Marsh Risk Management Research
MARKET PERSPECTIVE
LATIN AMERICA AND CARIBBEAN
INSURANCE MARKET REPORT 2013
FEBRUARY 2013
CONTENTS
Foreword1
Executive Summary
2
Insurance Markets by Country
Argentina.......................................... 5
Colombia........................................... 9
Puerto Rico...................................... 12
Brazil................................................. 7
Mexico............................................ 10
Venezuela........................................ 14
Chile.................................................. 8
Peru................................................ 11
Insurance Markets by Specialty and Industry
Captives.......................................... 17
FOREWORD
We are pleased to present the Latin America and
Caribbean Insurance Market Report 2013, which includes
commentary from nine countries in the region where
Marsh has a physical presence, including Puerto Rico.
The information provided is intended to give you
an overview of the key developments in the regional
insurance market and the general risk and insurance
trends over the last 12 months.
In preparing this report, we have engaged our senior
market-facing professionals, who deal with the markets
every day on behalf of our valued clients. We hope you
find this of use as you consider your insurance and risk
management needs for the next year.
The Latin America and Caribbean region continues to
change and grow from an insurance perspective. The
market is evolving as our clients’ needs change and we
are seeing a notably higher level of sophistication around
insurance purchasing.
Clients want to have conversations with us about how
to make risk management more relevant to their overall
business strategy, and they need the insurance markets
to continue to create products and solutions that support
their evolving strategies.
One way we are helping clients to use risk management
more strategically is through analytics. We are
doing significantly more work around the analytics
of insurance buying, which is a key trend. Clients
are interested in understanding factors such as
their tolerance to retain risk and the optimal point
at which to transfer risk.
We are seeing larger companies in the region expanding
geographically, both within Latin America and the rest
of the world. As a result, they are becoming exposed to
different types of risk and are demanding appropriate
solutions from their broker and insurer partners.
Regulations continue to evolve. Brazil and Argentina
are seeing a tightening of reinsurance legislation and
rules. In Colombia, the rules are changing to allow
better access to the international market. These changes
potentially imply more complexity for companies with
presence in these countries.
We would like to take this opportunity to thank our
clients for trusting us with your business. We continue
to invest in quality resources and expertise to ensure
we can service client needs. And, we look forward to
a successful 2013.
Sincerely,
Ricardo Brockmann
CEO of Marsh Latin America and Caribbean
Marsh • 1
EXECUTIVE SUMMARY
Overall, the Latin American insurance
market was mostly stable in 2012. With
the exception of Venezuela, where rates
rose in virtually all commercial lines,
most countries saw either stable or
falling rates, with increases limited to a
few specific lines.
As a general rule, rate changes for most coverage
lines fell within the range of minus 10% to plus
10%. Though demand for insurance grew with the
expansion seen in most Latin American and Caribbean
countries’ economies, insurance capacity increased
with the entrance of more carriers to the region,
helping to stabilize rates.
The increase in capacity and carrier competition
also helped drive lower rates in several coverage lines
throughout most Latin American and Caribbean
countries. Of course, individual business’ rates
depend largely on loss history, loss control programs,
and other measures companies take to market
their insurance programs.
ARGENTINA
•• Most coverage lines were stable and a few (general
liability, directors and officers liability, and marine)
saw lower rates.
•• Motor/automobile coverage saw the largest increase of
rates at renewal, averaging between 20% and 30%.
•• Workers’ compensation/employers’ liability rates
increased by between 10% and 20%.
•• Rates for financial institutions rose up to 10% due to
several losses related to banker’s blanket bonds.
•• Property insurance changes were mixed: Non-energy
companies saw a decrease in non-catastrophe rates of
about 10% on average, while energy clients saw rates
climb by up to 10%.
2 • Insurance Market Report 2013
•• Major legislative measures included changes to
workers’ compensation and employers’ liability laws,
mandates for insurers’ investment programs, and new
requirements for environmental insurance.
BRAZIL
•• With more insurers entering the market, most coverage
lines saw falling rates, generally up to 10%, but as
much as 20%, for good risks in certain lines (directors
and officers liability and aviation, for example).
•• Heath insurance and motor/automobile rates rose
by up to 10%.
The new liability insurance regulation, Superintendência
dos Seguros Privados, may also impact the market.
CHILE
•• Rates remained stable for the vast majority of coverage
lines in Chile in 2012.
•• The only exceptions to stable rates were in the general
liability line, where rates rose by up to 10%, and
marine, where they tended to fall by up to 10%.
•• A major earthquake is expected for northern Chile;
insureds with catastrophe-exposed properties could
see increases of up to 10% in 2013.
COLOMBIA
•• Rates remained stable for most lines of coverage with
virtually no dramatic rate increases or decreases.
•• Rates for financial institutions rose from 10% to 20%
due to few insurers providing capacity.
•• Medical malpractice and aviation rates rose by
up to 10%.
•• Motor/automobile saw the largest decreases
(10% to 20%).
•• Property (non-catastrophe exposed) and marine saw
decreases of up to 10%.
•• Demand for coverage is rising with the Colombian
economy. As more companies expand, they need
master controlled insurance programs to cover
all their operations.
•• In June 2013, changes in financial regulations will
allow Colombian companies to buy insurance from
international insurers and reinsurers that are not
established in Colombia.
MEXICO
•• The Mexican insurance market was notably stable: No
single line of coverage saw significant increases.
•• General liability and non-catastrophe-exposed
property rates fell by up to 10%.
•• Mexico did not experience any major natural
catastrophes in 2012, but Superstorm Sandy in the US
could put pressure on rates in 2013.
•• Foreign investment in Mexico remains healthy.
PERU
•• The Peruvian insurance market was largely
stable in 2012.
•• Directors and officers (D&O) liability rates saw the
most notable declines (from 10% to 20%), while
financial institutions and professional liability rates fell
by up to 10%.
PUERTO RICO
•• The insurance market in Puerto Rico saw mostly
stable-to-falling rates in 2012.
•• General liability, motor/automobile, environmental,
D&O liability, professional liability, and marine lines
rates fell by up to 10%.
•• Rates for financial institutions, medical malpractice,
and health insurance rose by up to 10%.
