Power 50 - LATAMIR Insurance Review by Poletto&Possamai

#42

March 2015 www.insurancelatam.com

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NEWS I NSID E

POWER 50

04 Brazil lacking cyber risk protection Dramatic rise in cybercrime exposes vulnerability

05 Budget cuts imperil insurers Effects of new austerity measures cause of concern for Mexicoâ&#x20AC;&#x2122;s (re)insurers

06 Venezuelan tax raises issues New tax on collected premiums causes confusion

LatAm IR lists the top insurance professionals and risk managers in Latin America 09 LINES: AGRICULTURE

NEWS ANALYSIS

08 Optimism rises in Colombia Global (re)insurers ďŹ&#x201A;ock to growing Colombian market

Dry times in Brazil Extreme weather event tests the (re)insurance market 20

COUNTRY PROFILE

Total uncertainty Challenges for (re)insurers in Venezuela 22

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EDITORIAL VIEW

INSURANCE REVIEW

London Thavies Inn House, 3-4 Holborn Circus, EC1N 2HA T+44 (0)20 7832 6500 F +44 (0)20 7832 6501 EDITORIAL Correspondent Alicia Dimas +44 (0)20 7832 6543 a.dimas@pageantmedia.com Staff writer Drew Nicol +44 (0)20 7832 6569 d.nicol@pageantmedia.com Group head of content Gwyn Roberts +44 (0)20 7832 6623 g.roberts@pageantmedia.com COMMERCIAL Associate publisher Thomas O’Riordan +44 (0)20 7832 6634 t.oriordan@pageantmedia.com

PRODUCTION Head of production Claudia Honerjager c.honerjager@pageantmedia.com Sub-editors Eleanor Stanley Luke Tuchscherer Mary Cooch Designer Jack Dougherty j.dougherty@pageantmedia.com CONTENT SALES Antonio Rua +44 (0)207 832 6581 a.rua@pageantmedia.com EVENTS Beth Hall +44 (0)20 7832 6576 b.hall@pageantmedia.com PAGEANT MEDIA CEO Charlie Kerr

enezuela remains in a state of chaos. The collapse in oil prices, combined with currency volatility, are not only scaring off foreign companies but also interfering with the lives of all Venezuelans. Investment in the country is a risky business, not least for global and local (re)insurers who are facing up to a restrictive and confusing regime (p18). Nevertheless, hopes of better days to come leave (re)insurance companies reluctant to give up on the market. Parts of the Brazilian (re)insurance market are also undergoing a period of strain due to a severe drought. Depleted water reserves and damaged coffee, cocoa and sugarcane crops have tested the mettle of agricultural specialists (p16). Although the Latin American market presents considerable challenges, insurers, reinsurers, brokers, risk managers and specialised lawyers are ready to face the test and make the most of the region’s potential. Some of those names are now part of this year’s Power 50, Latam Insurance Review’s assessment of the continent’s top market experts and rising stars in the (re) insurance business across Latin America (p9). With all of the Power 50 voted for by our subscribers, this issue is dedicated to the nominees and their efforts to develop and strengthen the Latin American (re)insurance market through both good and challenging times.

Alicia Dimas Correspondent

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LATAMIR

4 NEWS

CYBER LIABILITY COVERAGE

Brazil lacking cyber risk protection Businesses in Brazil are being underserved by the insurance market when it comes to purchasing cyber liability coverage. The XL Group claim to be the only insurer providing coverage for cyber liability in the country. Despite a 48% increase in cyberattacks around the globe in 2014, in Brazil this risk is still overlooked. Brazil has an online population of 120 million people (more than 60% of the population) and this “makes technology companies a huge target for data breach” according to Silvia Gadelha, international ﬁnancial lines underwriter for XL Group’s insurance operation in Brazil. “The combination of more sophisticated criminals and stricter data breach laws leave these businesses facing increasing ﬁnancial and reputational exposure,” she told LatAm Insurance Review.

MEXICO

Slowdown for Mexico’s insurance market Direct insurance premiums grew 2.4% in Mexico last year, a slowdown from the 4.9% growth registered in 2013. According to Comisión Nacional de Seguros y Fianzas (the Mexican insurance market regulator) property lines increased 36.8%, agricultural lines grew 48.7% and the maritime and transport segment had a 14.8% increase. Credit insurance in Mexico went up 13.9% last year and surety direct premiums registered an increase of 10.3%.

“As one of the fastest growing internet user communities in the world, Brazil has experienced a dramatic increase in cybercrime.” The region’s economic powerhouse ranks in the top ten of all the reports’ studies of malicious cyber activities, including spam zombies, phishing hosts and bot-infected computers. “Poor internet usage habits, unsafe web practices as well as a thriving underground market have turned the online market into a harvesting hub for cybercriminals,” Gadelha added. When asked why cyber-risk is still underestimated in the country, Gadelha said she believes Brazil still needs to develop a better risk management culture. The underwriter is optimistic about upcoming changes however, and gives the example of the new Marco Civil da Internet regulation which was recently added to the Brazilian Civil Rights

In the surety segment, performance bonds generated the biggest share of direct premiums, with a 75% market share. Fidelity bonds accounted for 18.9% of surety direct premiums, credit surety bonds had a 3.3% share and judicial surety bonds 2.8%.

CHILE

Five-year low for Chile’s insurers Chile’s insurance market registered a 1.7% growth in 2014, the lowest increase since 2009. However, non-life business continues to make progress.

Framework for the internet. “Also, many Brazilian companies have exposure in the US or other countries where local laws place greater liability them. Such factors help increase the awareness of cyber risks and the demand for adequate coverage,” she said. Gadelha added that, in June 2014, The XL Group launched two new products, to cover against cyber attacks: Cyber Liability Pro, which offers professional indemnity coverage for technology companies, and a more general cyber risks insurance solution serving mid- and large-sized companies, called Cyber Liability. There were 117,339 new cyberattacks every day, a total of 42.8 million incidents in 2014, generating a 34% increase in ﬁnancial losses for companies all over the globe, according to Symantec’s Internet Security Threat Report 2014.

According to Asociación de Aseguradores de Chile (the country’s insurance industry trade body), last year the non-life insurance sector grew by 3.6% – an increase on the sub-1% growth levels seen by the sector in 2013. Non-life business continued to out-perform life lines, which only increased 0.8% last year. Despite the weak performance last year, 2015 brings a more positive outlook for the Chilean insurance market, with Fitch Ratings, the rating agency, predicting growth of circa 6.5%.

NEWS 5

PERU

Peru’s insurance market grows 11% The insurance market in Peru grew 11.96% in 2014, compared to 2013, Superintendencia de Banca, Seguros y AFP (Peruvian banks and insurers regulator) reported. The insurance company Interseguro is Peru’s market leader, with a 25.28% share of all the premiums written in the country last year. The insurance industry in Peru contributes around 1.5% to the country’s GDP. The regulator said in a statement that “the growing opportunities for the insurance sector in Peru are extremely positive…The insurance market in Peru has been growing considerably more than the country’s economy for the past years.” Peru’s economy overall grew by 2.35% in 2014, according to the regulator.

MEXICO

Budget cuts imperil insurance market Mexico’s insurance trade body, Asociación Mexicana de Instituciones de Seguros (AMIS), has warned that government budget cuts will have a negative impact on the country’s insurance market. The Mexican ﬁnance ministry has announced budget cuts worth 0.7% of GDP, “as a preventive move in the face of a more adverse international economic environment.” AMIS has predicted that insurance premiums would grow in the 7 to 10% range in 2014, but the planned austerity measures might force the association to review these predictions. “Reduced spending on infrastructure is part of the austerity

measures, and “Reduced spending on this will have a negative impact infrastructure is part of on the insur- the austerity measures, ance industry’s growth,” Recare- and this will have a do Arias, head of negative impact on the AMIS said. Barclays Capi- insurance industry’s tal has released growth” a statement es- Recaredo Arias, head of AMIS timating that the announced budget cuts will reduce public investment by 11% in real terms this year and could slow down economic growth in the country.

The process has now been concluded with more than 95% of the insurance group shareholders accepting the offer. In a statement, Talanx said that the purchase of Magallanes is part of the group’s ongoing investment strategy in Latin America. The (re)insurer now operates in Argentina, Brazil, Chile, Colombia, Mexico and Uruguay. Even before the purchase, the (re)insurance company was already present in the Chilean market, through HDI Seguros Chile.

OUTLOOK CHILE

Patria Re to open first agency in South America The reinsurance firm Patria S.A. will open Patria Re Servicios S.A., a new representing agency in Chile. Patria Re Servicios S.A. will be the firm’s first branch in South America. “This new location is integrated with our strategic plans and will support the growth we have experienced over the last 60 years,” said Ingrid Carlou, Patria Re’s CEO. Carlou also pointed out that the new location will reinforce the reinsurer’s credibility in the region.

CHILE

Talanx takes over Aseguradora Magallanes Talanx, the global (re)insurance company, has acquired full control of Aseguradora Magallanes, one of Chile’s main insurance groups. Talanx launched a public tender offer last December to buy the minority shareholders’ part in the Chilean insurance group.

Euler Hermes forecasts slower growth for Brazil Euler Hermes, the global credit insurance company, expects Brazil’s GDP to grow only 0.5% in 2015, after stagnating in 2014. This outlook contradicts the Brazilian government’s target to reach a primary GDP surplus of 1.3% this year and 2% in 2016 and 2017. Euler Hermes estimates that the investment deﬁcit accumulated by the Brazilian economy over the past 10 years has now reached $1.1bn. The insurer’s ‘Economic Outlook’ report anticipates a global economic growth of 2.8% for 2015. Despite the growth prediction, Ludovic Subran, chief economist at Euler Hermes, has warned that “we continue to see political hotspots in the emerging world. Political risk can reverse investment ﬂows and hit the pause button on private sector development for quite some time.” The report also states that the oil price drop will provide relief to many countries but exporters, such as Venezuela and the Gulf countries, will have to adapt to lower revenues and be selective about investments and public spending.

LATAMIR

6 NEWS

EXPANSION

Partner Re targeting SMEs in Chile and Colombia Partner Re wholesale is looking to expand partnerships and increase its distribution network in Latin America. Marc Van der Veer, general manager of Partner Re’s wholesale arm, told LatAm IR the company has studied the region’s market and is particularly interested in doing business in Colombia and Chile. Partner Re wholesale builds strategic partnerships with small and medium sized enterprises (SMEs). The specialty (re)insurer helps property and casualty insurance companies to manage their distribution network, build robust IT infrastructure and access expert product knowledge. “This allows SMEs to adapt to the market expansion, offering new and improved products, without having to invest in more people and know-how,” Van der Veer said.

