London market’s relationship with Latin America examined in report

Latin American insurance markets are becoming more international and seeing regulatory improvements, according to a new report from New Dawn Risk. However, it says the challenges are growing for financial lines, as the global rate increases currently seen in D&O and aligned capacity/rate crunches in cyber cover begin to bite. New Dawn Risk’s latest whitepaper, Connecting across continents: International reinsurance solutions for Latin America, highlights the interactions between Latin American markets and London, as well as the tensions that capacity and rate issues can bring. Max Carter, CEO of New Dawn Risk, said: “Latin America is seeing growing demand for increasingly complex insurance products. One notable development has seen local brokers putting together in-country consortia to cover some larger risks, reducing their reliance on London. But the need for international cyber and financial lines cover is growing on a steady trajectory. Claims continue to spike in cyber, with ransomware being the most noted ‘problem child’, causing prices to be steeper than the broader class. These lines are seeing decreased local capacity, creating a growing need to look to London for its expertise and appetite in these areas.” The report explains that buyers in all insurance markets across Latin America are struggling with rising rates. “Local brokers are gaining ground and interest in solutions from local carriers has recently spiked. While they can be cost-effective, in-country insurers do not always have capacity to cover a risk alone. As a result, some consortia have been put together, with several companies joining forces to take on the large corporate financial lines risks,” it says. New Dawn Risk notes that governments in Latin America do not allow foreign insurers to participate directly in the market, so there will always be an important role for international, Lloyd’s and London market brokers to provide essential capacity for Latin America. “At present, the London market continues to hold enough cards to attract buyers. How long this situation will last is hard to tell. If local expertise and capacity were to build, and receive support from the right reinsurers, the London market could well find its position eroded over the next two years,” states the broker. The report highlights that London presents challenges for Latin American brokers: “One respondent to our survey commented that ‘knowledge of local conditions’ was sometimes lacking in the London market and ‘interaction could be difficult’. There is a general belief that London has been less responsive since the Covid lockdown (in terms of both time and support), and this has had a negative impact on buyer sentiment.” However, despite this, New Dawn Risk says that no substantial shift in business towards local insurers or Miami has yet occurred. “It is to London’s advantage that wordings and policy conditions available locally remain unfavourable, while Miami has suffered many of the same response issues as London, despite being in a better timezone to do business with Latin America. This is the year when London must focus on correcting some of the service gaps – particularly in terms of slow responses to requests and ensuring that international insurers remain the preferred option. If the basics of service are taken in hand, business will continue to flow because of lack of capacity locally and the expertise London has with complex risks,” the report states. Elsewhere in the report, the broker says Latin American brokers are seeing an increase in focus on international cyber solutions as the severity and frequency of cyber threats increases. It notes: “Companies in the region are not all high tech and often do not have the controls required to defend themselves against potential cyber threats. As a result, some insurers are not willing to underwrite the risk.”

London market’s relationship with Latin America examined in report

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