•• Following November’s elections, the public and
private sectors await changes as a new government
administration confronts multiple challenges affecting
the economy.
•• Although Puerto Rico has heavy catastrophe
exposure for earthquake and windstorm, the absence
of major catastrophic events has kept property
insurance rates low.
VENEZUELA
•• Venezuela was the only exception to the environment
of generally stable-to-falling rates in Latin America.
With relatively little available capacity, most lines saw
increases of up to 10%.
•• Medical malpractice insurance rates rose up to 30%,
due to inflation.
•• Property all risk: There is a lack of of local or
contractual capability for this line, and some reinsurers
have reduced the contracts for insurance companies.
•• Local capability for reinsurance is very low.
•• Health insurance rates grew by up to 10%.
•• A new insurance contract law, effective May 2013, is
likely to benefit insureds.
•• Two large companies share 68% of the non-life market.
Profits have fallen somewhat this year as a result of the
stock market declines.
•• Slight increases in rates are expected for 2013.
Marsh • 3
INSURANCE MARKETS BY
COUNTRY
4 • Insurance Market Report 2013
ARGENTINA
INSURANCE MARKET CONDITIONS
General Liability
Rates: Decrease 0% to 10%
The general liability insurance market is highly competitive and is
expected to remain so as insurers aggressively pursue this line of
business. International insurers’ capacity totals US$10 million, while
US insurers provide US$50 million in capacity. Such capacity combined
with the local domestic markets means a wide range of options for
clients. Most clients purchase an average limit between US$500,000 and
US$1 million. Railways and toll toads are the most complex activities to
cover. Product recall capacity is obtained through international market.
Motor/Automobile
Rates: Increase 20% to 30%
Costs have risen due to inflation and values of automobiles. Due to
the increased values, insurers are issuing monthly/quarterly policies
to keep values current.
Workers’ Compensation/Employers’ Liability
Rates: Increase 10% to 20%
Workers’ compensation insurance, which is mandatory for all public
and private sector employees and dependent workers, is regulated
by Law 24557. Insurers known as Aseguradoras del Riesgo del Trabajo
(ARTs) provide the coverage. Law 26773 recently modified regulations
covering employee damages. Among the most salient changes, it
establishes an exclusive option for victims that allows them to either
claim compensation for damages through the benefits provided by the
mentioned law (administrative claim) or by a judicial claim (through civil
law). For the latter, there is no mandatory insurance locally.
There is no local capacity for writing employers’ liability (EL) coverage
according to the new regulations, though Marsh is working to provide
a new EL product that offers full-value coverage, fixed deductibles, and
minimum exclusions. With the current changes in terms of legislation,
movement is expected in the markets for 2013. EL insurance is rarely
available in the local market, as most is taken by multinational companies
through international coverage programs.
Property: Non-Catastrophe Exposed
Rates: Decrease 0%-10% (non-energy)
Rates: Increase 0%-10% (energy)
Non-catastrophe property insurance is divided between energy and
non-energy clients. In non-energy, buyers may experience a decrease of
10% on average. Falling rates are expected to continue into the second
quarter of next year. In non-energy, local insurers have significantly
increased their treaty capacity as a result of changes in legislation
related to reinsurance. In addition, insurers appear to have larger growth
budgets, which is causing fierce competition. In some cases, rates have
fallen by up to 40%.
For energy, an increase of up to 10% can be expected.
Additional treaty capacity also reduced the requirement to buy
facultative reinsurance. There is more than US$250 million in local
market capacity based on probable maximum loss (PML) and good local
appetite, which varies depending on the type of risk and activity.
Construction: There is more than US$320 million in capacity based
on total construction value. Rates could rise next year as construction
increases due to government-sponsored infrastructure projects.
Terrorism: Coverage may be provided by local markets as a sublimit
in property policies or on a standalone basis. Multinational companies
may purchase such coverage if it is required by their corporate
governance procedures.
Machinery breakdown: This type of coverage is normally included
within the all risks policy (US$3 million limit).
Energy: The sector can be divided into two main groups: (1) generation
and distribution of electric power; and (2) petrochemical and oil and gas.
In the generation and distribution of electricity segment, the local market
has tightened due primarily to losses/claims. Carriers have tightened
terms compared to last year.
In the oil and gas and petrochemical segment, rates remain competitive
as markets outside Argentina have added capacity, while local carriers
maintain last year’s conditions and, in some cases, provide lower rates
depending on the risk and claims. In light of the rising cost of fronting,
making reinsurance solutions more expensive, local insurance capacity is
becoming more competitive.
Environmental
Rates: Stable -5% to +5%
The General Environment Act regulates compulsory insurance against
pollution for hazardous industries. Any person or entity (public or
private) performing risky activities in the environment is required to
purchase a bond to cover potential damages to the environment. There
is no liability policy that covers the provisions of the Act, though on
October 23, 2012, the Argentine government established new conditions
for such coverage. Several carriers are still waiting for approval of
wording and conditions from Argentina’s insurance regulator. On the
other hand, the government has also established new conditions for the
surety bond already in force through the very same resolution. Thus far,
Testimonio Seguros SA is the only carrier to modify its bond.
Directors and Officers Liability
Rates: Decrease 0% to 10%
Market trend is showing premium reductions due to greater competition
and more awareness of products and exposures. The exposures for D&O
have not increased necessarily, but the awareness of potential losses
and the need for protection, plus corporate governance standards
and potential personal liability exposures, are increasing demand
for D&O protections.
Financial Institutions
Rates: Increase 0% to 10%
Rates are increasing due to several losses of banker’s blanket bond, in
particular, safe deposit box coverage.
Marsh • 5
Professional Liability
Rates: Stable -5% to +5%
Premiums remain stable, though not many insurers specialize in this
risk. Several products have been launched, such as multimedia and
cyber professional liability. Demand for professional liability coverage
is expected to increase as more contracts require the coverage and
awareness of professional liability exposures grows.
Medical Malpractice
Rates: Stable -5% to +5%
In Argentina there are only a few local markets for this type of coverage.
The prices among insurers are similar, both for terms and conditions. The
main insurers are local, except for clinical trials, which are underwritten
by international carriers. The standard limits are between US$500,000
and US$1 million. Demand for such coverage is expected to increase as
the Argentine economy continues to expand.