NEWS IN BRIEF

Partner Re wholesale is focused on the “rapidly growing SME market”, which the firm believes is usually ignored. “There is a huge gap between saturation and growth and here is where we try to benefit,” said Van der Veer. He added that competitors are “so focused on the large companies that they miss the fact that the SME market is growing”. In fact, a large percentage of SMEs globally are still to insure. This is particularly significant in “less mature countries”, where many smaller companies do not have any insurance coverage.

TAX

Questions raised over new Venezuelan insurer tax A new 2.5% tax on premiums collected by (re)insurers is to be levied by Venezuela’s Economy, Finance and State Bank Ministry (Ministerio para Economía, Finanzas y Banca

Pública) has been published in the Government’s gazette. The new levy will go towards funding the industry’s regulator (Superintendencia de la Actividad Aseguradora).

“How will the insurers know exactly how much to pay?” Adolfo Paolini, DAC Beachcroft However, Adolfo Paolini, DAC Beachcroft’s consultant for Venezuela, told LatAm Insurance Review that the law is not clear and “will probably be amended soon”. “The Ministry expects (re)insurance companies to pay the 2.5% before they even close their year books,” Paolini said. “So how will the insurers know exactly how much to pay?” The new regulation, published in Gaceta Oﬁcial No 40.594, states that this “legal contribution will be expected from all insurance companies, reinsurers, private health clinics with health plans for the public and any entity that sells insurance premiums”.

(MARKET RESULTS 2014)

Brazilian insurer SulAmérica registered a 14.2% growth in net proﬁt during 2014, reaching $193m. According to the company’s latest earnings release, SulAmérica’s written premiums increased 10.7%, to $4.76bn. Brazilian reinsurer IRB-Brasil Re (IRB) registered a 72.5% net proﬁts growth to $209m in 2014. According to the company’s latest earnings release, IRB’s written premiums increased 18.6% and earned premiums stretched 34%. Additionally, the reinsurer’s claims ratio fell to 58% in 2014 from 63% the year before. Lower retrocession levels in the company’s P&C portfolio gave IRB a retention rate of 67.6%. Global reinsurance company Swiss Re is betting on the Colombian reinsurance market,

as the company’s profits decrease worldwide. “Colombia is a market where you can meet some of the most well educated people in the insurance business,” Michel Liès, Swiss Re’s CEO said. “The country is not on top of everybody’s list when it comes to doing business, but it is definitely on the top of industry expertise.” Swiss Re registered a profit of US$245m on the last quarter of 2014, representing a fall of 79.5% from the $1.2bn profit registered in 2013. Brazilian insurer Pan Seguros registered a 24.21% growth in written premiums during 2014, reaching $70m. According to the company’s latest earnings release, the positive result is due to the insurance company’s investment in new technology and a change in its main shareholders.

Brazilian insurance company Porto Seguro has registered a 24% net profit increase in 2014. In total, the insurer had a net profit of $311m last year. Profits grew 19% on the last quarter of 2014 and 16% compared to the final quarter of 2013. Over the course of the whole of 2014, Seguro’s premium values increased 13%, when compared to 2013. Liberty Seguros, Liberty Mutual’s Brazilian arm, grew 7% in 2014. The insurer returned a profit of more than $30m and by the end of the year had 1.3 million clients in Brazil. “It’s a record for the company in Brazil, regarding profitability,” Carlos Magnarelli, CEO for Liberty Seguros Brasil, said. The company’s lines for small and medium enterprises (SMEs) increased 9.4%, compared to 2013.

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LATAMIR

8 NEWS

NEWS ANALYSIS By Alicia Dimas

Optimism for Colombia’s (re) insurance market

to lower the barriers for foreign insurers and brokers entering the market,” Rubio added. However, there are still some challenges insurers have to face in the country, as there is a need for innovative solutions to face the emergence of new risks. Colombia also requires new infrastructures and the improvement of the mining and agriculture sectors, according to Escobar. Despite these challenges, Suramericana’s VP remains optimistic about future growth. Escobar describes a “continuous investment in science and technology”, as well as a major plan for new infrastructures all over the country, investments in mining and agriculture (particularly reforestation). Regarding foreign (re)insurance companies operating in the country, Escobar said they need to adapt themselves to the Colombian market and understand its nuances.

here are good prospects for the Colombian (re)insurance industry, participants and speakers agreed, at the Colombia Insurance Market Seminar, held by the international law ﬁrm Clyde & Co in London last month. “We expect the Colombian insurance market to grow around 9% this year,” said Juan David Escobar, vice-president of insurance for Suramericana S.A., the largest insurance company in Colombia. Currently, the insurance industry is worth $7.93bn in the country COLOMBIAN INSURANCE MARKET and, according to the Colombian (SOURCE: FASECOLDA) insurance federation, has increased 8.9% since 2013. In 2013 the total gross written premium in the country was worth $9.036m and Escobar believes “the insurance market in Colombia still has plenty of room to grow, due to the increase of the country’s middle class.” In fact, the insurance penetration rate in the South American country is 2.7%. This number is INDUSTRY GROSS WRITTEN PREMIUM below the Latin America region BY LINE (SOURCE: FASECOLDA) average, which has a penetration rate of 3.2%. Workers comp. This potential for growth, is annuities 25% supported by regulation, Raquel Life 17% Rubio, an associate at Clyde & Co, Motor 12% explained, “the Colombian legal Compulsory Motor Liab. 9% system has undergone a very Fire 7% substantial process of improvement Accident & health 6% in order to satisfy the growing de Bonds 4% mand from the insurance sector.” Other 20% “A revised regime of ﬁnancial regulation has been designed

“If a company sells the same standardized product everywhere, without positively differentiating it, then clients will always choose the company that offers the lowest price,” he said. Andrés Cárdenas, assistant vice-president at Marsh Ltd, also referred the language differences and the problems caused by document translations. He also highlighted Miami’s transcendence as an important hub for the Latin American (re)insurance market because of its large number of Spanish speakers. Overall, the seminar speakers agreed that the Colombian insurance market is benefiting from the country’s economic surge. Colombia is considered “one of the most dynamic economies in the world,” Neil Beresford, partner for Clyde & Co, explained. In fact, the country’s GDP increased 4.2% last year, higher than the Latin American average of 1.3% growth. Other indicators, such as a falling unemployment rate (8.6%), low inflation (3.3%) and an increase in the country’s per capita income, also testify for the country’s good business environment. Future prospects also seem bright, as Juan Manuel Uribe, deputy head of mission of the Colombian Embassy to the United Kingdom, predicts Colombia’s GDP might increase from 3.6% to 4% in 2015 and inflation should be around 3.5%. Andrés Sarmiento, business analyst for ProColombia UK, a Colombian agency for international investment and export, revealed that the country’s $25bn infrastructure program “is the biggest infrastructure plan Colombia ever had – never in our country’s history have we invested so much.” Andrew Wright, chief executive of UK Colombia Trade, a business consultancy, in Bogotá, said “the biggest challenge is to get investors to come here [Colombia]. Once they are here, they are astonished by Colombia’s way of business.”

POWER 50 9

2015 POWER

LatAm Insurance Review once again shines a spotlight on the region’s brightest and best in its annual Power 50 roundup. With nominations received from our audience of risk and insurance professionals, LatAm IR highlights how insurers, reinsurers, brokers, risk managers, law ﬁrms, regulators and trade associations have gained inﬂuence, grown in stature and outperformed over the last 12 months BY ALICIA DIMAS

LATAMIR

10 POWER 50

INSURERS

JORGE LUIS CAZAR

SENIOR VICE PRESIDENT, ACE GROUP

niﬁcant business growth in Brazil and other Latin American countries has contributed to the group’s recent positive results, with overall reported revenues of $24.53m in the ﬁrst nine months of 2014, up 1.6% year-on-year.

BRUNO LAVAL

REGIONAL MANAGER FOR IBERIA AND LATIN AMERICA, XL GROUP As well as holding the post of senior vice president, Cazar is also Latin America’s regional president for ACE. His main duties include general management and strategy for all operations in the region. Last year, Cazar was responsible for overseeing the successful acquisition of Itaú Seguros’ corporate P&C business. He is an experienced international executive with more than 25 years in the insurance industry, including senior underwriting and general management positions in Latin America and Asia Paciﬁc.

RAFAEL CASAS GUTIÉRREZ CHAIRMAN OF MAPFRE AMÉRICA SA; FIRST VICE-CHAIRMAN OF THE INTERNATIONAL INSURANCE DIVISION FOR MAPFRE SA

Gutiérrez holds several signiﬁcant positions within the group’s companies. His main focus is on Mapfre’s operations in South America. His experience in overseeing the Latin American market has contributed to Mapfre’s position as one of the key insurers in the region, with Latin America representing over 40% of the group’s revenue. In fact, Mapfre’s sig-

Laval planned and implemented XL’s Group’s strategy to enter the Latin American insurance market. Now he is successfully establishing the group’s presence in the region as a global programme partner and specialist insurer for complex risks. Early this year, the XL group conﬁrmed the acquisition of Catlin Group’s total capital stock, for $4.1bn. According to the group, the deal will create “a global specialty insurance and reinsurance player with a total capital of US$17bn and net premiums of $10bn”.

JAMES DWANE

PRESIDENT & CEO, LATIN AMERICA AND THE CARIBBEAN, AIG

Dwane is responsible for overseeing AIG’s property casualty insurance operations and business strategies in the 15 countries in which AIG operates in the Latin American region. A remit that represent $1.5bn in revenues for the group.

Under his leadership, the group is developing more than 100 products, as part of a strategy to double its revenues in the next four years. Dwane’s ability to provide direction will be pivotal as AIG continues placing a tremendous amount of focus on Brazil, Colombia and Mexico as strategic business expansion countries. In 2014, AIG opened its fourth ofﬁce in Brazil.

