FIDES insurance industry event seeks to open doors to growth in Latin America market

A delegation of Swiss Re Americas business leaders brought a consistent theme of opportunities and challenges to clients, brokers, regulators, the media and other influential groups who gathered in Guayaquil, Ecuador October 21-24 for the 31st annual FIDES event. The conference brought into focus key societal and economic issues in Latin America and proposed solutions that offer tremendous opportunities and positive growth and development of the insurance industry that will be key in driving the success of the region.

Versión en español

The Inter-American Federation of Insurance Companies’ conference, known in Spanish with the acronym FIDES, is held every two years and is a major agenda-setting event for the insurance business in Latin America. It is also a time for interaction among industry participants who seek regulatory and governmental support for expanding the market. More than 1,200 participants including representatives from 500 companies and organizations in Latin America, the United States and Spain took part in the conference, which included informational sessions, keynote speeches, trade show booths and hundreds of individual meetings among the various participants.

 

Pierre Ozendo addresses challenges and opportunities in Latin America

Swiss Re’s presence was highlighted by Americas Division CEO Pierre Ozendo’s presentation to the main plenary session, where he emphasized the importance of public-private partnerships in enhancing risk management in Latin America. The need is critical, considering the increasing losses from natural catastrophes and the lack of insurance penetration in the region. In fact, Ozendo noted that “there is a critical gap between economic losses and insurance industry penetration”.

Referring to recent data published in a special  FIDES 2007 Economics Research & Consulting report, Ozendo told the audience that the average level of insurance penetration on the non-life side is 2.4% in Latin America and the Caribbean (based on premiums as a percentage of gross domestic product). This level is even below the average in emerging markets, which is less than 3.6 percent, while the global average is around 7.5 percent. “This low level of insurance presence stands in stark contrast to the vulnerability of many emerging market countries to natural disasters,” added Ozendo.

Broadening the discussion to the needs for economic development in the region, Ozendo emphasized since much economic activity depends upon insurance, a reliable mechanism for risk transfer is a key prerequisite for prosperity and growth. For some risks, however, innovative approaches are needed to bolster the use of insurance. This holds particularly true for emerging markets, he said, where the development of insurance faces various obstacles. “The challenges faced by the public sector are threefold,” said Ozendo. “First of all, the need to change the mindset from post-event emergency funding to pre-funding. Second, to have a clear view of the prevalent exposure; and third, to apply a systematic risk management process.”

Proposing solutions to these challenges, Ozendo outlined several promising ideas that Swiss Re is promoting through its various outreach efforts to governments, regulators, business partners and other influential sectors.

One is the concept of encouraging national and local governments to establish the role of a Chief Risk Officer to lead a risk management department aimed at ensuring better allocation of resources for systematic risk identification, assessment, mitigation and adaptation.

Another example is to increase insurance coverage and provide capital where it is most needed, through public-private partnerships. “For such partnerships to be successful,” said Ozendo, “they must enlist the cooperation of all interested parties, including the government, private corporations, individuals, non-government organizations (NGOs) and the insurance industry.“

Examples of the potential of these public-private partnerships include disaster management and relief including prevention, immediate economic loss mitigation, safe reconstruction work and minimization of growth disruption. In agriculture, protection against hail, storm, fire, frost, drought, flood, heat, diseases, epidemics, insects, pests, commodity price fluctuation and loss of farmers’ income can help provide stability in the industry.

Ozendo’s also focused on a topic that many in the Latin American market agree is an important avenue to filling critical gaps in insurance coverage: microinsurance. Citing a joint effort of three companies -- Paralife Mexico, HSBC Mexico and Swiss Re – Ozendo pointed out that the cooperative effort led to a solution for providing affordable micro-life insurance for disabled people and their caretakers. The product can fill a critical need for people with disabilities, who account for approximately 10 percent of the worldwide population. “This is especially important in developing markets,” said Ozendo, “where these individuals have very limited access to financial services.”

Pointing to the success of such cooperative efforts, Ozendo concluded that Swiss Re and the international insurance and reinsurance industry have a huge responsibility and the ability to support economic development in emerging markets by helping these economies mitigate and manage risks, and by financing economic losses. “Public-private solutions can facilitate the extension of insurance coverage in emerging markets. This can be done in a variety of ways – by, for example, providing financing to governments through catastrophe bonds, through the creation of government catastrophe pools, and by designing affordable insurance solutions that can be distributed through channels that reach the poorest communities. To be successful these public-private solutions require the cooperation of all relevant parties: the government, corporations, households, non-governmental organizations and other entities that might be affected by the insurance coverage.“

See the presentation to FIDES participants by Chairman and CEO of Swiss Re America Corp Pierre Ozendo: Public Private Partnerships in Risk Management

 

Swiss Re Latin America business experts engage clients and media at FIDES

Members of the Business Unit Latin America headed by Beat Strebel played an important role in Swiss Re’s participation at FIDES. (Strebel has responsibility for all of Swiss Re’s Property & Casualty and Life & Health business in the region.) With extensive experience throughout Latin America, Strebel knows the region’s challenges well and is encouraged by the current economic growth in many areas and the related potential for the insurance industry. Speaking with various reporters from both local and international media attending the conference, Strebel noted that while the insurance penetration may be low, solid economic growth speaks well for strengthened demand for insurance.

As noted in the economic report Swiss Re released at the event, the economies of Latin America performed solidly in 2005 and 2006 with real GDP growth of 4.2% and 5.1%, respectively. In the six major economies of Argentina, Brazil, Chile, Colombia, Mexico and Venezuela, growth ranged from 3.7% to 10.3%1 in 2006. Both internal and external factors supported the growth including: strengthening domestic demand, high commodity prices and sustained growth of the global economy. Low interest rates, narrow sovereign spreads and rating upgrades also boosted the economic performance of the region.

The next FIDES will be held at Caesars Palace Hotel in Las Vegas, Nevada November 1-4, 2009. The conference will be hosted by the American Council of Life Insurers.

Visit the FIDES-Homepage

Back to Top

Media coverage

Insurance Day article:
Download