Marine
Rates: Decrease 10% to 20%
The local market continues to be competitive due to a growth in options
and capacity for the last two years. As insurers maintain high capacity for
a wide range of exposures, rates are expected to continue to fall.
Aviation
Rates: Stable -5% to +5%
As the market remains competitive, rates are stable and expected
to remain so.
insurance companies. The National Security Strategy
Program 2012/2020, coordinated by Argentina’s
insurance regulator and main industry parties, have
established regulatory changes that indicate that
insurers must redirect a percentage of their investment
to finance infrastructure projects (which typically
represent 0.16% of their portfolios). These percentages
were established based on each activity in particular:
–– Workers’ compensation carriers (ARTs): Due to the
greater need for liquidity, the minimum percentage
for these instruments will be 5% of the total
investment, up to 20% maximum.
–– For life insurance and retirement carriers, which
have lower liquidity requirements, the minimum will
be 12% and maximum 30%.
–– For general insurance companies and reinsurers,
the minimum and maximum amounts for
investment in production and infrastructure will be
10% and 20%, respectively.
INSURANCE COMPANY INVESTMENT
REQUIREMENT
Employee Benefits: Life
Rates: Stable -5% to +5%
The Ministry of Economy and Finance, the Ministry of
Industry, and the insurance regulator have created an
eligibility committee to ensure an appropriate investment
for productive development. Insurance companies will
increase their investment in the Argentine economy from
US$88 million to US$7 billion by May 31, 2013.
Employee Benefits: Accident and Health
Rates: Stable -5% to +5%
ENVIRONMENTAL INSURANCE
Employee Benefits: Health
Rates: Stable -5% to +5%
Rates for health, life, and accident insurance remain stable in Argentina.
RISK TRENDS
WORKERS’ COMPENSATION AND
EMPLOYERS’ LIABILITY
Major changes were made to the Argentine law
governing workers’ compensation and employers’
liability. Law 26773 recently modified regulations
covering employee damages. Among the most salient
changes, it establishes an exclusive option for victims
that allows them to either claim compensation
for damages through the benefits provided by the
aforementioned law (administrative claim), or by a
judicial claim (through civil law). For the latter, there is
no mandatory insurance locally.
•• Investment to finance infrastructure projects by
insurers: The Argentine government announced
significant changes to investment policies for
6 • Insurance Market Report 2013
The General Environment Act regulates compulsory
insurance against pollution for hazardous industries. Any
person or entity (public or private) performing activities
potentially hazardous to the environment is required
to purchase insurance coverage. In September 2012,
the Decree 1638/2012 for Environmental Policy was
published, creating the Environmental Risk Assessment
Technical Committee, which established provisions for
the insurance coverage to be purchased: annulment
and currency. The decree establishes two types of
insurance covers to be purchased: (1) bond insurance for
environmental damages with collective consequences;
and (2) third-party insurance for environmental
damages with collective consequences. Additionally,
in October 2012, Decree 1638/2012 was regulated by
Resolution 37.160, establishing the texts proposed by the
Argentina’s insurance regulator. As a result, movement is
expected in the environmental insurance market.
Contact:
MARCELO CORIA
Placement Leader
+54 114 320 5812
marcelo.coria@marsh.com
BRAZIL
INSURANCE MARKET CONDITIONS
General Liability
Rates: Decrease 0% to 10%
Lower general liability rates were seen in 2012, driven mainly by carrier
competition and the local culture’s limited appetite for third-party
coverage. The market is expected to stabilize in 2013, as the downward
trend is unsustainable in the long term. The economy’s growth will also
play a key role in market stabilization, as investment in infrastructure and
tourism (World Cup and Olympics) grows, imports and exports increase,
and capital expenditures rise.
Motor/Automobile
Rates: Increase 0% to 10%
Auto insurance rates increased 9% in 2012 and are expected to grow at a
similar rate in 2013.
Workers’ Compensation/Employers’ Liability
Rates: Decrease 0% to 10%
Financial Institutions
Rates: Increase 0% to 10%
Premium increases are more common and are a growing trend among
carriers due to losses in the last two quarters. Midsize and small banks
in Brazil are expected to face rate increases and more restrictive terms
and conditions. Large public banks are expected to keep rates stable,
as underwriters look to the latest government measures to improve
competition in the industry.
Financial and Professional Liability
Rates: Stable -5% to +5%
Though still a small market in Brazil, an increase in demand for errors
and omissions coverage is expected as a result of infrastructure changes
necessitated by the World Cup and Olympics.
Marine
Rates: Decrease 0% to 10%
Though loss trends continue to grow due to increasing cargo theft and
vehicle accidents, the countervailing influence of increased capacity has
resulted in lower rates. Several carriers have entered the cargo market. In
the hopes of establishing long-term relationships with insureds, they are
willing to price rates based on clients’ risk management improvements
(to a certain extent). New possibilities of combining stock and transit
solutions for clients on a case-by-case basis may also exist.
Aviation
Rates: Decrease 10% to 20%
The market remains focused on three insurers linked to banks, but
capacity and a focus on commercial aviation can be found through a
number of other insurers.
Workers’ Compensation: In Brazil, it is under government
administration.
Employee Benefits: Health
Rates: Increase 0% to 10%
Employers’ Liability: Underwritten as an additional coverage in Brazil,
and guarantees only death and permanent disability of the employees.
Employee Benefits: Life
Rates: Stable -5% to +5%
Property: Catastrophe Exposed
Rates: Decrease 0% to 10%
Though some fires caused huge losses, the claims ratio is generally
similar to that of previous years. While it has become more difficult
to place certain risks due to reinsurers’ demands of carriers, there is
sufficient capacity to place acceptable risks and new market entrants,
resulting in falling rates.
Environmental
Rates: Stable -5% to +5%
Only four or five insurers offer environmental liability coverage in
Brazil. With changes in federal, state, and municipal laws and growing
environmental awareness, it is expected that more carriers will be willing
to write environmental risks in 2013.
Directors and Officers Liability
Rates: Decrease 10% to 20%
The directors and officers liability insurance market was soft in 2012 and
is expected to remain so in 2013. Nonetheless, the market is somewhat
restrictive and underwriting is more conservative for companies with US
securities exposure.