GONZALO PÉREZ

CEO FOR SURAMERICANA “We had an exceptional 2014, closing the year with 7 billion sales, 103% of our target,” Pérez commented on the insurance company’s performance last year. The Colombian insurance company made a profit of $247.5m in 2014. Pérez’s directorship of the division (part of regional financial holding company Sura) has propelled its internationalisation process, establishing a presence in the Dominican Republic, El Salvador and Panama. Pérez aims to turn Suramericana into a multi-service, multichannel and multi-country company, with a focus on integral risk management. Pérez played a fundamental role in establishing Suramericana as the fifth largest insurer in Latin America, with 1.9% of market share, and as the market leader in Colombia.

JACQUES BERGMAN CEO, FAIRFAX BRASIL

Bergman’s experience has been the guiding force of Fairfax’s strategy in the Brazilian market, since the inception of Fairfax Brasil, in

2009. Bergman is regarded as an insurance industry statesman by the Brazilian industry, having established his name in the market as managing director of Itaú Seguros Corporativos.

JOSÉ ADALBERTO FERRARA

PRESIDENT, TOKIO MARINE SEGURADORA, TOKIO MARINE Ferrara is currently working on creating a reinsurance presence in Brazil. He commented recently that this operation will “make it signiﬁcantly easier for the company to grow in one of its main business areas: the large risk segment.” Ferrara added that the insurer wants to double its 5.3% market share, in the large risk segment, where it sees “lots of growth potential because of Brazil’s big pipeline of infrastructure projects.” Ferrara has been part of the Tokio Marine group since 2009 and was appointed president of Tokio Marine Seguradora in 2013. His goal in his present role is to double the number of premiums by 2016. Already, Tokio Marine’s transportation portfolio increased by 25% in Brazil in 2014 compared to 2013.

ALEJANDRO BAILLÈRES

CEO, GRUPO NACIONAL PROVINCIAL (GNP) Baillères has more than a decade of experience in the largest multi-line insurance company in Mexico and has been the insurer’s CEO since 2006. Baillères is focused on building a close relationship between the insurance company and its clients, proudly stating that “our customers are accustomed to the very best.”

POWER 50 11

ANDRÉ GREGORI

CEO, BANCO BTG PACTUAL SEGURADORA E RESSEGURADORA, BTG PACTUAL Gregori has been responsible for BTG’s reinsurance and insurance department in Brazil since 2013. Last month, SUSEP (the Brazilian Superintendency of Private Insurance) approved the transfer of the direct share control of Pan Insurance, from Brazil’s Banco Pan, to BTG Pactual Seguradora. BTG Pactual Seguradora now owns an 100% stake in Pan Seguros. BTG Pactual is also reportedly planning to expand its insurance business to Chile, Colombia, and Mexico.

RAFAEL VENEGAS CEO, RIMAC SEGUROS

Venegas is responsible for Peru’s largest insurance company, with over 33% of market share in the country. Venegas has been CEO of Rimac Seguros for ﬁve years and is proud of the insurance company’s contribution to Peru’s economy “Rimac broadened the market by offering for the ﬁrst time very affordable, very simple car theft, property and health insurance for low-income sectors through non-traditional channels,” he said.

ALVARO CORREA MALACHOWSKI CEO, PACIFICO

Malachowski has been leading the Peruvian insurance company on the path of success. The chief executive was responsible for Paciﬁco’s good results last year – the insurer registered a net income rise of 55% in 2014, compared to 2013. Malachowski was appointed Paciﬁco’s CEO in 2013. The

insurance company is part of Credicorp, Peru’s biggest ﬁnancial holding company.

VINCENT VANDENDAEL

DIRECTOR, GLOBAL MARKETS, LLOYD’S While promoting and protecting Lloyd’s across the globe, one of Vandendael’s main tasks is to implement the market’s Vision 2025 – a strategy that aims to substantially grow Lloyd’s business in emerging markets, with a speciﬁc focus on Latin America.

GABRIEL ANGUIANO

HEAD, MEXICO DESK AND SPANISH LATIN AMERICA, LLOYD’S Anguiano established the Lloyd’s Mexico desk and is responsible for its new initiatives and wider strategy in Latin America through a focus on analysis of local markets and the formulation of new strategies.

VICTOR A. MEINTJES

EXECUTIVE VICE-PRESIDENT AND COO LATIN AMERICA, LIBERTY MUTUAL GROUP Meintjes’s successful steering of the Latin America division of Liberty Mutual has helped to make the region a key focus for the global insurance group. Meintjes joined Liberty Mutual in 1995 and has supervised several acquisitions and expansion in Latin America.

ALEXANDER MONTOYA

MANAGING DIRECTOR, LATIN AMERICA, LIBERTY INTERNATIONAL UNDERWRITERS With a career of more than 20 years so far, Montoya has a vast experience in specialty lines insurance in Latin America. He has performed a variety of roles throughout his career, including local and regional product underwriting, distribution head and country

CEO. Montoya has proven himself as a results-driven executive with extensive experience implementing innovative business practices that maximize growth and strengthen company operations across multiple business lines. While overseeing the strategic direction of LIU’s Latin American operations, Montoya stated, “I look forward to further developing LIU’s business throughout our region. LIU has solid relationships with brokers and the businesses we insure and reinsure here. The LIU Latin America team is strong and talented and has built an excellent foundation. Together we will advance LIU’s standing in the marketplace as a premier specialty lines insurer.”

MICHAEL RANEY

CEO, GLOBAL CORPORATE, ZURICH LATIN AMERICA, ZURICH

Raney was appointed CEO of Global Corporate, Zurich Latin America in 2011. He is responsible for driving global corporate growth in the region and has successfully outperformed on development targets.

REINSURERS

MATTHIAS MARWEGE

PHILIPPE JOUVELOT

SENIOR EXECUTIVE MANAGER, LATIN AMERICA, SPAIN, PORTUGAL AND THE CARIBBEAN, MUNICH RE

Jouvelot was appointed AXA Brasil’s president and CEO early this year, as the global insurer entered the Latin American market. Jouvelot has been a member of AXA’s executive committee since 2003.

With seven years’ experience as a senior executive manager, Marwege represents Munich Re’s noted regional experience and reinsurance expertise. He has a detailed understanding of its markets and has furthered the reinsurer’s strategy of sustainable growth.

PRESIDENT, CEO BRASIL E AMÉRICA LATINA, AXA CORPORATE SOLUTIONS/AXA SEGUROS

IVÁN GONZÁLES

HEAD, LATIN AMERICA, SWISS RE CORPORATE SOLUTIONS, SWISS RE In 2014, Gonzáles was responsible for Swiss Re Corporate Solutions’ acquisition of a 51% stake in Compañía Aseguradora de Fianzas Conﬁanza, a leading Colombian specialty insurer. Under Gonzáles’s leadership, the corporate solutions provider of Swiss Re has gone from an insurer with two lines of business, to a multi-line player with an expanding presence in Latin America.

LEONARDO PAIXÃO CEO, IRB BRASIL RE

IRB’s CEO for the past ﬁve years, Paixão has maintained the status and relevance of the former state monopoly, not least by pushing its participation in markets outside Brazil. “The company’s strategy is to follow the expansion of Brazilian multi-nationals. If there are opportunities to become involved in foreign markets through acquisitions, they will be considered,” said Paixão.

LATAMIR

12 POWER 50

JOSÉ FARIAS DE SOUSA CHIEF UNDERWRITING OFFICER, IRB BRASIL RE

With more than 30 years of experience, José Farias de Sousa is a respected name in the industry. Regarded by his peers as a seasoned underwriter with a broad understanding of economics, he has shown adaptability in a number of roles within one of Latin America’s largest reinsurers.

primarily in reinsurance. He was appointed president and COO for XL Re Latin America in 2010. Some of his main achievements in XL Re include the establishment of support teams in Buenos Aires, São Paulo and Bogotá, increasing the capital of XL Reasseguros Brasil S.A. and, through the promotion of data quality, he has refocused the company’s portfolio, differentiating it through a technical approach to reinsurance.

MARGO BLACK

HEAD OF REINSURANCE, LATIN AMERICA SOUTH AND PRESIDENT OF SWISS RE BRASIL REASSEGUROS

ALEJANDRO PADILLA

HEAD OF REINSURANCE LATIN AMERICA NORTH AND PRESIDENT OF SWISS BROKERS MEXICO, SWISS RE

PAULO BOTTI

CEO, TERRA BRASIS Extensive experience in the P&C space has given Padilla the necessary understanding of a wide range of markets including Mexico, Central America and Venezuela, for his effective leadership of Swiss Re’s northern Latin America region.

INGRID CARLOU CEO, PATRIA RE

JAMES GRIEVE

COO AND REGIONAL MANAGER, LATIN AMERICA AND THE CARIBBEAN, SCOR RE Grieve recently spoke to LatAm Insurance Review about the softening of the insurance market in Latin America.“We are in that part of the (re) insurance market cycle when people are blindly reducing premiums…and that’s a scenario that seldom ends happily,” he said. Grieve has overall responsibility for the underwriting strategy and policy in Latin America drawing on his experience in the London and Miami markets, and displays a real dedication to success in emerging markets.

PHILIPPE ROCHAIX

PRESIDENT AND COO OF XL RE LATIN AMERICA, XL RE Rochaix has 27 years of experience in the international insurance industry,

Margo Black has recently talked to LatAm Insurance Review about Swiss Re’s expansion in Brazil “Brazil is one of the ﬁve countries selected by Swiss Re for its High Growth Markets Strategy, together with Mexico, China, India and Indonesia. The Group has been redirecting capital and talent towards those countries to further enhance its presence, client service and operations.” Black has 34 years of industry experience. She oversees Swiss Re’s reinsurance programmes for Brazil, Chile, Colombia and other key markets in South America.

look after us in the same way we look after them.” With a view to strengthen its position in the international market, Carlou was also responsible for opening a marketing ofﬁce in London.

Carlou has been Patria Re’s CEO since 2012 and is responsible for the company’s strategy and general performance. Carlou told LatAm Insurance Review that the Mexican reinsurance company has been “mainly dedicated to the medium sized companies of the region. We have devoted ourselves to serving national and regional companies that are experts in their own locality. It does not mean that we will not reinsure large international groups. However, we do expect our clients to treat us as their partners and

Botti is now planning Terra Brasis’ operating strategy in a new territory, Colombia, after the country’s national insurance regulator, Superﬁnanciera, approved the reinsurance company’s request to operate in the Colombian reinsurance market, early this year. The company is now registered as a foreign reinsurer in the Colombian Registry of Foreign Reinsurers and Reinsurance Brokers, and it is certiﬁed to operate in all reinsurance lines. After holding several key roles in the insurance industry, including a stint as executive vice president of Itaú Group, Botti was instrumental in the establishment of Terra Brasis. He has established himself as a main player in the highly competitive Brazilian market. In 2014, Botti won a lifetime achievement award at the LatAm Insurance Review Brazilian Insurance Awards.

