ON THE WAY UP
Mexico contains a wealth of opportunities for both insurers and reinsurers. Despite stiff competition, regulatory changes and solid economic growth mean the market remains high on the agenda of international companies seeking growth in Latin America. Intelligent Insurer reports.
of the Latin American market. The country’s insurance market has doubled in size over the past 10 years and, in 2009 alone, grew by 9.6 percent to $18.3 billion in premium.
M Since 2000, there has been considerable foreign investment in the
Mexican reinsurance industry and five companies, three foreign and two Mexican, now control 52 percent of the market. Some of the international players active in the Mexican insurance market include Chartis, Royal & Sun Alliance, Zurich, Factory Mutual, Allianz and QBE.
The local market is heavily reliant on foreign reinsurers due to a high
exposure to natural catastrophes and a low retention capability among local insurance companies. At the end of 2009, some 18.1 percent of the total written premium was ceded to reinsurers—3.9 percent more than in 2008. But it was much higher for some lines: for property/casualty business (excluding motor) 72.2 percent of written premium was ceded, according to Alejandro Padilla, commercial executive director, Cooper Gay Martinez del Rio.
During 2010, several hurricanes made landfall and flooding hit many
parts of the country. Often, the government foots the bill to help these regions rebuild after an event. As such, it is seeking new ways to insure these exposures and this means an opportunity for reinsurers wanting to grow in the region.
48 | INTELLIGENT INSURER | Summer 2011
exico is the second-largest insurance market in Latin America, after Brazil. Over the past decade, it has provided an attractive opportunity for international players looking to grow their share
“The level of dependence on reinsurance is quite high in Mexico because
of its exposure to catastrophe risks such as earthquake, hurricanes and floods, and because of the lack of specialism and capacity in the local insurance market,” explains Richard Schneider, head of Swiss Re Mexico.
Swiss Re has spearheaded two MultiCat Mexico deals with Mexico’s ministry
of finance, which protect the country against certain natural catastrophes. Mexico is also the first country in Latin American to use risk modelling.
“In most countries in the region, reinsurance for catastrophe risks is based in a simple percentage of aggregate,” says Anthony Phillips, managing director, Willis. “Mexico has introduced the requirement for reinsurance purchase to be done through modelling rather than main zone aggregate. This will be slowly implemented around the whole region, and Mexico is at the forefront of that.”
With hurricanes on both coasts, cresta zones across the country and heavy
rains between May and August, reinsurers operating in Mexico have more than their fair share of catastrophes to deal with. Despite this, rates remain soft. “They have been expected to harden for some time, and although a rise has been much commented on, it has failed to materialise,” Padilla says.
Opportunities for reinsurers are also driven by other factors. The country
has seen massive investment in infrastructure in recent years and the Mexican government has passed strict laws requiring that all large risks be properly insured. “Investments in infrastructure bring new premium to the engineering, surety, marine and casualty reinsurance market,” says Schneider at Swiss Re.
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iStockphoto.com / erlucho
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