Employee Benefits: Accident and Health
Rates: Stable -5% to +5%
Health insurance premiums are rising due to medical inflation and
increased claim ratios. Life and accident insurance rates remain
largely the same.
RISK TRENDS
FALLING RATES/NEW REGULATIONS
Rates are generally falling for what are considered good
risks as more insurers enter the Brazil market. The
new liability insurance regulation, Superintendência dos
Seguros Privados (SUSUP), may also impact the market.
The Brazilian insurance market has limited appetite for
certain industries such as pharmaceutical, chemical, and
automotive (critical parts) industries.
Marsh • 7
Contact:
EDUARDO MARQUES
Placement Leader
+55 11 3741 1187
eduardo.marques@marsh.com
CHILE
INSURANCE MARKET CONDITIONS
General Liability
Rates: Increase 0% to 10%
More clients are buying liability insurance and are buying higher
sublimits for employers’ liability, passenger transportation, and pollution
coverage. Typical limits are between US$1 million and US$5 million. Local
market capacity is US$25 million. Some clients buy excess layers of up to
US$100 million using facultative reinsurance.
Motor/Automobile
Rates: Stable -5% to +5%
Losses due to theft increased last year. The number of vehicles has
increased at a higher rate than repair facilities and parts stock, so repair
times have increased.
Property: Catastrophe Exposed
Rates: Stable
Property: Non-Catastrophe Exposed
Rates: Stable
Rates remained largely flat for large and some midsize insureds with
some losses. Rates fell up to 10% for some midsize and small companies
with good claims experience. Market capacity is US$500 million using
local capacity in coinsurance for the best risks. Catastrophe-exposed
insureds could see rate increases of up to 10% during the first
quarter of 2013.
Environmental
Rates: Stable -5% to +5%
Two carriers are offering environmental impact liability (EIL) and
contractors pollution liability (CPL) coverage. Coverage extends to
gradual and sudden accidental pollution in owned premises and
third-party premises. Capacity is US$10 million.
Demand is expected to grow as environmental law is further enforced. A
new mining closure law will require financial guarantees.
Professional Liability
Rates: Stable -5% to +5%
Coverage is available for architects and engineers and for miscellaneous
activities. Market capacity is up to US$5 million.
Medical Malpractice
Rates: Stable -5% to +5%
Clients with good claims experience saw a decrease in rates, while
those with less-than-favorable loss experience saw flat rates. Market
capacity is US$5 million.
Marine
Rates: Decrease 0% to 10%
Clients with good claims experience saw a decrease in rates, while
those with less-than-favorable claims experience saw flat rates. Market
capacity is US$ 5 million.
Aviation
Rates: Stable -5% to +5%
Aviation insurance in Chile remains dependent of the facultative
reinsurance market.
Employee Benefits: Health
Rates: Stable -5% to +5%
Employee Benefits: Life
Rates: Stable -5% to +5%
Employee Benefits: Accident and Health
Rates: Stable -5% to +5%
Rates for health, life, and accident insurance remain stable in Chile.
RISK TRENDS
MAJOR EARTHQUAKE EXPECTED
Indigenous catastrophic risks include earthquake and
tsunami. A major earthquake is expected for northern
Chile, where there is a seismic gap.
FIRE INSURANCE
Fire insurance is restricted to areas where there is Indian
rights activism (the regions of Araucania, Los Rios,
and Los Lagos).
Directors and Officers Liability
Rates: Stable -5% to +5%
Premiums are low and total capacity is US$25 million. There are
approximately 150 directors and officers (D&O) liability policies in
Chile, with limits ranging from US$5 million to US$25 million. Interest
in D&O coverage has increased, and more policies are expected
to be written in 2013.
8 • Insurance Market Report 2013
Contact:
ANDRES ALCALDE
Sales Leader
+562 2228 1545
andres.alcalde@marsh.com
COLOMBIA
INSURANCE MARKET CONDITIONS
General Liability
Rates: Stable -5% to +5%
The general liability line is very stable in Colombia. Rates tend to change
only because of an insurance company’s specific interest in a special
type of business. There is enough capacity in the local market for
non-hazardous activities. There are four main carriers, providing limits
up to US$10 million. In 2012, there were no losses large enough to affect
capacity or the rates trend for 2013.
Motor/Automobile
Rates: Decrease 10% to 20%
Limits of general liability of up to US$1 million are available from several
insurance companies. Many carriers offer zero deductibles on total
loss damage and total loss theft, as they try to improve their offerings.
New vehicle sales fell 3.5% compared to 2011, mainly due to higher
interest rates and greater requirements on borrowers before credit is
extended. In addition, sales were further depressed when prices failed
to fall as expected after passage of the Free Trade Agreement with the
US. The market loss ratio as of November 2012 was 63%. Two additional
carriers are expected to participate in the auto insurance and compulsory
insurance market in 2013.
Workers’ Compensation/Employers’ Liability
Rates: Stable -5% to +5%
The implementation of a new law (1562) in Colombia brings significant
changes to the workers’ compensation system, but does not change the
current rates provided by the law (1295/94).
Property: Catastrophe Exposed
Rates: Stable -5% to +5%
Property: Non-Catastrophe Exposed
Rates: Decrease 0% to 10%
The property market has become stable as it recovered from the huge
losses due to the floods caused by the fenomeno de la niña during 2010
and 2011. Despite several significant losses, rate increases were limited
to those with large losses or high exposure to flooding.
As the property market stabilizes and carriers restore flood coverage
to areas such as la Zona Franca del Pacifico in Valle del Cauca and Zona
Industrial Mamonal in Cartagena, rates could fall.
On the other hand, insurance companies in Colombia with capacity to
write terrorism coverage as part of a property program are not willing to
provide such coverage for rural risks due to the increase in attacks in rural
areas. Standalone programs supported by the London facultative market
will increase. Such factors may lead to an increase in property rates.
In addition, the capacity of the market will not vary much. There
are some local companies trying to enhance their treaties but not
significantly. With the exception of some activities such as oil and gas,
power generation, and mining, which are excluded from the treaties of
local insurance companies, there is ample capacity to place risks with
limits of up to US$500 million.