BRUNO FREIRE CEO, AUSTRAL RE

Freire believes local reinsurers, such as Austral Re, “enjoy certain advantages over their larger competitors.” He explains, “this is because Austral Re lacks the bureaucracy that slows decisionmaking in larger companies, especially multinationals.

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“WE VIEW ARGENTINA AS A STRATEGICALLY VERY IMPORTANT AND DYNAMIC ECONOMY. [OUR] NEW OPERATION IS ANOTHER STEP FORWARD IN OUR STRATEGY OF FURTHER BUILDING OUR STRONG PRESENCE IN THE REGION” Mike Methley, JLT

There is less distance between the decision-maker and the client. This allows us to give quick answers.” Freire worked for more than 10 years at Aon Benﬁeld, the world’s largest reinsurance broker. He has acted in several areas, such as placement of facultative business, account management and claims, and the placement of retrocession contracts. Since 2008 Freire has been involved in the structuring, pricing and placement of several reinsurance contracts from major insurance companies in Brazil.

GERARDO GARCÍA

GENERAL DIRECTOR, BARENTS RE As adviser for both insurers and brokers across the region, García’s 19 years in the industry have contributed to Barent Re’s ambitious growth strategy, as the Panamanian reinsurer looks to expand it footprint globally, with a focus on niche markets, facultative and treaty businesses.

ANGELO COLOMBO

CEO, REGIONAL UNIT, ALLIANZ GLOBAL CORPORATE & SPECIALTY RE (AGCS) Colombo has been leading Allianz Global Corporate and Specialty in Brazil for almost 16 years. He has employed an ambitious strategy to expand its footprint in the region, with plans to enter Peru and Bolivia. Colombo was responsible for AGCS obtaining a re-

insurance licence in Brazil and the regulatory approvals to operate in Chile and Colombia.

ALEXANDRE MALUCELLI CHAIRMAN, GRUPO SEGURADOR JMALUCELLI

Malucelli continues to play a key role in the ﬁrm, which has became a leader in surety bonds in Latin America, since his appointment in 1991.

CARLOS CAPUTO

CEO, LATIN AMERICA, MARKEL Caputo started his role as CEO for Latin America in 2009. Caputo has 38 years of underwriting and management experience in Latin America and, in particular, Brazil. Prior to Markel, he served as regional director and operating ofﬁcer for XL Re Latin America. Markel has been expanding the ﬁrm’s products and last year it launched a broad liability insurance solution for companies in the information and communication technology (ICT) sector, and a standalone cyber product designed for companies across all industries.

include driving business growth, managing client teams, and creating and maintaining a business environment that is supportive to optimising Latin America-based client’s results. After his promotion, Galizia stated, “being promoted to this role is an honour, and represents an amazing opportunity to lead the ﬁrm’s Latin American team. Working with our colleagues across the region, we will continue to deliver unmatched services and value to our clients.”

FERNANDO ANTONIO PEREIRA DA SILVA LATIN AMERICA CEO, AON RISK SOLUTIONS

Managing offices in more than 10 countries in Latin America, besides representative firms in the Caribbean, Silva has applied an innovative approach to the way Aon has established its presence in the region. Focusing efforts on promoting organic growth by expanding physically into new markets, da Silva has proven his worth in the region which represents the highest global growth rate for the broker.

RICARDO BROCKMAN

CEO OF LATIN AMERICA, MARSH

BROKERS

ALEJANDRO GALIZIA CEO FOR LATIN AMERICA, AON BENFIELD

Recently appointed as CEO for Aon Benﬁeld Latin America, Galizia’s duties

Brockman has successfully led Marsh’s regional operation, with key acqui-

sitions in Brazil, Panama, Peru and the Dominican Republic. By focusing on delivering industryleading global resources to both local and multinational clients, Brockman has strengthened the broker’s regional corporate footprint.

MIKE METHLEY GROUP COO, AND CEO LATIN AMERICA, JLT

Methley supervised Jardine Lloyd Thompson’s acquisitions in Brazil and Argentina last year. Commenting on the establishment of a reinsurance broking arm in Buenos Aires, Methley said, “We view Argentina as a strategically very important and dynamic economy. This new operation is another step forward in our strategy of further building our strong presence in the region and deepening our specialty capabilities. JLT Re Argentina will help drive the continued growth and momentum of JLT’s very successful Latin American operations.” Last year Methley was also appointed as chairman of JLT Canada and JLT Insurance Management, combining these roles with his existing role as CEO of the Group’s Latin American business, “which will provide a signiﬁcant opportunity to further develop collaboration and capabilities across the Americas”, the group said. Methley has more than 30 years’ experience in the insurance industry with a background in construction, power, utilities and infrastructure projects.

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14 POWER 50

LUIS MAURETTE

REGIONAL CEO OF LATIN AMERICAN OPERATIONS, WILLIS

supported by various Lloyds’ syndicates. With plans to continue to build its presence in Latin America, adding to 11 ofﬁces in six countries, Astorqui’s knowledge will only beneﬁt the company further.

treaty and facultative lines. Pope is also spearheading Guy Carpenter’s initiative to protect residual insurance loss for governments and institutions by helping them access alternative markets.

AIDAN POPE

JUDI NEWSAM

CEO OF LATIN AMERICA AND THE CARIBBEAN OPERATIONS, GUY CARPENTER Since taking this role in 2011, Maurette has been responsible for the company’s expansion into unexplored Latin American markets, while also making significant changes to the leadership of Willis Latin America with new senior appointments and consolidation of high-performance operations. Last year strong results in Brazil drove organic growth in commissions and fees in Latin America during H1 2014 for the group. With over 30 years’ experience in the insurance and financial markets, Maurette led several important companies including CIGNA, La Caja and Liberty Brazil and looks set to continue paving the way to sustainable profitable growth in the long term for the broker.

JOSE H. ASTORQUI MANAGING DIRECTOR, HOWDEN LATIN AMERICA

Astorqui’s experience and understanding of markets in the Iberian Peninsula and Latin America are a key asset for Howden Broking Group as it builds its Iberoamerican broking platform. Just last month, Howden Latin America has begun operating a Cargo Binding Authority in the region, with a limit of $25m,

Last year, as part of the company’s growth initiative in the Englishspeaking Caribbean, Guy Carpenter’s GC Securities wing completed the ﬁrst catastrophe bond issued by the World Bank on behalf of the Caribbean Catastrophe Risk Insurance Facility (CCRIF). Guy Carpenter also expanded in two countries last year. In Colombia, Guy Carpenter hired a new leader for its strategy there. Secondly, Guy Carpenter expanded its presence in Peru to reach that country’s large reinsurance market. These moves ensure the broker is well represented in all key strategic regions throughout Latin America and the Caribbean. Pope is leading Guy Carpenter’s strategy to expand its presence in the Latin American region. He is responsible for establishing strategic investments in Peru and Colombia, and heading efforts to diversify the ﬁrm’s product offerings in both

COUNTRY HEAD, GUY CARPENTER BRAZIL, GUY CARPENTER

Newsam runs the firm’s two offices in Rio de Janeiro and São Paulo where she is in charge of strategic planning across all business lines and categories. Newsam develops and maintains strong client and colleague relationships and has increased revenues significantly through more effective sales efforts. Newsam is also responsible for the building and retention of both treaty and facultative teams in Brazil. She has been involved personally in arranging the reinsurance treaties for numerous multinational “start-up” operations. Newsam has built a cross-continent network of contacts to ensure that Brazil is seen as a place for investment, while creating new local revenue generating business opportunities She is part of the Brazil CEO Champions (Women’s Forum for the Economy & Society) group, and established the chapter in Rio de Janeiro. She is commit-

ted to mentoring young talent and ensuring equal opportunity in hiring. She is also a member of ABECOR Re – the Reinsurance Brokers Association in Brazil, which sets market standards for all participating members.

FRANCISCO XAVIER CASANUEVA PÉREZ

CEO, INTERPROTECCIÓN, GROUPO CP Casanueva Pérez is a leading figure in the Mexican market, transforming the first generation company into a leading insurance brokerage firm in Latin America. Specialising in commercial retail P&C, risk management services and reinsurance solutions, Grupo CP’s operations are now expanding regionally, an achievement down to Casanueva Pérez’s efforts to drive the company forward.

STEVE JACKSON

LATIN AMERICA REGIONAL CEO, COOPER GAY Jackson has more than 25 years insurance experience, all of which have been spent working at Cooper Gay. He is responsible for the broker’s extensive Latin American network of ofﬁces, and leads Cooper Gay’s Latin Executive Committee. Jackson’s main area of expertise is property facultative reinsurance, oil and gas, power and mining to general property. Jackson is a highly respected Latin American reinsurance expert with a market-leading programme placement and claims settlement record, his contacts in the region are also second to none.

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16 POWER 50

HÉLIO NOVAES

COUNTRY GENERAL MANAGER, BRAZIL, MDS Novaes was appointed country general manager for Brazil in 2010. He says that “speed in attending customers’ needs, total availability and giving a good example are key ingredients for success.” Novaes brings his vast experience in risk management to the role of general manager in MDS Brazil, operating across the whole domestic territory and managing over $452m in premium from 90,000 corporate clients. With a focus on providing solutions for industries including telecoms, petrochemicals, energy generation and large construction projects, Novaes brings a wealth of knowledge from previous roles (including at Sul America Seguros, where he led the integration of the local insurer with ING).

SANTIAGO CASANUEVA CEO, REASINTER

Casanueva has been responsible for Reasinter, the Mexico based reinsurance brokerage company, since 2001. Casanueva is in charge of the production areas and is responsible for strengthening relations with insurance companies and reinsurers.

LAWYERS

ALEX GUILLAMONT

DIRECTOR OF MIAMI OFFICE FOR LATIN AMERICA & CARIBBEAN, KENNEDYS Guillamont leads the Latin American and Caribbean practice at Kennedys. He handles disputes on behalf of leading international (re)insurers, having repre-

sented clients across the region. With 15 years of experience, Guillamont is an acknowledged leading expert on insurance and reinsurance matters. He is involved in complex losses on major environmental and natural disasters. He is specialised in contractors all risk, ﬁnancial institutions and D&O claims. He is also recognised as an expert on energy losses, regulatory compliance and third-party administration schemes. He is a political risk and trade expert for the entire Latin American region.

