used to capture the attention of CFOs in relevant subjects, including adequate coverage and risk management strategies, beyond only viewing insur-ance as a price.” Because “it is not uncommon for insurance companies or brokers to face a conflict of interest between the genuine desire to engage in risk consulting and their sales goals.” Ortiz has a wide range of experience, including roles at Mexican oil company Pemex, as cor-porate risk manager and head of the firm’s captive insurer.
CHRISTIAN MENDONÇAERM SUPERINTENDENT, SCHAHINMendonça has over 10 years of experience as a risk manager. He is an ex-pert in the Latin American insurance market, manag-ing global insurance pro-grams, building relation-ships and negotiating with insurance and reinsurance companies,
ANDREA ALMEIDA HEAD OF GLOBAL RISK MANAGEMENT, VALEAlmeida says that eve-rything she learned, as a risk management profes-sional, she learned at Vale. Almeida joined the mining company as a trainee and made her way up to head
of global risk management. Almeida’s achievements include successfully im-plementing a global prop-erty programme, with the participation of a captive insurer, and creating an analytical pricing project, using loss distribution for all layers of the risk man-agement strategy.
GUILHERME BROCHMANN RISK DIRECTOR FOR THE SOUTHERN CONE, DHLBrochmann has more than 33 years of experience in the Brazilian insurance market, at insurance com-panies, brokers and risk management businesses. Brochmann has spent the last nine years in a management position at DHL, with responsibilities for the risk and insurance program.
Brochmann is skilled in loss prevention and control, program implementation, gap analysis and corrective action plans, and the com-pany’s insurance program.
KATIA LUZRISK DIRECTOR, ODEBRECHTLuz is responsible for a team of 19 people and manages Odebrecht’s com-panies in the construction and engineering sectors. Luz started her career as an architect and has used her knowledge to better assess risks related to build-ings and large infrastructure projects.
“IT IS NOT UNCOMMON FOR INSURANCE COMPANIES OR BROKERS TO FACE A CONFLICT OF INTEREST BETWEEN
THE GENUINE DESIRE TO ENGAGE IN RISK CONSULTING AND THEIR SALES GOALS.
Salvador Ortiz, Grupo Peñoles
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LATAMIR
DRY TIMES IN BRAZIL
For the last six months, Brazil has been witnessing the worst drought in the country’s history. The Can-tareira interbasin transfer system,
comprised of six dams, that provide water for almost 9 million people in the region of São Paulo, had water reserves drop to 5% of capacity early in the year. Although the situation has improved, it is now only up to 10.7% of its total capacity.
Experts from the Water Resources Of-fice in Brazil believe the extreme weather was caused because the rain fronts, that are normally carried south from the humid Amazon, have largely failed to materialise, while this year’s temperatures have been higher than usual.
The drought is affecting the water and energy supply in a country where 70% of all the energy produced is hydro electrical.
“One thing that Brazil has that is unique compared to all other countries in the world is the amount of its hydropower ca-pacity. The majority of power generation in Brazil is from hydropower plants and they heavily rely on rainfall. So you can imagine how the drought is affecting the country,” states Karsten Berlage, global head for weather solutions at Allianz Risk Transfer (ART).
“The lack of water increases the costs with electricity and water distribution for consumption, and this negatively impacts all the industries in the country,” says Luis Althoff, the property insurance company FM Global’s commercial director.
The extreme weather has been particu-larly harsh to coffee beans and sugarcane producers. Cristina Ribeiro, SwissRe’s sen-ior underwriter for agriculture in Brazil, says that often “these crops are poorly insured, especially considering the total planted area in Brazil, although there is a wide range of insurance products avail-able for both crops [coffee beans and sugarcane].”
According to Ribeiro, some crops “es-caped the drastic dry weather” due to a good rain season in the beginning of 2014.
This was not enough though to prevent the prediction of a $7bn loss for the Bra-zilian agricultural sector in 2015, explains Althoff. “The agriculture industry contrib-utes to 23% of Brazil’s GDP, so this loss concerns the whole country,” Althoff adds.
According to Swiss Re, there are cur-rently nine private insurance companies operating crop insurance in Brazil.
“Crop, livestock, bloodstock and for-estry insurance are examples of products available in the market,” says Ribeiro.
The reinsurer points out that “despite the Ministry of Agriculture providing a rural insurance premium subsidy pro-gramme, the harvest insurance penetra-tion is only 13% of the total planted area for grains, fruits and vegetables, which is approximately 72.4 million hectares in Brazil.”
The Brazilian government is trying to boost this shortfall and support private in-surance penetration, by funding between 30% to 70% of the insurance premium, depending on the type of crop and region.
“We understand that the private crop insurance market could grow at higher rates, if the amount designated by the government to the agriculture subsidy was higher,” believes Ribeiro, who ex-plains that the government also provides
Brazil’s recent struggle with drought has had a serious impact on its hydropower, causing a significant loss for the agriculture sectorBY ALICIA DIMAS
Total premium volume in 2014: $475m
Number of farmers covered: 65.556
Market leaders: Bank of Brazil and Mapfre
Main rural insurance covers' categories in Brazil:
agricultural
livestock farming
aquaculture
improvements and agricultural products
rural pledge
forestry
rural producer life insurance
rural producer certificate
THE BRAZILIAN AGRICULTURE SECTOR (SOURCE: SUSEP)
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a protection programme, PROAGRO (Guarantee Programme of Agricultural Activities), which covers some crops against adverse weather conditions.
“This programme is not an insurance coverage, so it is not following specific regulation determined by SUSEP (the Brazilian private insurance superintend-ence),” he says.
In fact, all over the Latin American re-gion, governments are increasingly sup-porting the development of agricultural insurance, either by providing subsidies or by creating specific policies for the sector.
Visible differencesThe differences between the diverse Latin American countries, dictated by the Gov-ernment and agricultural sector’s ability to work together, are visible: “the Brazil-ian agricultural insurance market is not growing significantly, when compared to Mexico, for instance,” states Ribeiro.
“There [in Mexico] the government is strongly promoting crop insurance pen-etration by providing premium subsidy for the market and creating programmes for catastrophic weather events. One of the most significant programmes created by the Mexican government is CADENAS (Componente de Atención a Desastres Naturales).”