Environment
Rates: Stable -5% to +5%
The local market is ready to provide this coverage; two carriers launched
products in 2011.
Directors and Officers Liability
Rates: Stable -5% to +5%
Over the last few years, rates have decreased substantially but
stabilization is expected for financial institutions (stock brokers) in 2013.
After a large claim, carriers that write this risk have a different perception
of the exposure.
Financial Institutions
Rates: Increase 10% to 20%
In general, the loss record of the market is not good in terms of severity
and frequency. Just a few companies can provide capacity. Accordingly,
higher rates and deductibles can be expected in 2013.
Professional Liability
Rates: Stable -5% to +5%
Companies are becoming increasingly aware of errors and omissions
exposures. Though the market is not fully developed in this line, a few
companies are willing to provide this type of coverage.
Medical Malpractice
Rates: Increase 0% to 10%
Medical malpractice insurance rates rose up to 10% in Colombia.
Marine
Rates: Decrease 0% to 10%
Good claims performance (34% loss paid/premiums paid), and strong
insurer competition have led to falling freight insurance rates. For
2013, the expansion of free trade is expected to lead to increased
volume of goods transportation across more routes. In addition,
Articles 61-66 of Law 1328 of 2009, which allows consumers to
purchase non-admitted insurance except compulsory social security
and protection of state interests, goes into effect on July 15, 2013. Stock
throughput is also developing in Colombia as a new product, particularly
for logistics operators.
Aviation
Rates: Increase 0% to 10%
Aviation insurance in Colombia remains dependent of the facultative
reinsurance market. Premiums are expected to increase due to the
growth of claims in the industry, from US$18.5 million in 2011 to
US$33.5 million, as of October 31, 2012.
Employee Benefits: Health
Rates: Stable -5% to +5%
Employee Benefits: Life
Rates: Decrease 0% to 10%
Employee Benefits: Accident and Health
Rates: Decrease 0% to 10%
In addition to tax reform in Colombia that reduces the value-added
tax (VAT) from 10% to 5%, the health care market in Colombia remains
stable. The Tratado de Libre Comercio (TLC) will allow new entrants in the
local market, which will likely become even more competitive.
Marsh • 9
RISK TRENDS
GROWING INSURANCE NEEDS
The Colombian economy continues to expand mainly
due to the high activity in sectors such as mining, oil and
gas, and infrastructure. The significant growth of foreign
investment has also impacted most of the industries in
Colombia. As companies expand and diversify, their
exposure to risk expands and widens accordingly.
Colombian companies have also expanded throughout
the region, generating the need for a master controlled
insurance program to cover all their operations. Such
expansion has led to challenges for the client and
broker alike, as such programs require much of the
international insurers’ and reinsurers’ capacity, which
the local market lacks.
COVERAGE FROM INTERNATIONAL INSURERS
In June 2013, changes in financial regulation will
allow Colombian companies to buy insurance from
international insurers and reinsurers that are not
established in Colombia. While such a change will likely
bring more options for some clients, it is important to
seek advice from the broker for each case and evaluate
and analyze the costs and benefits for the insured in
terms of pricing, terms and conditions, and claims
procedures. On the other hand, the new law, El estatuto
del consumidor, applicable to the insurance industry,
provides insureds with more clarity about the text and
clauses included in their insurance programs. It is
the broker’s and insurance company’s duty not only
to advise the insured about the coverages, exclusions,
deductibles, and limits, but also to advise them on the
complete wording before inception.
INSURANCE MARKET AND CAPACITY GROWING
2012 was an interesting year for the Colombian
insurance market, and 2013 will be full of new
challenges. Capacity and market size are expected
to continue expanding.
Contact:
CARLOS RIVERA
Placement Leader
+57 1 423 5397
carlos.a.rivera@marsh.com
MEXICO
INSURANCE MARKET CONDITIONS
General Liability
Rates: Decrease 0% to 10%
As a consequence of Mexico’s new federal labor law, insureds will have
to increase their liability limits, potentially forcing carriers with a limited
capacity to review their reinsurance treaties. Depending on how much
the limits increase and the available capacity in the market, premiums
will most likely be impacted.
Motor/Automobile
Rates: Stable -5% to +5%
An increase in premiums is expected as a result of the increase in the cost
of auto parts due the new federal labor law. Liability coverage in auto
policies will need to be increased, directly affecting premiums.
Property: Catastrophe Exposed
Rates: Stable -5% to +5%
Property: Non-Catastrophe Exposed
Rates: Decrease 0% to 10%
There is good capacity in the local market, keeping renewal rates stable
to lower. For insureds with high limits or non-preferred risk, capacity is
reduced; sometimes it is necessary to obtain support from the facultative
market. Most carriers are looking more closely at castastrophe modeling
to control their exposures and ratings.
Environmental
Rates: Stable -5% to +5%
This coverage is usually included in general liability programs as a
sublimit. There is a fee if it is used as standalone coverage.
Directors and Officers Liability
Rates: Stable -5% to +5%
There is a new carrier participating in the local market, but premiums are
expected to remain stable due to already low prices.
Financial Institutions
Rates: Stable -5% to +5%
There is an increasing appetite for this coverage in light of the increase of
foreign investment in the country due to new trusts instruments. A new
market entrant appears to have good capacity.
Professional Liability
Rates: Stable -5% to +5%
There is an increasing appetite for this coverage due to the growth of the
sector, particularly for architects and engineers.
Medical Malpractice
Rates: Stable -5% to +5%
Medical malpractice is a growing line of business with specialized markets.
10 • Insurance Market Report 2013
Marine
Rates: Stable -5% to +5%
Premiums are mainly driven by the loss record, especially during inland
transit. Premiums are stable for those with good loss histories. However,
an increase in losses is being seen, mainly due to highway robberies.
Aviation
Rates: Stable -5% to +5%
There is a new carrier participating in the local market; insureds with
good loss records may get discounts.
Employee Benefits: Health
Rates: Stable -5% to +5%
Employee Benefits: Life
Rates: Stable -5% to +5%
Employee Benefits: Accident and Health
Rates: Stable -5% to +5%
A possible increase in premiums of up to 10% is expected as a
consequence of the rate of exchange impacting some pharmaceutical
prices, medical inflation, and loss records. In health, there will no
longer be unlimited programs due to a change in local legislation
in recent months.