JOÃO MARCELO SANTOS

HEAD PARTNER, INSURANCE AND REINSURANCE DEPARTMENT, DEMAREST & ALMEIDA ADVOGADOS Santos recently talked to LatAm Insurance Review about the Brazilian reinsurance market, stating “looking back on the development of Brazil’s reinsurance market, the quality of the rules applicable to the reinsurance industry – enabling the market to be opened up – are undeniable.” Santos was formerly a director and deputy superintendent of Brazil’s insurance watchdog, Susep, working on the drafting, discussion and approval of supplementary Law 126/2007, which ﬁrst opened the Brazilian reinsurance market. Santos currently advises clients on regulatory, contractual and M&A matters, including AXA on its return to the Brazilian market through the incorporation of a corporate (re)insurer in the country, and other global companies like

AON, General Re, Lloyd’s, Mapfre, Munich Re, RGA and RSA.

ARY OSWALDO MATTOS FILHO

FOUNDING PARTNER, MATTOS FILHO Mattos Filho has a vast experience across a number of legal areas. Prior to his position at Mattos, he was chairman of the Securities and Exchange Commission of Brazil, served as Administrative Court Justice of Taxes and Duties of the State of São Paulo, was a member of the National Monetary Council, and president of the Federal Commission for Tax Reform. Mattos Filho currently serves on the board of Getulio Vargas and the Brazilian Institute of Capital Markets.

GABRIELA MONROY TORRES PARTNER, DAC BEACHCROFT COLOMBIA

Torres has been involved with the insurance industry for many years and has particular knowledge of reinsurance. Torres has broad experience of insurance and reinsurance law, as well as commercial and civil law. She advises foreign investors and business corporations, and national and international insurance and reinsurance entities. Torres is a member of the Colombian Association of Insurance Law, a litigation attorney, and an arbitrator at the Arbitration and Conciliation Centre of the

Bogotá Chamber of Commerce, Colombia’s main arbitration centre. She has participated in a signiﬁcant number of arbitrations. She is ranked in tier 1 for insurance in both the Chambers Latin America 2015 Guide and in the latest Legal 500 Latin America Directory.

FRANCISCO FERNANDEZ FLETES

PARTNER, DAC BEACHCROFT MEXICO, DAC BEACHCROFT

Fletes heads DAC Beachcroft’s Mexican ofﬁce, which was established over 10 years ago. Fletes represents insurance and reinsurance companies, brokers and Lloyd’s syndicates’ interests in a domestic and international context. His core practice areas are environmental liability, professional liability, fraud, ﬁdelity bonds, construction liability and defending professional negligence claims on behalf of insurers. Fletes is ranked in tier 1 for insurance in Chambers and Partners Directory and recognised as a leading lawyer in Mexico in the latest Legal 500 Latin America Directory.

GLADIMIR ADRIANI POLETTO OWNER, POLETTO & POSSAMAI

Poletto is the founding owner of the Brazilian law ﬁrm and is committed to “providing effective legal solutions, innovative, sustainable and customer satisfaction.” Poletto is also a

POWER 50 17

member of the International Association of Insurance Law (AIDA), a member of the Legal Affairs Commission of Fenaseg (National Federation of Security and Capitalization Companies) and author of the book Insurance Guarantee in search of its legal nature.

REGULATORS & ASSOCIATIONS

ROBERTO WESTENBERGER SUPERINTENDENT, SUSEP, BRAZIL

Westenberger was recently appointed to supervise the Brazilian private insurance watchdog. He specialises in mergers & acquisitions, capital evaluation (regulatory and economic), pricing, technical reserves evaluation, outsourcing pension funds liabilities and enterprise risk management for insurance companies and corporations in general.

MANUEL AGUILERA PRESIDENT, CNSF, MEXICO

Aguilera has been president of the Insurance and Surety National Commission (CNSF) since 1998. Aguilera is responsible for the Mexican insurance and surety markets’ supervision, and has participated in the development and implementation of the main reforms that have led to the modernisation of the

regulatory and supervisory frameworks that rule these markets in Mexico. Since 1998, Aguilera has been a member of the Board of the Banking and Securities National Commission, as well as of the National Commission for the Retirement Savings System, and since 1999, of the National Commission for the Protection of the Financial Services’ Users. Likewise, as President of the CNSF, he is part of the Mexican Financial Stability Council. Aguilera was also chairman of the International Association of Insurance Supervisors, chairman of the Latin American Association of Insurance Supervisors. Since 2007, Aguilera has been the chairman of the Insurance and Private Pensions Committee of the Organisation for Economic Co-operation and Development.

JORGE HUMBERTO BOTERO, PRESIDENT, FASECOLDA, COLOMBIA

Botero was appointed president of the Colombian insurer’s association in 2013. Since this time, Botero has facilitated the promotion of the industry’s interests by meeting some of its main challenges head on, including addressing barriers to implementation of mandatory coverage for ﬂoods and ﬁre damage.

JOSÉ MANUEL CAMPOSANO LARRAECHEA, PRESIDENT, AACH, CHILE

Camposano has been an active member of the Chilean insurers association for more than 30 years. He is a key voice for the industry domestically and regionally,

not least during the enactment of Chile’s new risk based capital regulation.

MARCO ANTONIO ROSSI PRESIDENT, FIDES AND CNSEG

Rossi was appointed CNSeg’s president in 2013 and has brought to the directorship of CNSeg and Fides a vast amount of experience, accumulated over 30 years in the industry and as CEO of Grupo Bradesco de Seguros e Previdência, the insurance arm of one of Brazil’s largest ﬁnancial groups. Recently taking over as head of the InterAmerican insurance association, FIDES, representing around 1,600 insurers and reinsurers, Rossi’s goal is to encourage debate on a range of regulation, as well as to address the main trends in the industry.

RISK MANAGERS LatAm Insurance Review is also highlighting 11 Latin American risk managers for their efforts in driving forward innovative risk management strategies at their companies and in the wider Latin American region.

CRISTIANE ALVES

HEAD OF INSURANCE, COMPANHIA SIDERUGICA NACIONAL (CNS) Alves’ career started with an internship at Pirelli. A position in the insurance department at the global tire producer followed in the early 1990s, after which Alves took on a role at the ﬁrm’s captive broker. “I had to hit the ground running,” Alves told LatAm Insurance Review recently. “I started managing life insurance, then worked with

import and export insurance solutions. Only then did I graduate to operational risk and civil liability.” Alves was then invited to manage Latin America risks for telecommunications group Telecom Italia in 2002, before returning to Pirelli as Latin America risk manager and then embarking on a new challenge at CSN. “It is great being in a company where risk management is recognised as an important area, where people stop what they are doing to pick up the phone and discuss risk-related information,” she told LatAm Insurance Review. “I was lucky enough to experience this at Pirelli and Telecom Italia. Now at CSN, I couldn’t be happier with the way the company’s risk perception is ingrained in the ﬁrm’s culture.” Alves has become a leading name in the Brazilian risk management space. She is perhaps most recognised for her work as head of the Brazilian Association of Risk Management (ABGR) where she continuously works to advance the culture of risk management by shedding light in the main barriers to the implementation of effective insurance solutions, as well as encouraging debate on effective risk transfer methods. Alves was awarded Risk Manager of the Year at the LatAm IR 2014 Brazilian Insurance Awards.

CARLOS TESSAROLLO GLOBAL INSURANCE MANAGER, PETROBRAS

Tessarollo is responsible for insuring assets of around

LATAMIR

18 POWER 50

$160bn and managing the oil giant’s largest engineering risk facilities. He recently told LatAm Insurance Review about how his role at Petrobras, stating that, “You come to work in the morning knowing that there will be something new to tackle, a new challenge.”

RENÉ MARTINEZ

GLOBAL DIRECTOR OF INSURANCE & RISK MANAGEMENT, CEMEX Martinez has an extensive knowledge of global insurance programmes and the insurance market place. With 13 years in the industry, Martinez has designed, evaluated and implemented strategic, innovative and creative solutions at global building material supplier CEMEX.

CRISTÓBAL MENA AMIGO EMERGENCY AND SAFETY MANAGER, METROGAS

This month, Mena Amigo was invited to participate in a UN-UNISDR programme for risk reduction as a world expert, where he will be answering questions about the role of corporate social responsibility (CSR) in risk reduction. Mena Amigo has more than 10 years of experience in risk and emergency management, working in areas such as CSR and public policy. He is currently responsible for implementing a CSR program at Metrogas, Chile’s leading company in gas distribution. Mena Amigo was recently summoned by the Chilean Senate to give advice about the bill to create a new national system for disaster risk management. He has also been a volunteer ﬁreﬁghter for more

than 11 years in the Santiago Fire Brigade, performing the roles of training ofﬁcer and second lieutenant. He was a member of the Chilean USAR Team that responded to the Haiti and Chile earthquakes of 2010. This month, Mena Amigo writes for LatAm IR about the 2010 Chile earthquake (see Comment p34).

CARLOS ALBERTO RIBEIRO OLIVEIRA PINTO

RISK MANAGER FOR PATRIMONIAL AND INSURANCE, CEMIG Oliveira Pinto has more than 10 years experience at Cemig, one of the largest energy companies in Brazil. He is responsible for Cemig’s risk assessment and risk prevention and negotiating Cemig’s contracts with (re) insurers. Oliveira Pinto is also taking part in Cemig’s commitment to research and develop new technologies to explore renewable energies. (see Proﬁle, pp28-29).

DANTE TAPIOCA

RISK MANAGER, NEOENERGIA Tapioca has more than 20 years of experience in the industry, a period that has made him a well-respected ﬁgure in the Brazilian risk management space. “I receive weekly calls from people in the industry. There is always someone who will ask for an opinion or advice. I am proud of my commitment to risk management and the admiration the Brazilian market has for me,” Tapioca told LatAm Insurance Review..

