LATAM buyers turning to international markets as local capacity dries up

Latin American insurance buyers are turning to international hubs like London and Miami to meet their growing appetite for specialty covers as local underwriters become more risk adverse, according to market experts.

“Our clients have shown much interest in products that they were never interested in before,” Paula Lopes, head of Marsh Specialty for Latin America and the Caribbean at Marsh McLennan, told Commercial Risk during FIDES, the Latin American insurance conference in Rio de Janeiro. “And the market abroad is getting softer than in places like Brazil, so I see an opportunity for growth in Latin America [for foreign insurers].”

The trend has gained steam over the past few months, according to Marjorye Hoejenbos, a partner at broker Latin Re. She said Latin American buyers no longer enjoy abundant capacity, but by using a range of options, companies with good loss histories and well-prepared risks stand a good chance of finding what they need.

“Capacity is more difficult to access right now, but it is there. What we need to do is devise tailor-made solutions for clients who previously had access to excesses of capacity from some insurers,” she said. “We have to talk more with clients, to get more information from them, and they have to make more investments in risk management.”

Latin Re looks for capacity in places like Miami and London, where in August, the company became the first Brazilian broker authorised to trade directly at Lloyd’s. Hoejenbos noted that Lloyd’s syndicates have renewed their interest in the Latin American market of late, particularly Brazil, and are open to learn about risks based in the region.

But she said London market carriers are still asking plenty of questions, and brokers like Latin Re need to thoroughly explain to underwriters the risks and circumstances of local markets.

Paul Connolly, CEO of Carpenter Marsh Fac in Brazil, told Commercial Risk that the resurgence of Lloyd’s in Latin America can be attributed to its ability to compete with the local reinsurance market.

He also said that the abundance of local reinsurance capacity, which has mitigated the impact of previous cycles in Brazil and other Latin American markets, is now less of a factor, as local reinsurers have reduced their risk appetite.

In addition, large local underwriters suffered exceptionally high catastrophic losses in Brazil and Argentina as drought and hail wreaked havoc on their powerful agribusiness sectors since 2021.

“We are in an adjustment market right now,” Connolly said. “Clients with poor loss histories still face tougher conditions. But those with better loss histories can find competitive terms and conditions. Some have even managed to get rates a tad lower.”

In the facultative reinsurance segment, the loosening market has been helped by the arrival of new capital. Connolly pointed out that Lloyd’s, which was out of the top five largest providers of capacity for his clients a year ago, has now surpassed even IRB to become the number one in Brazil.

This trend has allowed Connolly to find new sources of capacity for risks like cyber and marine.

He said companies that already operated in niche markets in the Latin American region are taking advantage of the current market to expand their presence to other areas. Capacity from other parts of the world – including from eastern Europe, the Middle East and Asia – is also looking for opportunities to get into Latin American.

What is yet to happen is the arrival of new leaders in facultative reinsurance programmes. So far, nobody, not even experienced followers in the region, has stepped into this role. Hemant Gulati, a senior vice-president at Indian reinsurance brokers Unison, said that underwriters from India and the Middle East are eager to participate in Latin American reinsurance programmes, as long as they can follow the lead of established local players like IRB and Austral Re, another Brazilian reinsurer.

Switzerland’s Helvetia Specialty Lines also prefers to offer follow capacity to Latin American facultative programmes, said Alain Bizet, the firm’s Miami-based head of Latin America and Caribbean. And rather than pursuing growth at any costs, the company is now focusing on showing up for clients and creating long-term relationships in the region.

“We have developed the resources and technical capabilities to provide tailor-made solutions and act as an influential following market,” said Bizet.