RISK TRENDS
CHANGES TO LABOR LAW
A change in the federal labor law requiring
compensation of 5,000 days of salary (raised from
730 days of salary) in cases of death or disability is
necessitating higher third party liability limits for
aviation, general liability, automotive liability, and
employment liability lines. The new law went into effect
December 1, 2012.
SUPERSTORM SANDY ’S EFFECTS
Although Mexico did not experience major natural
catastrophes, events outside the country such as
Superstorm Sandy could put pressure on insurance
and reinsurance markets.
MEXICO ATTRACTS FOREIGN INVESTMENT
Some international companies are being forced to
reconsider their business strategies given world
economic conditions. However, the relatively good
performance of the Mexican economy is attracting
new foreign investment.
Contact:
ALBERTO BALLESTEROS
Placement Leader
+52 55 5999 4417
alberto.ballesteros@marsh.com
PERU
INSURANCE MARKET CONDITIONS
General Liability
Rates: Stable -5% to +5%
Local legislation still does not allow major suits regarding compensatory
damages, keeping the loss record for the market at acceptable levels. An
increase in foreign investment has triggered a need for higher limits.
Motor/Automobile
Rates: Stable -5% to +5%
A recent entrant to the motor/automobile insurance field should stir up
competition with local companies, benefiting insureds. Rates remained
stable throughout 2012 and no significant increases are envisioned for
2013. Only about 40% of the vehicles in Peru are voluntarily insured.
There is much room for growth.
Workers’ Compensation/Employers’ Liability
Rates: Stable -5% to +5%
Workers’ compensation in Peru is compulsory only for high-risk
industries such as mining, construction, oil, and steel. The government
intends to make such coverage required for all occupations over the
next couple of years.
Property: Catastrophe Exposed
Rates: Increase 0% to 10%
Property: Non-Catastrophe Exposed
Rates: Stable -5% to +5%
Property catastrophe rates have been on the rise since 2011, but not
significantly. Only one company remains with an excess of loss cover and
the highest level of capacity. This will result in more facultative purchases
by the other companies and will bring the local market more in line with
international price trends.
Directors and Officers Liability
Rates: Decrease 10% to 20%
This cover is not retained by the local market and is a 100% facultative
purchase. The industrial and public sectors have increased interest in
purchasing this coverage.
Financial Institutions
Rates: Decrease 0% to 10%
This coverage is not retained locally; it is a 100% facultative purchase.
Professional Liability
Rates: Decrease 0% to 10%
This coverage is not retained locally; it is a 100% facultative purchase.
Marsh • 11
Marine
Rates: Stable -5% to +5%
Even though a high percentage of imports are cost insurance and freight,
this line of business has not been increasing over the past several years
due to steady economic growth in Peru. The main exposure is theft
during inland transits. Rates have been stable and are expected to
remain so in 2013.
Aviation
Rates: Stable -5% to +5%
This coverage is not retained locally; it is a 100% facultative purchase and
abides by international trends. Aviation opportunities in Peru are limited.
Employee Benefits: Health
Rates: Increase 0% to 10%
Employee Benefits: Life
Rates: Stable -5% to +5%
Employee Benefits: Accident and Health
Rates: Stable -5% to +5%
Accident and health insurance rates remain stable in Peru.
RISK TRENDS
INSURED-FRIENDLY INSURANCE LAW
A new insurance contract law, passed in late 2012,
will go into effect in May 2013. The new law is
designed to curb abusive practices in the industry, so
insureds stand to benefit.
A TWO-INSURER MARKET
Two large companies share 68% of the non-life market.
Profits have fallen somewhat this year as a result of the
stock market declines worldwide. Slight increases in rates
are expected for 2013.
Contact:
ARGYROS PHILIPPIDES
Placement Leader
+511 215 9505
argyros.philippides@marsh.com
12 • Insurance Market Report 2013
PUERTO RICO
INSURANCE MARKET CONDITIONS
General Liability
Rates: Decrease 0% to 10%
The local casualty insurance market has good capacity and appetite. It
includes the participation of three main casualty insurance carriers. The
market is more restricted for hospitality, health care, and pharmaceutical
products. Insurance premiums vary according to loss experience and
exposure classification.
Motor/Automobile
Rates: Decrease 0% to 10%
In Puerto Rico, almost all insurance carriers are very aggressive for this
line of business. Depending on the client’s loss experience and exposure,
premium reductions can be obtained for renewals and new business.
Workers’ Compensation/Employers’ Liability
Rates: Stable -5% to +5%
Puerto Rico is a monopolistic state, so the majority of the workers’
compensation business is provided by the government. Other insurance
companies provide workers’ compensation coverage for those projects in
federal territory and abroad. Rates and premiums depend on operations,
classifications, and premium basis (payroll).
Property: Catastrophe Exposed
Rates: Stable -5% to +5%
Property: Non-Catastrophe Exposed
Rates: Stable -5% to +5%
Property rates have decreased significantly for the last four years due to
soft market conditions. Two new carriers were approved to do business
on the island, adding more capacity and alternatives.
During the first three quarters of 2012, property rates remained stable
and renewals flat. The property market capacity ranges from US$10
million to a maximum of US$50 million per company/per location.
For high-stock values risks, there are various admitted carriers providing
stock throughput insurance coverage alternatives, including marine
cargo coverage. The market appetite is very good, although rates vary
depending on total insurable values, types of construction, operations,
location, and occupation. Capacity for beachfront properties is limited
and rates are relatively high when compared to non-beachfront.
Environmental
Rates: Decrease 0% to 10%
The environmental market consists of four major carriers, and capacity
ranges from US$1 million to US$50 million per risk with a minimum
deductible of US$10,000. Available coverages consist of pollution
legal liability, transportation, contractors pollution liability, storage
tank liability, and closure/post-closure financial responsibility.
Underwriters will aggressively quote new accounts and renewals
provided that the required underwriting information is submitted on a
timely basis. However, minimum premium levels established by type
of risk will be observed.