Ribeiro also praises the Argentina ag-ricultural insurance market, saying that “in Argentina the market is well devel-oped and the crop insurance penetra-tion reached 60% of the planted area last year.”
As for all the other countries in the region, “crop insurance is still incipient,” according to Swiss Re’s specialist, “but it is growing fast in countries like Chile and Colombia, due to an increasing govern-ment support.”
Indeed, governments play an extremely important role in supporting and regulat-ing the agricultural insurance market.
In Brazil, João Marcelo Santos, head partner in the insurance and reinsurance department for the law firm Demarest & Almeida Advogados, says that the gov-ernment is under a lot of pressure to find a solution for the sector’s losses.
“For some years now the Brazilian gov-ernment has been discussing the creation of a rural insurance stability fund, but this is not an easy task,” Santos states. “It is hard to get the main market players to agree on a solution. Farmers ask for more subsidy, the government struggles with lack of budget and insurance companies want to grow their market share.”
Santos considers that “this is an ex-tremely complex subject that requires a high level of collaboration between public and private identities. If there was an easy solution for this problem, the government would already have implemented it.”
This year, the drought has pulled the risk up and increased the premiums for harvest insurance. “With damaged crops, the farmers have a hard time paying for their insurance covers and the govern-ment has less income to help them,” San-tos concludes.
When asked about what insurance coverage a farmer should consider, to protect himself against extreme weather conditions, the global head for weather solutions for ART says that “companies in agriculture should at least look at crop insurance but also potentially consider weather index solutions.”
Berlage explains how a weather solu-tion works: “we analyse the historic yield success of the company or farmer and then try to find an effective weather in-dex, usually a combination of temperature
and rain, for that particular crop. We then customize a weather index that is tailored to that farmer’s needs.”
“The advantage of a weather index so-lution, compared to a normal crop cover-age, is that the weather index solution is very objective in terms of claims assess-ment, hence the claims payments are very fast.”
Berlage describes both processes, say-ing that after the harvest a weather index solution enables the insurer to know ex-actly how the weather conditions contrib-uted to the success or damage of the crop, hence “the pay-out is very quantitatively assessed and the insurance payment to the farmer can be made within days.”
“Weather index solutions are an alter-native that many farmers do not know about,” Berlage continues. “Crop insur-ance is quite a different process: you have an adjuster that comes in, you go back and forth on the claims adjustment, sometimes it can take years to complete the process.”
According to Ribeiro, from the reinsurer Swiss Re, in Brazil the most commercial-ized insurance cover for annual crops, like soybean, corn, wheat and barley, is the multi-peril crop insurance (MPCI). MPCI covers a wide range of natural disasters, like drought, frost, hail and excess of rain among others.
Another insurance product widely com-mercialized in the Brazilian agricultural market is the Crop Revenue Coverage (CRC), which combines yield (MPCI) and future price coverage, Ribeiro adds.
In the end, “agricultural insurance in Brazil represents a huge potential for us, despite the difficult economic scenario for 2015,” says the Brazilian underwriter.
“Agriculture production is growing fast in the region, farmers are constantly in-creasing their investments in technology, to improve production and create new business opportunities.”
“On the other side, farmers are very exposed to adverse climate change and this constantly impacts the sector’s pro-duction rate. Therefore, I believe the de-mand for crop insurance, so that farmers can better protect their investments, will increase significantly in the next years, in the Latin American region,” concludes Ribeiro.
PREMIUMS IN BRAZIL: BY REGION (SOURCE: MINISTRY OF AGRICULTURE, LIVESTOCK AND SUPPLY)
Centre & west 12%North & north west 2%
South 60%South-east 26%
22 COUNTRY FOCUS
LATAMIR
TOTAL UNCERTAINTYWhile the country struggles with economic recession, (re)insurers’ resilience to stay and do business in the South American country is being testedBY ALICIA DIMAS
VENEZUELA Venezuela is a country on the brink of eco-nomic collapse. The oil price dropped 60% in seven months, the Bolivar (Venezuela’s currency unit) seems to be in a never-ending
roller-coaster ride with its value increasing and de-creasing, rampant inflation exceeds 63% and it is al-ready considered the highest in the world.
The country is officially in recession, with its GDP decreasing 4.5% but statistics and “official” numbers are hard to rely on, as different government agencies often provide conflicting “official” numbers regarding Venezuela’s economy.
GDP GROWTH (%) (SOURCE: LLOYD’S)
24 COUNTRY FOCUS
LATAMIR
One thing is for sure though, the coun-try’s economic situation is deteriorating, a stark reality that Venezuelans witness every day while they queue for grocery shopping and find empty shelved supermarkets.
The (re)insurance business has also been hit hard, as oil exports, the coun-try’s main source of revenue, fall in value and the government tightens up control on capital repatriation.
“I wouldn’t put my money in the coun-try,” says Adolfo Paolini, DAC Beach-croft’s consultant for Venezuela. “There is no way out at the moment. I wouldn’t recommend foreign investment in the country,” Paolini adds.
“We are no longer active in the credit insurance business in Venezuela, because of the economic environment,” says Bart Pattyn, LatAm CEO for Coface. Pattyn blames the high inflation, the lack of economic growth and the government control over capital flow and late pay-ments for Coface’s decision to abandon the Venezuelan market.
Tony Matta, Crandon Re’s president, explains that, “Venezuela spends more money than it brings in from oil sales, which produces the bulk of its revenues” and since oil revenues have dropped dra-matically, this “affects every corner of the Venezuelan economy.”
“If businesses shut down and/or re-duce their earnings as a result of the drop in oil revenues, then total premiums (in inflation adjusted dollars) will similarly come down as long as the economy con-tinues to spiral downwards,” says Matta.
Pattyn also highlights the fact that, “with the price of crude going down, oil exports can no longer pay the govern-ment’s increasing costs”.
Jose Figueroa, operations vice-presi-dent for insurance and reinsurance ser-vices for LatAm, at FM Global, the global business property insurer, agrees with Pattyn saying the oil price drop influenc-es the government’s ability to implement its social programs. Also with “less dol-lars available in the market” investment in the country and even basic food im-ports are doomed.