SALVADOR ORTIZ

CORPORATE RISK MANAGER, SERVICIOS ADMINISTRATIVOS, GRUPO PEÑOLES In a recent interview with LatAm Insurance Review,

“IT IS NOT UNCOMMON FOR INSURANCE COMPANIES OR BROKERS TO FACE A CONFLICT OF INTEREST BETWEEN THE GENUINE DESIRE TO ENGAGE IN RISK CONSULTING AND THEIR SALES GOALS. Salvador Ortiz, Grupo Peñoles

Ortiz commented that it is a risk manager’s responsibility to “translate the sales pitches into financial jargon used to capture the attention of CFOs in relevant subjects, including adequate coverage and risk management strategies, beyond only viewing insurance as a price.” Because “it is not uncommon for insurance companies or brokers to face a conflict of interest between the genuine desire to engage in risk consulting and their sales goals.” Ortiz has a wide range of experience, including roles at Mexican oil company Pemex, as corporate risk manager and head of the firm’s captive insurer.

CHRISTIAN MENDONÇA ERM SUPERINTENDENT, SCHAHIN

Mendonça has over 10 years of experience as a risk manager. He is an expert in the Latin American insurance market, managing global insurance programs, building relationships and negotiating with insurance and reinsurance companies,

ANDREA ALMEIDA

HEAD OF GLOBAL RISK MANAGEMENT, VALE Almeida says that everything she learned, as a risk management professional, she learned at Vale. Almeida joined the mining company as a trainee and made her way up to head

of global risk management. Almeida’s achievements include successfully implementing a global property programme, with the participation of a captive insurer, and creating an analytical pricing project, using loss distribution for all layers of the risk management strategy.

GUILHERME BROCHMANN RISK DIRECTOR FOR THE SOUTHERN CONE, DHL

Brochmann has more than 33 years of experience in the Brazilian insurance market, at insurance companies, brokers and risk management businesses. Brochmann has spent the last nine years in a management position at DHL, with responsibilities for the risk and insurance program. Brochmann is skilled in loss prevention and control, program implementation, gap analysis and corrective action plans, and the company’s insurance program.

KATIA LUZ

RISK DIRECTOR, ODEBRECHT Luz is responsible for a team of 19 people and manages Odebrecht’s companies in the construction and engineering sectors. Luz started her career as an architect and has used her knowledge to better assess risks related to buildings and large infrastructure projects.

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20 LINES: AGRICULTURE

DRY TIMES IN BRAZIL Brazil’s recent struggle with drought has had a serious impact on its hydropower, causing a signiﬁcant loss for the agriculture sector BY ALICIA DIMAS

or the last six months, Brazil has been witnessing the worst drought in the country’s history. The Cantareira interbasin transfer system, comprised of six dams, that provide water for almost 9 million people in the region of São Paulo, had water reserves drop to 5% of capacity early in the year. Although the situation has improved, it is now only up to 10.7% of its total capacity. Experts from the Water Resources Office in Brazil believe the extreme weather was caused because the rain fronts, that are normally carried south from the humid Amazon, have largely failed to materialise, while this year’s temperatures have been higher than usual. The drought is affecting the water and energy supply in a country where 70% of all the energy produced is hydro electrical. “One thing that Brazil has that is unique compared to all other countries in the world is the amount of its hydropower capacity. The majority of power generation in Brazil is from hydropower plants and they heavily rely on rainfall. So you can imagine how the drought is affecting the country,” states Karsten Berlage, global head for weather solutions at Allianz Risk Transfer (ART). “The lack of water increases the costs with electricity and water distribution for consumption, and this negatively impacts all the industries in the country,” says Luis Althoff, the property insurance company FM Global’s commercial director.

The extreme weather has been particularly harsh to coffee beans and sugarcane producers. Cristina Ribeiro, SwissRe’s senior underwriter for agriculture in Brazil, says that often “these crops are poorly insured, especially considering the total planted area in Brazil, although there is a wide range of insurance products available for both crops [coffee beans and sugarcane].” According to Ribeiro, some crops “escaped the drastic dry weather” due to a good rain season in the beginning of 2014. This was not enough though to prevent the prediction of a $7bn loss for the Brazilian agricultural sector in 2015, explains Althoff. “The agriculture industry contributes to 23% of Brazil’s GDP, so this loss concerns the whole country,” Althoff adds. According to Swiss Re, there are currently nine private insurance companies operating crop insurance in Brazil.

“Crop, livestock, bloodstock and forestry insurance are examples of products available in the market,” says Ribeiro. The reinsurer points out that “despite the Ministry of Agriculture providing a rural insurance premium subsidy programme, the harvest insurance penetration is only 13% of the total planted area for grains, fruits and vegetables, which is approximately 72.4 million hectares in Brazil.” The Brazilian government is trying to boost this shortfall and support private insurance penetration, by funding between 30% to 70% of the insurance premium, depending on the type of crop and region. “We understand that the private crop insurance market could grow at higher rates, if the amount designated by the government to the agriculture subsidy was higher,” believes Ribeiro, who explains that the government also provides

THE BRAZILIAN AGRICULTURE SECTOR (SOURCE: SUSEP) Total premium volume in 2014:

$475m

Number of farmers covered:

65.556

Market leaders:

Bank of Brazil and Mapfre

Main rural insurance covers' categories in Brazil: y agricultural y livestock farming y aquaculture y improvements and agricultural products

y rural pledge y forestry y rural producer life insurance y rural producer certiﬁcate

LINES: AGRICULTURE 21

PREMIUMS IN BRAZIL: BY REGION (SOURCE: MINISTRY OF AGRICULTURE, LIVESTOCK AND SUPPLY)

South 60% Centre & west 12% South-east 26% North & north west 2%

a protection programme, PROAGRO (Guarantee Programme of Agricultural Activities), which covers some crops against adverse weather conditions. “This programme is not an insurance coverage, so it is not following specific regulation determined by SUSEP (the Brazilian private insurance superintendence),” he says. In fact, all over the Latin American region, governments are increasingly supporting the development of agricultural insurance, either by providing subsidies or by creating specific policies for the sector. Visible differences The differences between the diverse Latin American countries, dictated by the Government and agricultural sector’s ability to work together, are visible: “the Brazilian agricultural insurance market is not growing significantly, when compared to Mexico, for instance,” states Ribeiro. “There [in Mexico] the government is strongly promoting crop insurance penetration by providing premium subsidy for the market and creating programmes for catastrophic weather events. One of the most significant programmes created by the Mexican government is CADENAS (Componente de Atención a Desastres Naturales).”

Ribeiro also praises the Argentina agricultural insurance market, saying that “in Argentina the market is well developed and the crop insurance penetration reached 60% of the planted area last year.” As for all the other countries in the region, “crop insurance is still incipient,” according to Swiss Re’s specialist, “but it is growing fast in countries like Chile and Colombia, due to an increasing government support.” Indeed, governments play an extremely important role in supporting and regulating the agricultural insurance market. In Brazil, João Marcelo Santos, head partner in the insurance and reinsurance department for the law firm Demarest & Almeida Advogados, says that the government is under a lot of pressure to find a solution for the sector’s losses. “For some years now the Brazilian government has been discussing the creation of a rural insurance stability fund, but this is not an easy task,” Santos states. “It is hard to get the main market players to agree on a solution. Farmers ask for more subsidy, the government struggles with lack of budget and insurance companies want to grow their market share.” Santos considers that “this is an extremely complex subject that requires a high level of collaboration between public and private identities. If there was an easy solution for this problem, the government would already have implemented it.” This year, the drought has pulled the risk up and increased the premiums for harvest insurance. “With damaged crops, the farmers have a hard time paying for their insurance covers and the government has less income to help them,” Santos concludes. When asked about what insurance coverage a farmer should consider, to protect himself against extreme weather conditions, the global head for weather solutions for ART says that “companies in agriculture should at least look at crop insurance but also potentially consider weather index solutions.” Berlage explains how a weather solution works: “we analyse the historic yield success of the company or farmer and then try to find an effective weather index, usually a combination of temperature

and rain, for that particular crop. We then customize a weather index that is tailored to that farmer’s needs.” “The advantage of a weather index solution, compared to a normal crop coverage, is that the weather index solution is very objective in terms of claims assessment, hence the claims payments are very fast.” Berlage describes both processes, saying that after the harvest a weather index solution enables the insurer to know exactly how the weather conditions contributed to the success or damage of the crop, hence “the pay-out is very quantitatively assessed and the insurance payment to the farmer can be made within days.” “Weather index solutions are an alternative that many farmers do not know about,” Berlage continues. “Crop insurance is quite a different process: you have an adjuster that comes in, you go back and forth on the claims adjustment, sometimes it can take years to complete the process.” According to Ribeiro, from the reinsurer Swiss Re, in Brazil the most commercialized insurance cover for annual crops, like soybean, corn, wheat and barley, is the multi-peril crop insurance (MPCI). MPCI covers a wide range of natural disasters, like drought, frost, hail and excess of rain among others. Another insurance product widely commercialized in the Brazilian agricultural market is the Crop Revenue Coverage (CRC), which combines yield (MPCI) and future price coverage, Ribeiro adds. In the end, “agricultural insurance in Brazil represents a huge potential for us, despite the difficult economic scenario for 2015,” says the Brazilian underwriter. “Agriculture production is growing fast in the region, farmers are constantly increasing their investments in technology, to improve production and create new business opportunities.” “On the other side, farmers are very exposed to adverse climate change and this constantly impacts the sector’s production rate. Therefore, I believe the demand for crop insurance, so that farmers can better protect their investments, will increase significantly in the next years, in the Latin American region,” concludes Ribeiro. Q

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22 COUNTRY FOCUS

VENEZUELA

TOTAL UNCERTAINTY While the country struggles with economic recession, (re)insurers’ resilience to stay and do business in the South American country is being tested BY ALICIA DIMAS

enezuela is a country on the brink of economic collapse. The oil price dropped 60% in seven months, the Bolivar (Venezuela’s currency unit) seems to be in a never-ending roller-coaster ride with its value increasing and decreasing, rampant inflation exceeds 63% and it is already considered the highest in the world. The country is officially in recession, with its GDP decreasing 4.5% but statistics and “official” numbers are hard to rely on, as different government agencies often provide conflicting “official” numbers regarding Venezuela’s economy.