Directors and Officers Liability
Rates: Decrease 0% to 10%
It is possible to negotiate premium discounts for directors and officers
liability (D&O) coverage for private companies with good loss histories,
although reductions are smaller than they had been. There is an increase
in claims frequency when D&O is combined with employment practices
liability, but little change in severity. D&O coverage for public companies,
especially in the financial sector, is tighter, with stable or increasing
premiums directly tied to financial condition, stock-price fluctuation, and
claims experience.
Financial Institutions
Rates: Increase 0% to 10%
Limited capacity from authorized carriers for primary policies has led
to stable premiums when financial conditions and claims experience
are good. Notable adverse experience, financial conditions, and
fluctuations in stock prices of public companies can all impact pricing.
While capacity remains stable for financial institutions bonds coverage,
premium discounts are hard to achieve and there is pressure to increase
rates. Competition allows for flat renewals with good loss experience.
Capacity is limited for lenders liability and broker/dealer coverage
extensions. Particularly for broker/dealers, there has been adverse
experience in the market, and carriers are raising rates and deductibles
for insureds that had claims.
Professional Liability
Rates: Decrease 0% to 10%
With multiple carriers offering professional liability coverage, capacity is
good, providing leverage to negotiate premiums and better terms and
conditions. Rates are stable and frequently reflect discounts at renewal.
Medical Malpractice
Rates: Increase 0% to 10%
Medical malpractice rates have not changed significantly over the past
three years. Renewals are based on the loss experience of each insured
and the appetite of the markets. The increases in premium for some
clients are the result of poor loss experience. Recently, an increase in the
frequency and severity of loss activity has been observed, although rates
have remained stable and the market appetite varies depending on the
insured. Insurers writing this type of business are limited.
Marine
Rates: Decrease 0% to 10%
With almost all local carriers offering inland and marine coverage,
capacity is good, providing insureds leverage to negotiate premiums
and terms and conditions. For inland marine, rates remained stable and
have fallen for clients with good loss experience. In marine cargo, the
entry of new carriers into the market has led to increased competition
and premium discounts of up to 50% for some renewals. Quotes for stock
throughput and shore risks coverage for warehouses and distributors
with high-stock insured values are also competitive.
Aviation
Rates: Stable -5% to +5%
There are three main carriers doing this type of business on the island;
premium varies according to loss experience, aircraft make and model,
and pilot experience.
Employee Benefits: Health
Rates: Increase 0% to 10%
Employee Benefits: Life
Rates: Stable -5% to +5%
Employee Benefits: Accident and Health
Rates: Stable -5% to +5%
This is a US$275 million market in Puerto Rico. The appetite for this type
of insurance is growing, but for voluntary programs where employees
pay the entire premium. The overall claim trend is 9%. The Puerto
Rico insurance market has been shrinking due to insurance company
mergers and acquisitions, closures, or local market departures.
Such changes may affect future renewals, but major changes are not
expected for 2013. Upcoming Patient Protection and Affordable Care
Act mandates will impact processes and costs. The largest insurance
company in Puerto Rico has been affected by the loss of its government
contract and federal investigations.
RISK TRENDS
INSURANCE CARRIERS FEEL EFFECTS OF
ECONOMIC DOWNTURN
The economic downturn, which has been negatively
affecting businesses on the island since 2008, has directly
impacted insurance carriers’ net income as well.
Following November’s elections, the public and
private sectors await changes, as a new government
administration confronts multiple challenges affecting
the Puerto Rican economy.
PROPERTY RATES STAY LOW DESPITE
CATASTROPHE RISK
Although Puerto Rico has heavy catastrophe exposure
for earthquake and windstorm, the absence of major
catastrophic events has kept property insurance
rates low. Two new property and casualty insurance
carriers have been approved to do business on the
island, adding more capacity and alternatives to the
local insurance market.
Contact:
CARLOS PICAPORTE
Placement Leader
+787 620 2620
carlos.picaporte@marsh.com
Marsh • 13
VENEZUELA
Property: Catastrophe Exposed
Rates: Increase 0%-10%
INSURANCE MARKET CONDITIONS
Property: Non-Catastrophe Exposed
Rates: Increase 0%-10%
General Liability
Rates: Increase 0% to 10%
General liability is not quoted alone in the insurance market, but as part
of other coverages. Rates are stable and the increases seen by some
have been moderate. Rates depend largely on loss experience and are
adjusted at renewal.
Motor/Automobile
Rates: Increase 0% to 10%
Although rates rose modestly overall, those with good loss experience
are generally able to maintain rates or even see small decreases. Those
with less favorable loss histories have seen rate increases of up to 10%.
In Venezuela, each insurance company has its own method of calculating
premiums, but rates must be approved by the Superintendence of the
Assurer Activity. Most insurance companies write this line without
compensation of other lines and have a good appetite.
Workers’ Compensation/Employers’ Liability
Rates: Increase 0% to 10%
Almost all insurance companies write workers’ compensation coverage
but only a few have sufficient infrastructure to handle claims. Rates have
increased slightly, and carriers have an appetite for this line.
Employers’ liability insurance is included in general liability policies,
but there is an employers’ liability line that is written according to
the Organic Law on Prevention, Conditions, and Labor Environment.
This law requires that:
•• Permanent and temporary employees work under safe conditions that
promote their health and welfare and in a propitious environment that
supports their well being.
•• Compliance with the law is the responsibility of employers,
contractors, subsidiaries, or agents.
•• The State of Venezuela guarantees the avoidance of hazards to
employees through vigilance over work centers in order to comply
with the statute’s fundamental objectives.
Chapter VIII of the Organic Law on Prevention, Conditions and
Labor Environment makes it the responsibility of the worker in cases
involving professional diseases and accidents. The worker must make
contributions toward temporary, partial, and permanent disability
and death benefits.
If disability or death results due to negligence from the employer,
the immediate supervisor, legal representative, agent, or manager,
may face a prison term. With this law in mind, insurance companies
created an employers’ liability coverage, responsabilidad empresarial
(entrepreneurial liability), which covers the employer’s duty to indemnify
the employee. Most of our clients have such a policy and workers’
compensation coverage.
The lack of local capability requires that local insurance companies go to
reinsurers out of the country to look for coverage. Reinsurers, in some
cases, increase the costs due to factors such as country risk. Reinsurers
require a significant amount of information to review coverage, and in
some cases, decline the opportunity to quote.