Nevertheless currency volatility is the issue that truly worries Figueroa, as it
completely destabilises the insurance business in the country.
“There are three different official ex-change rates,” explains Figueroa, “this causes a basic underwriting problem for many insurers: because you may not know how to value your risk. And even if you manage to value the risk and price it, you may not have the ability to pay your reinsurers because the government may not allow you to withdraw enough dol-lars to pay the reinsurer.”
“Additionally, if there is a loss, the in-surer and reinsurer may not know how much they are going to pay: depending on the currency rate at the moment, it can be several million dollars or tens of millions of dollars for the same risk. It can be total uncertainty.”
With new currency regulations that came into effect last month, Matta says “it’s still too early to know if they will help
NON-LIFE DIRECT INSURANCE MARKET MAIN LINES (SOURCE: LLOYD’S)
Property 6%Motor 33%Pecuniary Loss 3% TOTAL NON-LIFE DIRECT INSURANCE MARKET (USD$m)
(SOURCE: LLOYD’S)
Reinsurer Premium (US$m)
Caracas de Liberty Mutual C.A., Seguros 1280
Mercantil C.A., Seguros 1066
Horizonte, C.A. Seguros 795
Occidental C.A., Seguros La 706
Mapfre La Seguridad, C.A. de Seguros 661
Previsora, C.N.A. de Seguros La 426
Altamira C.A., Seguros 345
Banesco Seguros C.A. 290
Estar Seguros, S.A. 285
Multinacional 267
Total 6121
TOP 10 INSURERS IN VENEZUELA (SOURCE: SUPERINTENDENCIA DE LA ACTIVIDAD ASEGURADORA)
COUNTRY FOCUS 25
“
the economy, and by extension the rein-surance market.”
“In theory the new regulations may tempt more reinsurers to write business, but we won’t know the outcome until the full effect of the new currency regu-lations is better understood,” explains Crandon Re’s president.
Also uncertain is the date for Ven-ezuela’s parliamentary elections, which should take place before the end of the year.
The poll will test President Nicolás Ma-duro’s popularity, who has tried to boost his popularity by accusing large super-market chains of being “at war against the Venezuelan people” and taking them into state ownership.
Expropriation is a major risk for inves-tors in the country, as the socialist gov-ernment takes control over companies in areas considered strategic for Venezue-la’s economy.
“The left wing government is restrict-ing private investment and the country’s large businesses are in hands of compa-nies in which the government has direct control,” says Paolini from DAC Beach-croft.
Despite the government populist ac-tions, demonstrations in Venezuela are becoming more frequent and violent, with students and the military clashing in the country’s main cities. Venezuela is also suffering from an electricity crisis, although the government assures it will heavily invest in the power sector.
Given the present situation, Paolini confides: “I fear the government won’t even go to elections this year.”
Matta also comments on this year’s elections saying that: “the interesting thing for me is to see how Maduro’s people will fare in the elections. Pundits
seem to think that if the ruling party loses the parliamentary election, internal rifts within the party will widen, and po-litical rivals would begin to openly chal-lenge Maduro for leadership.”
“Although the government does not seem to face a collapse, it could be that Maduro may find it tough to sustain enough political support,” predicts Matta.
The situation in Venezuela is so un-certain that some experts do not dare to give a positive outlook for the country’s near future.
“In my personal opinion things may get worst, before they get better,” says Figueroa. The VP compares the Latin
American country’s present economic situation to Asian countries like Cambo-dia and Vietnam, fearing things may take a long time to “get back on track”.
Nevertheless, not everyone operating in the region shares the pessimism and Matta, from Crandon Re, has a different view, giving a more positive note about the future of the Venezuelan insurance market: “I have somewhat of a contrar-ian view on the subject, and believe that business in Venezuela can be successfully transacted, albeit carefully, if done hand-in-hand with the right local partners, and with a clear view of which accounts can be best written.”
Jose Figueroa, from FM Global, believes that although in other countries regulation determines how the (re)insurance market behaves, in Venezuela regulations don’t have a significant impact on how the market performs.
“The rules are not too restrictive,” Figueroa explains, “the real problem is the currency volatility. With the Bolivar value going up and down, insurers’ ability to pay for reinsurance is constantly at risk and that’s the main issue, not regulation.”
Although Adolfo Paolini, DAC Beachcroft’s consultant, agrees that “Venezuela is more flexible than Brazil and Argentina” regarding the (re)insurance market regulation, and can even be considered flexible for admitting foreign companies in the country, there are still important restrictions to consider.
Paolini points to the new Foreign Investment Act, passed last November, as an example.
“It imposes serious obstacles for insurance companies that want to invest in Venezuela. As it states that the capital invested in the country cannot be repatriated for the first five years and then the company is banned from repatriating up to 80% of its dividends in the country.”
The new investor also needs to invest $1m to be accepted in the Venezuelan insurance market.
The law also establishes that upon liquidation, the foreign company cannot repatriate more than 85% of the final liquidation value. “Meaning that 15% has to
stay in the country after liquidation,” Paolini concludes.
DAC Beachcroft’s consultant particularly highlights that “the Venezuelan government is entitled by law to restrict foreign investors’ rights for capital and dividend repatriation, in case of extraordinary economic circumstances.” Which shows some arbitrariness and does not give investors a sense of stability and security.
Recently a new National Centre for Foreign Trade was created to replace the Superintendencia de Inversiones Extranjeras. This new entity will control foreign insurance companies’ investment in the country.
The government has also capped medical insurance premiums and imposed a 2.5% tax on premiums collected by (re)insurers to fund the industry’s regulator (Superintendencia de la Actividad Aseguradora).
Adrian Kaerle, Swiss Re’s Head of Credit & Surety, mentions Venezuela’s reinsurance regulations as an obstacle to Swiss Re’s business in the country.
“In Venezuela you are not sure that the premium goes out because of all the restrictions, so we don’t predict growing there,” Kaerle says.
Figueroa admits that “many insurers are accumulating cash in the country because they may not be able to pay their reinsurance premiums,” due to the increasing restrictions.