GDP GROWTH (%) (SOURCE: LLOYD’S)

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24 COUNTRY FOCUS

NON-LIFE DIRECT INSURANCE MARKET MAIN LINES

TOP 10 INSURERS IN VENEZUELA

(SOURCE: LLOYD’S)

Reinsurer

A&H 50% Property 6% General liability 33% Motor 33% MAT 2% Pecuniary Loss 3% Other non-life 5%

One thing is for sure though, the country’s economic situation is deteriorating, a stark reality that Venezuelans witness every day while they queue for grocery shopping and find empty shelved supermarkets. The (re)insurance business has also been hit hard, as oil exports, the country’s main source of revenue, fall in value and the government tightens up control on capital repatriation. “I wouldn’t put my money in the country,” says Adolfo Paolini, DAC Beachcroft’s consultant for Venezuela. “There is no way out at the moment. I wouldn’t recommend foreign investment in the country,” Paolini adds. “We are no longer active in the credit insurance business in Venezuela, because of the economic environment,” says Bart Pattyn, LatAm CEO for Coface. Pattyn blames the high inflation, the lack of economic growth and the government control over capital flow and late payments for Coface’s decision to abandon the Venezuelan market. Tony Matta, Crandon Re’s president, explains that, “Venezuela spends more money than it brings in from oil sales, which produces the bulk of its revenues” and since oil revenues have dropped dramatically, this “affects every corner of the Venezuelan economy.”

(SOURCE: SUPERINTENDENCIA DE LA ACTIVIDAD ASEGURADORA) Premium (US$m)

Caracas de Liberty Mutual C.A., Seguros

1280

Mercantil C.A., Seguros

1066

Horizonte, C.A. Seguros

795

Occidental C.A., Seguros La

706

Mapfre La Seguridad, C.A. de Seguros

661

Previsora, C.N.A. de Seguros La

426

Altamira C.A., Seguros

345

Banesco Seguros C.A.

290

Estar Seguros, S.A.

285

Multinacional

267

Total

6121

TOTAL NON-LIFE DIRECT INSURANCE MARKET (USD$m) (SOURCE: LLOYD’S)

“If businesses shut down and/or reduce their earnings as a result of the drop in oil revenues, then total premiums (in inflation adjusted dollars) will similarly come down as long as the economy continues to spiral downwards,” says Matta. Pattyn also highlights the fact that, “with the price of crude going down, oil exports can no longer pay the government’s increasing costs”. Jose Figueroa, operations vice-president for insurance and reinsurance services for LatAm, at FM Global, the global business property insurer, agrees with Pattyn saying the oil price drop influences the government’s ability to implement its social programs. Also with “less dollars available in the market” investment in the country and even basic food imports are doomed. Nevertheless currency volatility is the issue that truly worries Figueroa, as it

completely destabilises the insurance business in the country. “There are three different official exchange rates,” explains Figueroa, “this causes a basic underwriting problem for many insurers: because you may not know how to value your risk. And even if you manage to value the risk and price it, you may not have the ability to pay your reinsurers because the government may not allow you to withdraw enough dollars to pay the reinsurer.” “Additionally, if there is a loss, the insurer and reinsurer may not know how much they are going to pay: depending on the currency rate at the moment, it can be several million dollars or tens of millions of dollars for the same risk. It can be total uncertainty.” With new currency regulations that came into effect last month, Matta says “it’s still too early to know if they will help

COUNTRY FOCUS 25

spends “ Venezuela more money than it brings in from oil sales” TONY MATTA, CRANDON RE

the economy, and by extension the reinsurance market.” “In theory the new regulations may tempt more reinsurers to write business, but we won’t know the outcome until the full effect of the new currency regulations is better understood,” explains Crandon Re’s president. Also uncertain is the date for Venezuela’s parliamentary elections, which should take place before the end of the year. The poll will test President Nicolás Maduro’s popularity, who has tried to boost his popularity by accusing large supermarket chains of being “at war against the Venezuelan people” and taking them into state ownership. Expropriation is a major risk for investors in the country, as the socialist government takes control over companies in areas considered strategic for Venezuela’s economy. “The left wing government is restricting private investment and the country’s large businesses are in hands of companies in which the government has direct control,” says Paolini from DAC Beachcroft. Despite the government populist actions, demonstrations in Venezuela are becoming more frequent and violent, with students and the military clashing in the country’s main cities. Venezuela is also suffering from an electricity crisis, although the government assures it will heavily invest in the power sector. Given the present situation, Paolini confides: “I fear the government won’t even go to elections this year.” Matta also comments on this year’s elections saying that: “the interesting thing for me is to see how Maduro’s people will fare in the elections. Pundits

REGULATION Jose Figueroa, from FM Global, believes that although in other countries regulation determines how the (re)insurance market behaves, in Venezuela regulations don’t have a significant impact on how the market performs. “The rules are not too restrictive,” Figueroa explains, “the real problem is the currency volatility. With the Bolivar value going up and down, insurers’ ability to pay for reinsurance is constantly at risk and that’s the main issue, not regulation.” Although Adolfo Paolini, DAC Beachcroft’s consultant, agrees that “Venezuela is more flexible than Brazil and Argentina” regarding the (re)insurance market regulation, and can even be considered flexible for admitting foreign companies in the country, there are still important restrictions to consider. Paolini points to the new Foreign Investment Act, passed last November, as an example. “It imposes serious obstacles for insurance companies that want to invest in Venezuela. As it states that the capital invested in the country cannot be repatriated for the first five years and then the company is banned from repatriating up to 80% of its dividends in the country.” The new investor also needs to invest $1m to be accepted in the Venezuelan insurance market. The law also establishes that upon liquidation, the foreign company cannot repatriate more than 85% of the final liquidation value. “Meaning that 15% has to

seem to think that if the ruling party loses the parliamentary election, internal rifts within the party will widen, and political rivals would begin to openly challenge Maduro for leadership.” “Although the government does not seem to face a collapse, it could be that Maduro may find it tough to sustain enough political support,” predicts Matta. The situation in Venezuela is so uncertain that some experts do not dare to give a positive outlook for the country’s near future. “In my personal opinion things may get worst, before they get better,” says Figueroa. The VP compares the Latin

stay in the country after liquidation,” Paolini concludes. DAC Beachcroft’s consultant particularly highlights that “the Venezuelan government is entitled by law to restrict foreign investors’ rights for capital and dividend repatriation, in case of extraordinary economic circumstances.” Which shows some arbitrariness and does not give investors a sense of stability and security. Recently a new National Centre for Foreign Trade was created to replace the Superintendencia de Inversiones Extranjeras. This new entity will control foreign insurance companies’ investment in the country. The government has also capped medical insurance premiums and imposed a 2.5% tax on premiums collected by (re)insurers to fund the industry’s regulator (Superintendencia de la Actividad Aseguradora). Adrian Kaerle, Swiss Re’s Head of Credit & Surety, mentions Venezuela’s reinsurance regulations as an obstacle to Swiss Re’s business in the country. “In Venezuela you are not sure that the premium goes out because of all the restrictions, so we don’t predict growing there,” Kaerle says. Figueroa admits that “many insurers are accumulating cash in the country because they may not be able to pay their reinsurance premiums,” due to the increasing restrictions. “I heard some reinsurers are withdrawing from the Venezuelan market because they can’t collect their reinsurance premiums,” he concludes.

American country’s present economic situation to Asian countries like Cambodia and Vietnam, fearing things may take a long time to “get back on track”. Nevertheless, not everyone operating in the region shares the pessimism and Matta, from Crandon Re, has a different view, giving a more positive note about the future of the Venezuelan insurance market: “I have somewhat of a contrarian view on the subject, and believe that business in Venezuela can be successfully transacted, albeit carefully, if done handin-hand with the right local partners, and with a clear view of which accounts can be best written.” Q

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26 REGULATION WATCH

MARCH 2015

REGULATION FOCUS

International law ﬁrm DAC Beachcroft and its associated ﬁrms provide an overview of the latest regulatory and legal updates in the Latin American insurance sector

VENEZUELA New Foreign Investment Act 2014 Adolfo Paolini, consultant, DAC Beachcroft

On 18 November 2014, Venezuela enacted a new Foreign Investment Act. Here are some of the most important changes. • The new Act restricts choice of law and jurisdiction clauses, in favour of local courts or possibly recognised dispute resolution bodies in the Community of Latin American and Caribbean States. • A new National Centre for Foreign Trade is created and replaces SIEX. The new centre will act alongside the Insurance Regulator (SUDESEG) to control foreign insurance companies wanting to invest and/or open businesses in Venezuela.

• In order to qualify, a minimum of US$1m must be invested, to which the National Exchange Rate applies. The original investment (capital) cannot be repatriated for ﬁve years. • Dividends are distributable and paid in local currency. Only 80% of these dividends can be repatriated on a yearly basis. Such dividends (proﬁts) are only those directly linked with the foreign capital. For example, a mixed company created with both foreign (51%) and national (49%) capital, could only repatriate 80% of the dividends produced by the foreign 51% of capital. In case of liquidation, only 85% of any surplus capital can be repatriated. • In case of ‘Extraordinary Economic Circumstances’ the government could restrict the repatriation of both capital and dividends.

COLOMBIA Liability and compensation Gabriela Monroy, partner, DAC Beachcroft Colombia

Liability for general as opposed to special damages Losses covered by civil liability policies have been subject to debate in Colombia. Some argue that insurers must compensate for both general (non-material) and special (material) damages caused by the insured to third parties, while others consider that only special damages are covered. A recent decision from the Supreme Court of Justice, the highest authority on civil cases, has clariﬁed that only material damage (i.e. special damages) caused by the insured to third parties is covered by civil liability policies. According to this decision, compensation for general damages by the policy requires the express agreement of the parties to the insurance contract.

Compensation limits for general damages Following several recent judgments, the Council of State, the highest authority for disputes involving a “public entity” or a private person performing public duties, has consolidated its position regarding compensation for different kinds of general damages, establishing the highest limits and parameters that judges must consider, and which can only rarely not be taken into account. Based on these decisions, compensation for "moral damage", i.e. pain, suffering and loss of amenity, cannot exceed 100 times the monthly minimum wage in Colombia (approx US$26,350). However, in serious human rights violations and other exceptional cases, compensation may exceed this amount, provided an increased degree of harm is proved. Regarding psychophysical damage, the limit is the same, but in cases of very severe injury, compensation can rise to 400 times the minimum monthly wage (approx US$105,400).