Environmental
Rates: No market
There is no local coverage for environmental risk. It is possible to cover
accidental pollution and damage to the environment in general liability
policies, though not all carriers are willing to do so. This coverage
normally is placed in global liability policies as part of corporate
insurance programs.
Directors and Liability
Rates: Increase 0% to 10%
There is only one market for this line of coverage in Venezuela, and it not
common to seek coverage for this kind of risk.
Medical Malpractice
Rates: Varies
Due to inflation in Venezuela, rate increases of up to 30% are not
uncommon. Those seeing large increases need to analyze their loss
histories, as well as the frequency and severity of claims to negotiate
with carriers.
Marine
Rates: Increase 0% to 10%
Rates have risen due to the lack of new investment beyond the state, as
well as the high risk in ports and airports.
Aviation
Rates: Increase 0% to 10%
There is no local market for aviation coverage. All the insurance markets
have to go to reinsurers out of the country.
RISK TRENDS
PROPERTY ALL RISK
Lack of local or contractual coverage has led
some reinsurers to reduce their contracts with
insurance companies.
REINSURANCE
Local capability for reinsurance is very low.
14 • Insurance Market Report 2013
SURETY BONDS
Surety bonds have to be written in standard models,
controlled by the Superintendence of the Assurer
Activity. Some models have suffered changes that have
been not accepted by the insurance market. On the other
hand, there is lack of local or contractual capability.
GENERAL LIABILITY
General liability risk is not covered alone, but with
other lines.
Contact:
JOSE VILLASMIL
Placement Leader
+58 212 278 7811
jose.villasmil@marsh.com
Marsh • 15
INSURANCE MARKETS BY
SPECIALTY AND INDUSTRY
16 • Insurance Market Report 2013
CAPTIVES
INSURANCE MARKET CONDITIONS
Latin America has shown an increasing interest and
significant growth in alternative risk transfer programs.
Many regional firms are well-positioned financially
to consider some type of self-insured retention in
combination with traditional risk transfer options, and
are eager to improve their understanding of the nuances
and operational and financial benefits of using captives.
Much of the increased interest in captives can be
attributed to the growth of many Latin American
countries’ economies. As companies grow, they are
branching out, becoming “multi-Latinas.” In addition,
the improved political and regulatory environment in
some Latin American countries, and the efforts by some
governments to make doing business in their countries
easier, more flexible, and more secure, have further
contributed to the growth of captives.
Clients have become aware of the benefits of a captive,
including the option to write risks that the insurance
market is either not willing or unable to cover (or will
cover only with limited conditions).
Not only are Latin American companies expanding their
operations worldwide, but the risk management culture
in the region has also become more mature. Alternative
options for risk financing are becoming better known
in risk management circles. Latin American risk
managers are increasingly open to the idea of risk
financing tools and are searching for more sophisticated
ways to optimize their organization’s total cost of risk.
Companies are looking at stabilizing their bottom lines,
and a captive solution is often an effective way to manage
insurance market volatility.
Some clients, as they grow, are looking to benchmark
their programs and the use of captives against other
companies that are in the same industry. They
are looking beyond Latin America to their global
competitors and want to ensure that their programs
meet the same state-of-the-art standards that their global
competitors can meet.
LOOKING AHEAD
In the years ahead, the adoption of captives as an
alternative to traditional insurance market solutions will
likely increase, and the strategies used by those captives
will likely become more sophisticated. Many Latin
American companies should consider the role captives
could play in their risk management programs.
The main challenge for managers and shareholders is to
fully understand the concept of a captive and the benefits
they provide. There is still much to do in that field.
Another challenge comes with fronting possibilities.
Although the global names are present in Latin America,
there are not many fronting companies in the region.
Regulation is also a challenge in Latin America. Each
country’s regulation is unique. Establishing a captive
and understanding the various applicable country
regulations can be complex, but the benefits captives
bring can justify the effort.
RISK TRENDS
GROWING INTEREST IN CAPTIVES
Many industries are interested in captives, including
manufacturing, financial, mining, energy, utilities,
and aviation. No specific industry, more than another,
is looking to adopt a captive solution. As long as a
company has operations in many countries, it can
benefit from a captive solution.
When it comes to the types of insurance lines a captive
can insure, it depends on the industry and the company;
property is a typical line of business for captives to
write in Latin America. Other lines include liability,
political risk, transportation, extended guarantee,
and terrorism lines.
Captives can also make sense for risks that are
difficult to cover via the traditional insurance market
in Latin America.
Contact:
Maria Escobar
Head Captive Solutions Latin America
+57 313 3333711, +574 3258311
maria.c.escobar@marsh.com
Marsh • 17
NOTES
18 • Insurance Market Report 2013
NOTES
Marsh • 19
NOTES
20 • Insurance Market Report 2013
ABOUT MARSH
Marsh is a global leader in insurance broking and risk management. We help clients
succeed by defining, designing, and delivering innovative industry-specific solutions that
help them effectively manage risk. We have approximately 26,000 colleagues working
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companies offering clients advice and solutions in the areas of risk, strategy, and human capital.
With more than 53,000 employees worldwide and annual revenue exceeding $11 billion,
Marsh & McLennan Companies is also the parent company of Guy Carpenter, a global leader in
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For further information, please contact your local Marsh office or
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Marsh is one of the Marsh & McLennan Companies, together with Guy Carpenter, Mercer, and Oliver Wyman.
This document and any recommendations, analysis, or advice provided by Marsh (collectively, the “Marsh Analysis”) are not intended to be taken as
advice regarding any individual situation and should not be relied upon as such. This document contains proprietary, confidential information of Marsh
and may not be shared with any third party, including other insurance producers, without Marsh’s prior written consent. Any statements concerning
actuarial, tax, accounting, or legal matters are based solely on our experience as insurance brokers and risk consultants and are not to be relied upon
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subject to inherent uncertainty, and the Marsh Analysis could be materially affected if any underlying assumptions, conditions, information, or factors
are inaccurate or incomplete or should change. The information contained herein is based on sources we believe reliable, but we make no representation
or warranty as to its accuracy. Except as may be set forth in an agreement between you and Marsh, Marsh shall have no obligation to update the Marsh
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latin america and caribbean insurance market report 2013