“I heard some reinsurers are withdrawing from the Venezuelan market because they can’t collect their reinsurance premiums,” he concludes.
REGULATIONVenezuela spends more money than it brings in from oil sales”TONY MATTA, CRANDON RE
26 REGULATION WATCH
LATAMIR
MARCH 2015
REGULATION FOCUSInternational law firm DAC Beachcroft and its associated firms provide an overview of the latest regulatory and legal updates in the Latin American insurance sector
VENEZUELA
On 18 November 2014, Venezuela enacted a new Foreign Investment Act. Here are some of the most important changes.
• The new Act restricts choice of law and jurisdiction clauses, in favour of local courts or possibly recognised dispute resolution bodies in the Community of Latin American and Caribbean States.
• A new National Centre for Foreign Trade is created and replaces SIEX. The new centre will act alongside the Insurance Regulator (SUDESEG) to control foreign insurance companies wanting to invest and/or open businesses in Venezuela.
• In order to qualify, a minimum of US$1m must be invested, to which the National Exchange Rate applies. The original investment (capital) cannot be repatriated for five years.
• Dividends are distributable and paid in local currency. Only 80% of these dividends can be repatriated on a yearly basis. Such dividends (profits) are only those directly linked with the foreign capital. For example, a mixed company created with both foreign (51%) and national (49%) capital, could only repatriate 80% of the dividends produced by the foreign 51% of capital. In case of liquidation, only 85% of any surplus capital can be repatriated.
• In case of ‘Extraordinary Economic Circumstances’ the government could restrict the repatriation of both capital and dividends.
New Foreign Investment Act 2014
Adolfo Paolini, consultant, DAC Beachcroft
COLOMBIA
Liability for general as opposed to special damages Losses covered by civil liability policies have been subject to debate in Colombia. Some argue that insurers must compensate for both general (non-material) and special (material) damages caused by the insured to third parties, while others consider that only special damages are covered.
A recent decision from the Supreme Court of Justice, the highest authority on civil cases, has clarified that only material damage (i.e. special damages) caused by the insured to third parties is covered by civil liability policies. According to this decision, compensation for general damages by the policy requires the express agreement of the parties to the insurance contract.
Compensation limits for general damagesFollowing several recent judgments, the Council of State, the highest authority for disputes involving a “public entity” or a private person performing public duties, has consolidated its position regarding compensation for different kinds of general damages, establishing the highest limits and parameters that judges must consider, and which can only rarely not be taken into account.
Based on these decisions, compensation for "moral damage", i.e. pain, suffering and loss of amenity, cannot exceed 100 times the monthly minimum wage in Colombia (approx US$26,350). However, in serious human rights violations and other exceptional cases, compensation may exceed this amount, provided an increased degree of harm is proved. Regarding psychophysical damage, the limit is the same, but in cases of very severe injury, compensation can rise to 400 times the minimum monthly wage (approx US$105,400).
Liability and compensation
Gabriela Monroy, partner, DAC Beachcroft Colombia
REGULATION WATCH 27
CHILE
On 7 January 2015, a new administrative rule was issued by the Chilean insurance regulator that interprets some of the provisions of Chilean insurance law regarding the early termination of insurance contracts and the requirements with which insurance companies must comply.
The current law recognises the right of the insurer to terminate an insurance contract early if it expressly:
• sets out the possibility of an early termination of the contract in the text of the insurance policy;
• gives 30 days' written notice in advance to the other party.The new administrative rule thereby interprets the first
requirement by saying that, in the event of an early termination, insurers cannot invoke different grounds from those already set out in the General Conditions of the policy and they must not be vague or generic. This rule strengthens the regulation in favour of insureds, as previously the law simply allowed insurance companies to provide their explanation at the time of the termination. This is now forbidden, and the reasons for an early termination by the insurer must be set out in the policy wording so that they are known by both parties before they accept the contract.
Marcia Cicarelli Barbosa de Oliveira, partner, JBO Advocacia
SUSEPAmid speculation that Roberto Westenberger would be replaced as Superintendent of the Brazilian Regulatory Body for private insurance (SUSEP), the Brazilian Finance Ministry has confirmed that Westenberger will remain in office. The announcement followed a meeting between the Superintendent and the newly appointed Finance Minister, Joaquim Levy, to discuss, among other things, the possibility of looser regulation of the sector, the protection of companies’ assets and the
World Bank proposal to merge SUSEP and CVM, the Brazilian securities watchdog.
Insurance marketDespite the weak performance of the Brazilian economy in 2014, which is expected to grow by 0.7% in 2015, the insurance market enjoyed double digit growth last year. Estimated growth for 2014 is 11.2%, as provided by the National Confederation of Insurance Companies (CNSeg). CNSeg’s forecast is in line with a recent KPMG study which showed consistent development of the sector in the past 10 years and an expected growth of 50% over the next five years. Specialists believe that the low level of participation of the insurance market in the GDP and the successful control of inflation in Brazil during the past decade has allowed such significant development and should generate further growth.
The New Mexican Law of Insurance and Bonds, effective from 4 April 2015, has been supplemented with a Single Circular of Insurance and Bonds. The circular, published on 19 December 2014, also comes into force this April.
One of the key changes for the reinsurance sector is that the Mexican Insurance Commission (IC) will no longer act as an advisory body to the Tax Ministry on reinsurance matters. Rather, the IC will be responsible for authorisations and regulatory issues, so as to achieve more rigorous adherence to standards and
greater control of the reinsurer market. The IC will oversee the Foreign Reinsurance Registry which
will interpret and apply the rules. As part of the new policy, the IC will require the formal appointment of local representatives to file application requests. This will entail securing a power of attorney granted abroad, which must be notarised and legalised and thereafter notarised in Mexico, in order for the registration application to be filed. The IC will also require all documents submitted as evidence of the foreign reinsurer's credit rating to be certified by an apostille, whereas previously a simple print-out of the rating was sufficient.
In addition, the IC will undertake a much more detailed analysis of the actual regulatory framework applicable to the foreign reinsurer in order to ensure that it is authorised to underwrite reinsurance from foreign risks (e.g. those located in Mexico).
