Latin American Reinsurers See New Opportunities, Ample Capital

Silhouette of a Standing Person Facing an Increasingly Upward Trend Represented in a Giant Bar Graph

September 19, 2023 |

Silhouette of a Standing Person Facing an Increasingly Upward Trend Represented in a Giant Bar Graph

Global reinsurers' limited appetite for business in Latin America has created opportunities for domestic and regional reinsurers in the region, according to A.M. Best.

At the same time, over the past 4 years the minimal number of severe catastrophe events in the region have not produced major insured losses, Best says in a Best's Market Segment Report titled Fewer Major Cat Events Limit Claims Activity for Latin America Reinsurers.

Best said that the Latin America region's large reinsurers have ample available capital due to greater retentions by ceding companies during the current hard market conditions.

"Given this environment, domestic and regional reinsurers have increased their participation in lower layers of programs or have delegated underwriting authority to specialized parties like managing general agents," Eli Sanchez, director, analytics, at A.M. Best, said in a statement. "As a result, we are seeing new names enter the reinsurance space."

According to the Best report, claims activity has been favorable for reinsurers' income, and, to varying degrees, many rated reinsurers have reported more success translating inflationary pressures into better pricing.

In Brazil, domestic reinsurers with international catastrophe exposures are following global trends in reducing their property catastrophe exposures, Best said, though their actions have yet to translate into meaningful underwriting profits or capacity growth.

Best said that political risks remain a significant factor for reinsurers domiciled in Latin America with investment requirements posing pressure to invest in domestic sovereign debt with deteriorating credit quality. "Although there has not yet been a flight of companies to less risky domiciles, it is a constant consideration in companies' internal risk assessments," Best said.

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September 19, 2023