28 RISK MANAGER FOCUS
LATAMIR
GETTING TO KNOW YOUCemig is proud of its risk management culture but worries that foreign insurers don’t recognise the company’s eff ortsBY ALICIA DIMAS
ergy, due to the lack of water, which means Cemig has to buy energy from other sources, increasing its production costs dramatically.”
Also, the company is having a hard time to maintain a constant energy distribution, since the plants are gen-erating less power and causing energy distribution dis-ruptions.
To mitigate the damages caused by the present and future droughts, Cemig has a well-developed risk man-agement strategy and is focused on diversifying its energy production mechanisms, according to the risk manager.
Oliveira Pinto highlights the fact that the company has invested heavily in research and development of new technologies to explore renewable energies.
He says that, although Brazil has always invested in renewable energies, the country is still very dependent on hydraulic energy, which is not enough to satisfy the country’s energy necessities.
“In the last few years, Cemig has invested in other en-ergy resources, such as wind and solar power,” says the risk manager.
In fact, Cemig is now building a new solar plant, with photovoltaic technology, in the city of Sete Lagoas, Brazil.
Despite the company’s vulnerability to climate change damage, Cemig is not covered against climate change risks. Oliveira Pinto explains that only now the Brazilian insurance market is coming up with new products for this kind of risk and the company is “keeping an eye on the market developments and checking new environmental
C arlos Alberto Ribeiro Oliveira Pinto, risk man-ager for patrimonial and insurance at Cemig, one of the largest energy companies in Brazil, says there is a lack of “innovative solutions” for
the Brazilian market and that foreign insurers tend to sell standardized products, not adapted to the nuances of the Latin American market.
His daily duties as a risk manager for patrimonial and insurance include surveying, analysing and risk assessing the company’s facilities, identifying exposures and the possibility of losses related to property risks, cost control and risk prevention and transfer. The risk manager is also responsible for negotiating contracts with the (re)insur-ers in Brazil and abroad.
As such, Oliveira Pinto believes there is a lack of knowledge about Brazilian companies from international insurers and that their underwriters sometimes decline a coverage without properly knowing the client. “They’d rather decline the coverage than travelling to Brazil and evaluate the risk in loco,” he points out.
“We, the insured, are evaluated as if we were all the same. I know that some companies, when they transfer a risk, stop worrying about it, but not all the companies are like that. The distinction between clients that care for the insured risk and clients that don’t is not being cor-rectly considered by insurance companies,” worries the risk manager.
Another subject that greatly concerns Oliveira Pinto at the moment is the severe drought in Brazil and how it is increasing the production costs for Cemig.
“Hydraulic plants are not able to produce enough en-
RISK MANAGER FOCUS 29
protection lines,” as they are released into the market.
Cemig’s insurance coverageThe company mainly buys property insur-ance, supply chain cover, national and in-ternational shipping insurance, aeronauti-cal risks coverage, operational equipment risk coverage, litigation insurance, finan-cial guarantee, bid guarantee insurance and life insurance for current and retired employees.
Cemig renews its insurance coverages annually, if the insurance contract allows so and the company still finds the cover-age necessary. When it is not possible for Cemig to renew an insurance contract and the line is considered indispensable for the company, Cemig has to open a public bid-ding to buy the new insurance product.
The company will also shift its use of in-surance as the company’s business growth or Brazilian regulation demand new lines of coverage. “But the insurance market does
not always provide the necessary products to feed our needs,” states the risk manager.
Oliveira Pinto reveals that the company is now in the market for an insurance prod-uct to cover a potential profit loss, given the new law for energy generation conces-sions, transmission and electricity distribu-tion (law number 12.783/2013).
The risk manager explains that, while choosing between different insurance companies, Cemig has to comply by the Brazilian bidding law (law number 8.666), therefore the company is required to buy insurance lines by public bidding.
Local and foreign insurers are able to participate in the public bidding, as long as they are allowed to operate in the country.
“Insurance companies are extremely valuable partners for Cemig’s success-ful risk management strategy and the company’s feasibility. Hence, we need to have a very close contact with our insurer. Nowadays, this close contact is possible whether the insurance company is nation-al or foreigner.”
Oliveira Pinto says that insurer ratings don’t play an important role, when Cemig is choosing an insurance company, since the selection process is dependent on pub-lic bidding.
“When we are looking to buy a new in-
surance product, besides the legal require-ments, we usually include in the public notice, as a prerequisite, that the insurer has proven experience in the insurance line they are selling.”
Additionally, Cemig also doesn’t involve an insurance broker, while choosing an in-surer. Since the company is owned by the Government of the State of Minas Gerais, it has a special insurance department that will buy insurance products directly from insurers.
Captive insuranceAlthough Cemig doesn’t have captive in-surance, Oliveira Pinto recognises the im-portance of establishing one and says the company is considering that option at the moment.
The risk manager believes that “creating a captive for Cemig will show the market how much the company believes in its risk management policy. Besides being a way to reduce spending, by rates reduction, al-lowing the company to get back part of the current costs from its current insurance spend”.
Currently, the company is considering establishing a captive to cover new con-tracts, “where risks are practically non- existent and the premiums are high”.
Gross income: $6,763bnNet profit: $1,080bnTotal annual insurance premium: $2,614m7,781m clients25% of market share65 power plants with an installed capacity of 6,925 megawatts
IN NUMBERS: CEMIGSOURCE: CEMIG
NET PROFIT BY SEGMENTSOURCE: CEMIG
Cemig was created on 1952, in the state of Minas Gerais, Brazil, and it is now one of the largest groups in the electric energy segment in the country. Cemig is an open capital company, controlled by the Government of the State of Minas Gerais and has 114,000 shareholders in 44 countries. The company owns or has stakes in 103 companies and 15 consortia. The group’s shares are traded on the São Paulo, New York and Madrid stock exchanges.Cemig is widely recognised for its sustainable practices. It has been part of the Dow Jones Sustainability Index World (DJSI World) for 12 consecutive years.It is also recognised for its size and technical competence and is considered the largest integrated company in the electric energy sector in Brazil. Cemig has operations in 22 Brazilian states and in Chile, where it operates a transmission line as part of consortium with Alusa.The company has expanded its stake in Light, assuming control of this energy distribution company. It also has equity stakes in electric energy transmission companies (TBE and Taesa), investments in the natural gas segment (Gasmig), telecommunications (Cemig Telecom) and energy efficiency (Efficientia).Cemig has also acquired equity stakes in three wind farms owned by Energimp S.A. (Impsa), with an installed capacity of 99.6 megawatts in the state of Ceará. The company is also investing in renewable energy sources, such as biomass, small hydroelectric plants, solar energy and cogeneration plants.
COMPANY PROFILE: CEMIG SOURCE: CEMIG
Generation 60%
Others 11%
Transmission 9% Distribution
20%
LATAMIR
30 POLITICAL RISK
SHIFTING POLITICS CAN BE A WIN
Financial and economic risks are part of every MNC’s regional analysis and forecast, yet less tangible political and regulatory risks are of-ten set aside. Understanding the political out-
look is essential to assessing risks to policy continuity, sharp adjustment risks through unorthodox macroe-conomic policies and emerging market opportunities.
The political outlook also sheds light on long-term growth. Structural reforms to support sustainable growth in Latin America are diverse, including ad-dressing a dependence on external markets and vul-nerability to external demand shocks, outdated infra-structure and imbalanced tax systems. Also, with the Eurozone and Japan giving continuity during 2015 to the US Federal Reserve’s tapering on quantitative eas-ing, the electorate in countries like Argentina, holding presidential elections in the next 12 months, could re-act sharply to liquidity constraints, prompting populist monetary policy measures.
Insurance companies seeking growth in the region
or rebalancing their Latin American portfolio need to know which countries are amenable to reform and which ones are prone to sharp adjustments.
A pivotal political yearLatin America’s political outlook will be particularly important through 2015 because of the large number of presidential elections that are about to or have re-cently taken place.
In the last quarter of 2014, presidential elections were held in Bolivia, Brazil and Uruguay, each having been governed by left-wing parties that had been in power for at least 10 years despite falling approval rates. Brazil and Uruguay chose to couple social re-distribution measures with neoliberal economics and kept their business environment stable and attractive. In contrast and in spite of redistribution policies, Bo-livia has struggled to reduce social unrest or signifi-cantly increase gross domestic product per capita.
In the face of controversies, such as strong criti-cism about the 2014 Soccer World Cup costs, Brazil’s President Dilma Rousseff was re-elected last year by the smallest of margins. Her narrow victory and the nation’s incipient recession will put pressure on intro-ducing reforms of rigid labour policies and the taxa-tion system. Such changes could attract business and renew the demand for creative life insurance and an-nuity products.
COUNTRY ANALYSIS
ARGENTINAThe long-term economic outlook for Argentina has always been promising and better than its short-term economic outlook, given its rich natural resources and agro-commodities, as well as a strong talent pool. However, in the short run, the country’s monetary policy and lack of investment have created long-term infrastructure issues and declining competitiveness. Unpredictable policies have directly impacted sus-tainable growth, with local talent and capital migrat-ing abroad. Argentina’s default on July 30, 2014, (its ninth) hurt bondholders and will diminish this capital source if left unresolved. Alternative sources of capi-tal, e.g. from China, may alleviate the issue, but with-
Multinational companies (MNCs) face not only global but also regional systemic risks. These risks are difficult to manage in Latin America, where a high level of heterogeneity is the norm. But in this region, such risks are more important than ever for MNCs to understand. Risks remain moderate, but opportunities have ceased to be low-hanging fruit BY MAGDALENA RAMADA, SENIOR ECONOMIST,
TOWERS WATSON, MIAMI
POLITICAL RISK 31
out a significant change in the country’s way of dealing with foreign capital, in-vestment cannot be expected to increase sustainably.
Although Argentina’s democracy re-mains stable, the country faces political stagnation. Approval rates have plum-meted, driven partly by 40% inflation and restrictions to foreign currency trade. Fol-lowing the 2013 mid-term elections, when President Fernandez de Kirchner received weak support, signs emerged of more moderate macroeconomic policies and in-itiatives to encourage foreign investment. Nevertheless, the risk of a renewed, sharp policy adjustment to increase approval in the short term before the 2015 presiden-tial election remains high.
BRAZILHuge markets enable entrants in Brazil to generate large revenue, even with a small market share. Energy resources, com-modities and a strong consumer base have nurtured 15 years of growth, forti-fying Brazil’s service sector and financial services industry. Brazilian multilatinas (multinational companies rooted in Latin America) are expanding quickly and sus-tainably, including insurers with strong bancassurance channels.
The 2016 Olympic Games and foreign direct investment (FDI) in the hydrocar-bon and mineral industries will boost mid-term growth. But sustainable growth also depends on structural problems being addressed, from inflexible labour laws and talent scarcity to a deteriorating balance of payments and high business costs.
Although social inequity has dimin-ished, with redistribution strengthening the lower-income populations, there is still reason for concern. Less emphasis on redistribution over the next five years, inflation, declining living standards, and corruption scandals are likely to increase social pressures. Political polarisation and internal power struggles between differ-ent industries could also escalate.
Despite the country’s recent recession, Brazil’s political outlook is positive. Mini-mal policy disruption risk and reforms to strengthen investment and financial mar-kets are expected. But this will only lead to moderate growth, with monetary tight-ening targeting inflation and a weaker
Real expected to hamper both real private consumption and GDP growth in 2015.
COLOMBIAInternational Monetary Fund and rat-ing agency assessments have improved Colombia’s business image. The country has a strong fiscal policy, while large public investments and lower inflation compared to its neighbours offer new investment opportunities. Still, long-term growth is at risk without structural re-forms and strong credit growth of doubt-ful quality could reverse if Colombia’s economy slows.
High exposure to US demand for goods and energy prices, and difficult negotiations with FARC, the country’s main insurgent group, are major weak-nesses for Colombia. Although politically stable, the risk of armed civil violence and the power wielded by drug lords re-main. President Santos was re-elected, in part, because of a commitment to lower crime rates and reform health care and education. His efforts may help to ad-dress the country’s high inequality and, unlike most Latin American countries, Colombia is expected to sustain its pri-vate-consumption-led growth in 2015.
MEXICOMexico attracts foreign capital with its huge market and strong business en-vironment. FDI is drawn by free-trade agreements such as NAFTA, proximity to the US and strong economic fundamen-tals. Mexico also has a large, skilled tal-ent pool, while its growing semi-skilled workforce is unique among neighbouring countries and is driving growth in key in-dustries. Yet, Mexico is dependent on US consumer demand and volatile specula-tive foreign investments. Demographic pressures, poor public services and high crime rates constitute its main sociopo-litical risks.
Mexico’s political system is stable, dis-playing strong democratic principles and multi-partisanship in the last 15 years. Several reforms were passed in 2013, making certain industries (hydrocarbons and oil, and telecommunications) more appealing to FDI. A solid fiscal policy platform, together with e-literacy and digitalization programmes targeted at
all population segments, also has strong implications for insurers. Since January 2014, strong efforts to modernise and reform Mexico’s financial system and strengthen banks’ credit channels have also been announced.
However, Mexico’s congressional elec-tions in 2015 risk creating a power shift that may hamper Peña-Nieto’s govern-ability, given his approval rates took a big hit after the disappearance and death of almost 50 students, as well as a slower than expected economic recovery and falling oil prices.
PERURecent growth and comprehensive tax reform have generated a fiscal surplus, while an investment grade from rating agencies has renewed Peru’s attractive-ness for FDI. Investment in infrastructure has also increased. Modest diversifica-tion efforts and continued privatisation of state-owned enterprises could boost mid-term growth.
However, Peru’s export-led growth depends largely on declining Chinese demand and obsolete infrastructure is constraining capacity in key sectors. Highly skilled talent is scarce and social unrest has increased. There is also a high dependence on the mineral industries, where working conditions are under pressure from indigenous groups and non-governmental organisations.
President Ollanta Humala has kept a strong fiscal policy, strengthened Peru’s institutions and focused on creating an investment-friendly climate, combined with a less rigid labour market. But this has not prevented Humala’s approval rat-ing from falling due to the slow pace of reform and failure to address key prob-lems such as health, education and ine-quality. Increasing corruption, strong po-litical polarisation and shifting alliances in parliament make it unlikely these chal-lenges will be addressed soon.
For insurance companies in emerging markets such as Latin America, under-standing, measuring and managing po-litical risks go beyond good governance and enterprise risk management. They relate directly to the core underwriting and asset management functions of their businesses.
32 SPONSORED FEATURE
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the captive owner. However, it should be emphasised that the owner must make the major decisions, such as coverage terms and retention levels.
• Suffi cient annual premiums Given the fi nancial commitment required for the formation and annual operating costs, it is generally acknowledged that a company should be paying in excess of $1m annually for total insurance costs.
• Management of loss control The fi nancial viability of a captive will ultimately rest with the ability of the owners to control losses, so a commitment to controlling potential claims and loss-es is essential.
• Financial security of insurance partners Critical to the success of the captive is engaging third-party insurance partners who have demon-strated a solid fi nancial foundation and expertise in their respective industries. This is especially true of the fronting company and the reinsurers in the local country.
We have been receiving more and more inquiries from companies in the region interested in a captive programme. Conversations with their risk manage-ment personnel are revealing that these companies have the suffi cient size and more importantly, the so-phistication to make a captive programme work. With operations in 15 countries and over 3,500 employees serving the region, AIG is well positioned to help cli-ents assess and implement a captive programme.
AIG TALKS CAPTIVES IN LATAM
Robert Gagliardi (left) and David White of AIG Global Risk Solutions, review how companies in Latam can benefi t from captives
T he Latin American region has received con-siderable attention from the business com-munity searching for growth. The insurance industry is no diff erent as carriers develop
more presence in this region. The captive insurance industry has developed
over the last 50 years, particularly in the US and Eu-rope in response to commercial markets of limited capacity and high prices. It is likely that over time, the Latin American insurance market will experience similar cycles. Companies with a long-term view and the capital to withstand some volatility should con-sider a captive.
Captives operate in much the same way as com-mercial insurance companies do. The captive accepts risk, receives premium, and is obligated to pay losses incurred in accordance with an insurance policy.
Captives in Latin America – Who?The successful operation of a captive depends upon many factors, including:
• Long-term senior management commitmentCaptive ownership should be viewed as no less than a fi ve-year commitment. Given the initial costs, coupled with the possibility of suff ering initial larger-than-expected losses, no less than fi ve, and preferably a 10-year horizon should be used.
• Strong and capable ownershipHowever capable the manager of the captive, it is ul-timately the assets of the owners that are at risk. The captive manager will provide services and advice to
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Captives in Latin America – Why?The commercial insurance market in Latin America is quite different from the market in North America. The prop-erty market in Latin America represents a much larger proportion of insurance premiums than in North America where liability lines produce greater premium. Property coverage can be somewhat more difficult to manage in a captive as it is often more volatile than liability, but many captives do successfully cover property over the long term.
Regardless, the benefits for a Latin American company owning a captive are no different from companies in other regions. A captive is a financial manage-ment tool. The captive owner(s) can de-sign and price coverages to fit exposures and reduce the total cost of risk.
• Underwriting profitsA captive that produces underwriting profits will result in a lower ‘total cost of risk’ for the company. Therefore, a cap-tive facilitates discipline and motivation to reduce insurance costs through great-er risk retention resulting in premium to captive, and promoting loss control and improvements in claims management.
• Coverage flexibilityA captive can provide coverage that may be unavailable or too expensive in the traditional insurance market. In addition, the captive can offer a company added flexibility as terms and conditions of cov-erage can be tailored to specific require-ments.
• Direct access to reinsurance marketsAs an insurance entity organised and regulated in accordance with the appli-cable statutes of its domicile, a captive gains access to the worldwide reinsur-
ance marketplace. This access may en-able a captive to negotiate terms or ac-cess capacity not available in the primary insurance market.
• TaxationA captive may allow for the accumulation of underwriting profits in a tax-efficient manner. However, outside tax counsel must be consulted in order to gain a full understanding of the tax implications, as regulations vary widely by country and some common captive jurisdictions are viewed as tax havens in some Latin American countries.
Captives in Latin America – How? A captive can either provide reinsurance for a fronting insurer or write coverage directly to the insured. Under a fronted arrangement, a licensed insurer issues the policy directly to the owner (in-sured) and then reinsures a portion (or all) of the risk to the captive. The ma-jority of captives in Latin America are fronted, as regulations in many coun-tries require a locally admitted carrier to issue the policies.
In addition to wholly owned captives, there are also ‘rent-a-captives’ that allow clients to utilise a ‘cell’ within an existing captive facility. A cell offers the many benefits of a captive without the full operating costs of a standalone captive. AIG currently has cell facilities available for rent in both Bermuda and Vermont.
The key benefits of using a cell include quick formation and minimal start-up costs, enhanced management and con-
trol over losses, potential for sharing in underwriting and investment profits. Assets and liabilities of each rent-a-captive cell are legally segregated, and a cell can easily be converted to a stan-dalone captive.
A captive manager or other consultant can provide a captive feasibility study to help a company determine if a captive insurance subsidiary would be of benefit. This study provides a full analysis of the captive alternative, including a review of the client’s loss history, an assessment of coverages and retentions, structure of the captive and a domicile comparison.
Captives in Latin America – Where? Selecting a domicile for a captive de-pends upon a number of factors, but we like to think of it as taking a ‘TRIP’:
• Taxes – the tax implications for a captive owner can be very signifi-cant, and each Latin American coun-try has its own regime which must be evaluated.
• Regulation – a strong captive domi-cile will effectively balance flexibility with certainty.
• Infrastructure – established domiciles typically have stronger infrastructure such as law firms, captive managers, and audit firms.
• Price – the cost and ease of doing business in the domicile must be considered.
Captives in Latin America – When?The time is now. While a captive may generate the most value during a hard market, it can still serve a purpose in a soft market. The captive industry is no longer just a response to hard markets. The modern captive industry works with traditional carriers to balance levels of risk transfer and risk retention. In ad-dition, planning and forming a captive takes time, so having a captive in place and operational before a hard market hits can help a risk management team to add value to their company.
The property market in Latin America represents a much larger proportion of insurance premiums than in North America” ROBERT GAGLIARDI AND DAVID WHITE, AIG GLOBAL RISK SOLUTIONS
“
Robert Gagliardi is senior vice president and director of Captive Management Services at AIG Global Risk Solutions (GRS).
David White is vice president of Global Risk Solutions’ US Captive Management Services group headquartered in Burlington, Vermont.
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34 COMMENT
I often hear the term “lessons learnt” as if, the sole act of expe-riencing a disaster, suffices the whole learning process. I point this
out because after the 8.8 Richter scale earthquake that struck the central part of Chile, on the 27th of February 2010, most of the risk managers or policy advocates declared that lessons were learnt. Well, the purpose of this brief comment after 5 years of this natural event, is to present some of the implications and lessons that Chilean risk managers are learning; after all you never stop learning, right?
First, for context, some facts and figures about this socio-natural disas-ter. On the economic perspective Chile suffered losses of nearly 17% of its GDP, which comes to almost US$30bn, of which 27% or US$8bn, where insured mainly in commercial and industrial property. According to a study of the Forensic Medical Service (Nahuelpán & Varas, 2010) there were 512 direct vic-tims of the earthquake and tsunami. The shock of these losses plus the judicial process that still is taking place, due to possible neglected actions of the gov-ernment and the national emergency offices, raised awareness of the need to dramatically improve the way risk was managed in the country.
Before the 2010 Chilean earthquake, risk management was understood main-ly in two ways: risk transfer and correc-tive disaster risk management (UNISDR, 2009). Chief financial officers where the key actors in transferring risk at a com-mercial and industrial level through the insurance market, primarily because risk was understood as financial loss and; on a more radical view, biased by the idea that disasters where unavoidable
reflected in the use of the term natural disaster – we will see later that disasters aren’t natural but socio-natural. Strict constructive standards, influenced by the recurrent seismic activity in Chile, it’s still a stronghold of the way disaster risk is corrected in the country, setting an example that has raised the attention of other earthquake prone nations.
Unfortunately, disaster risk manage-ment based on these two pillars, proved insufficient to cope with an event such as the ‘27F earthquake’; as Chileans call it. Reasons for the former abound and somehow are diffused, I dare to pre-sume this can be explained by the fact that risk management, besides financial risk management, it’s not a professional activity in Chile hence the implications derived usually are sustained in opin-ions more than in facts and knowledge. This brings my first lesson to learn from this event, the need to implement edu-
cational programmes on graduate and postgraduate level. If we want to have CRO’s – in Chile this position practically doesn’t exist in the organisations - man-aging risks instead of CFO’s, it’s impera-tive to develop and implement formal studies to manage and raise awareness of risk management.
I’ve always believed you should lead by example. Under this premise, some-thing that became evident after 27F, and hasn’t been tackled, is the lack of business and government continu-ity plans particularly in publicly owned companies. There´s a huge space for improvement in this topic, therefore I believe the government should act de-cidedly to adopt and implement BCP’s for their companies, leading by example on this critic issue.
Finally, the most important lesson to learn from this experience is the need for better public-private cooperation and synergy in risk management topics. There’s a lot of experience and resources – physical and intellectual – allocated on the private sector that, without doubt, could improve the way the government and vice-versa could reduce risk and vulnerabilities in the Chilean society.
Ulrich Beck, who recently passed away, left us with a final reflection about the emancipatory side effect of global risk (Beck, 2015), this means that we should see the positive side effects of bads. Let me rephrase it, every crisis is an opportunity. Therefore, I’m a firm be-liever that after 5 years from one of the biggest earthquakes measured by man-kind, the role and trade of managing risks still has a big opportunity to keep improving the way we deal with socio-natural disasters.
LESSONS TO LEARN AFTER 27F EARTHQUAKECristóbal Mena A., risk and safety manager for Metrogas, Chile
My fi rst lesson
to learn from this event is the need to implement educational programmes”