REGULATION WATCH 27

BRAZIL Growing double digit Marcia Cicarelli Barbosa de Oliveira, partner, JBO Advocacia SUSEP Amid speculation that Roberto Westenberger would be replaced as Superintendent of the Brazilian Regulatory Body for private insurance (SUSEP), the Brazilian Finance Ministry has conﬁrmed that Westenberger will remain in office. The announcement followed a meeting between the Superintendent and the newly appointed Finance Minister, Joaquim Levy, to discuss, among other things, the possibility of looser regulation of the sector, the protection of companies’ assets and the

World Bank proposal to merge SUSEP and CVM, the Brazilian securities watchdog. Insurance market Despite the weak performance of the Brazilian economy in 2014, which is expected to grow by 0.7% in 2015, the insurance market enjoyed double digit growth last year. Estimated growth for 2014 is 11.2%, as provided by the National Confederation of Insurance Companies (CNSeg). CNSeg’s forecast is in line with a recent KPMG study which showed consistent development of the sector in the past 10 years and an expected growth of 50% over the next five years. Specialists believe that the low level of participation of the insurance market in the GDP and the successful control of inflation in Brazil during the past decade has allowed such significant development and should generate further growth.

CHILE Terminating contracts Guillermo Amunategui, partner, DAC Beachcroft Chile

On 7 January 2015, a new administrative rule was issued by the Chilean insurance regulator that interprets some of the provisions of Chilean insurance law regarding the early termination of insurance contracts and the requirements with which insurance companies must comply. The current law recognises the right of the insurer to terminate an insurance contract early if it expressly:

• sets out the possibility of an early termination of the contract in the text of the insurance policy; • gives 30 days' written notice in advance to the other party. The new administrative rule thereby interprets the ﬁrst requirement by saying that, in the event of an early termination, insurers cannot invoke different grounds from those already set out in the General Conditions of the policy and they must not be vague or generic. This rule strengthens the regulation in favour of insureds, as previously the law simply allowed insurance companies to provide their explanation at the time of the termination. This is now forbidden, and the reasons for an early termination by the insurer must be set out in the policy wording so that they are known by both parties before they accept the contract.

MEXICO New Mexican reinsurance rules José Luis Arce Fernández, DAC Beachcroft Mexico

The New Mexican Law of Insurance and Bonds, effective from 4 April 2015, has been supplemented with a Single Circular of Insurance and Bonds. The circular, published on 19 December 2014, also comes into force this April. One of the key changes for the reinsurance sector is that the Mexican Insurance Commission (IC) will no longer act as an advisory body to the Tax Ministry on reinsurance matters. Rather, the IC will be responsible for authorisations and regulatory issues, so as to achieve more rigorous adherence to standards and

greater control of the reinsurer market. The IC will oversee the Foreign Reinsurance Registry which will interpret and apply the rules. As part of the new policy, the IC will require the formal appointment of local representatives to file application requests. This will entail securing a power of attorney granted abroad, which must be notarised and legalised and thereafter notarised in Mexico, in order for the registration application to be filed. The IC will also require all documents submitted as evidence of the foreign reinsurer's credit rating to be certified by an apostille, whereas previously a simple print-out of the rating was sufficient. In addition, the IC will undertake a much more detailed analysis of the actual regulatory framework applicable to the foreign reinsurer in order to ensure that it is authorised to underwrite reinsurance from foreign risks (e.g. those located in Mexico).

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28 RISK MANAGER FOCUS

GETTING TO KNOW YOU Cemig is proud of its risk management culture but worries that foreign insurers don’t recognise the company’s efforts BY ALICIA DIMAS

arlos Alberto Ribeiro Oliveira Pinto, risk manager for patrimonial and insurance at Cemig, one of the largest energy companies in Brazil, says there is a lack of “innovative solutions” for the Brazilian market and that foreign insurers tend to sell standardized products, not adapted to the nuances of the Latin American market. His daily duties as a risk manager for patrimonial and insurance include surveying, analysing and risk assessing the company’s facilities, identifying exposures and the possibility of losses related to property risks, cost control and risk prevention and transfer. The risk manager is also responsible for negotiating contracts with the (re)insurers in Brazil and abroad. As such, Oliveira Pinto believes there is a lack of knowledge about Brazilian companies from international insurers and that their underwriters sometimes decline a coverage without properly knowing the client. “They’d rather decline the coverage than travelling to Brazil and evaluate the risk in loco,” he points out. “We, the insured, are evaluated as if we were all the same. I know that some companies, when they transfer a risk, stop worrying about it, but not all the companies are like that. The distinction between clients that care for the insured risk and clients that don’t is not being correctly considered by insurance companies,” worries the risk manager. Another subject that greatly concerns Oliveira Pinto at the moment is the severe drought in Brazil and how it is increasing the production costs for Cemig. “Hydraulic plants are not able to produce enough en-

ergy, due to the lack of water, which means Cemig has to buy energy from other sources, increasing its production costs dramatically.” Also, the company is having a hard time to maintain a constant energy distribution, since the plants are generating less power and causing energy distribution disruptions. To mitigate the damages caused by the present and future droughts, Cemig has a well-developed risk management strategy and is focused on diversifying its energy production mechanisms, according to the risk manager. Oliveira Pinto highlights the fact that the company has invested heavily in research and development of new technologies to explore renewable energies. He says that, although Brazil has always invested in renewable energies, the country is still very dependent on hydraulic energy, which is not enough to satisfy the country’s energy necessities. “In the last few years, Cemig has invested in other energy resources, such as wind and solar power,” says the risk manager. In fact, Cemig is now building a new solar plant, with photovoltaic technology, in the city of Sete Lagoas, Brazil. Despite the company’s vulnerability to climate change damage, Cemig is not covered against climate change risks. Oliveira Pinto explains that only now the Brazilian insurance market is coming up with new products for this kind of risk and the company is “keeping an eye on the market developments and checking new environmental

RISK MANAGER FOCUS 29

NET PROFIT BY SEGMENT

COMPANY PROFILE: CEMIG

SOURCE: CEMIG

Generation 60%

Others 11% Transmission 9%

Distribution 20%

protection lines,” as they are released into the market. Cemig’s insurance coverage The company mainly buys property insurance, supply chain cover, national and international shipping insurance, aeronautical risks coverage, operational equipment risk coverage, litigation insurance, financial guarantee, bid guarantee insurance and life insurance for current and retired employees. Cemig renews its insurance coverages annually, if the insurance contract allows so and the company still finds the coverage necessary. When it is not possible for Cemig to renew an insurance contract and the line is considered indispensable for the company, Cemig has to open a public bidding to buy the new insurance product. The company will also shift its use of insurance as the company’s business growth or Brazilian regulation demand new lines of coverage. “But the insurance market does

IN NUMBERS: CEMIG SOURCE: CEMIG

y Gross income: $6,763bn y Net profit: $1,080bn y Total annual insurance premium: $2,614m y 7,781m clients y 25% of market share y 65 power plants with an installed capacity of 6,925 megawatts

y Cemig was created on 1952, in the state of Minas Gerais, Brazil, and it is now one of the largest groups in the electric energy segment in the country. y Cemig is an open capital company, controlled by the Government of the State of Minas Gerais and has 114,000 shareholders in 44 countries. y The company owns or has stakes in 103 companies and 15 consortia. The group’s shares are traded on the São Paulo, New York and Madrid stock exchanges. y Cemig is widely recognised for its sustainable practices. It has been part of the Dow Jones Sustainability Index World (DJSI World) for 12 consecutive years. y It is also recognised for its size and technical competence and is considered the largest integrated company in the electric energy sector in Brazil. y Cemig has operations in 22 Brazilian states and in Chile, where it operates a transmission line as part of consortium with Alusa. y The company has expanded its stake in Light, assuming control of this energy distribution company. It also has equity stakes in electric energy transmission companies (TBE and Taesa), investments in the natural gas segment (Gasmig), telecommunications (Cemig Telecom) and energy efficiency (Efficientia). y Cemig has also acquired equity stakes in three wind farms owned by Energimp S.A. (Impsa), with an installed capacity of 99.6 megawatts in the state of Ceará. The company is also investing in renewable energy sources, such as biomass, small hydroelectric plants, solar energy and cogeneration plants.

not always provide the necessary products to feed our needs,” states the risk manager. Oliveira Pinto reveals that the company is now in the market for an insurance product to cover a potential profit loss, given the new law for energy generation concessions, transmission and electricity distribution (law number 12.783/2013). The risk manager explains that, while choosing between different insurance companies, Cemig has to comply by the Brazilian bidding law (law number 8.666), therefore the company is required to buy insurance lines by public bidding. Local and foreign insurers are able to participate in the public bidding, as long as they are allowed to operate in the country. “Insurance companies are extremely valuable partners for Cemig’s successful risk management strategy and the company’s feasibility. Hence, we need to have a very close contact with our insurer. Nowadays, this close contact is possible whether the insurance company is national or foreigner.” Oliveira Pinto says that insurer ratings don’t play an important role, when Cemig is choosing an insurance company, since the selection process is dependent on public bidding. “When we are looking to buy a new in-

surance product, besides the legal requirements, we usually include in the public notice, as a prerequisite, that the insurer has proven experience in the insurance line they are selling.” Additionally, Cemig also doesn’t involve an insurance broker, while choosing an insurer. Since the company is owned by the Government of the State of Minas Gerais, it has a special insurance department that will buy insurance products directly from insurers. Captive insurance Although Cemig doesn’t have captive insurance, Oliveira Pinto recognises the importance of establishing one and says the company is considering that option at the moment. The risk manager believes that “creating a captive for Cemig will show the market how much the company believes in its risk management policy. Besides being a way to reduce spending, by rates reduction, allowing the company to get back part of the current costs from its current insurance spend”. Currently, the company is considering establishing a captive to cover new contracts, “where risks are practically nonexistent and the premiums are high”. Q

LATAMIR

30 POLITICAL RISK

SHIFTING POLITICS CAN BE A WIN Multinational companies (MNCs) face not only global but also regional systemic risks. These risks are difficult to manage in Latin America, where a high level of heterogeneity is the norm. But in this region, such risks are more important than ever for MNCs to understand. Risks remain moderate, but opportunities have ceased to be low-hanging fruit BY MAGDALENA RAMADA, SENIOR ECONOMIST, TOWERS WATSON, MIAMI

inancial and economic risks are part of every MNC’s regional analysis and forecast, yet less tangible political and regulatory risks are often set aside. Understanding the political outlook is essential to assessing risks to policy continuity, sharp adjustment risks through unorthodox macroeconomic policies and emerging market opportunities. The political outlook also sheds light on long-term growth. Structural reforms to support sustainable growth in Latin America are diverse, including addressing a dependence on external markets and vulnerability to external demand shocks, outdated infrastructure and imbalanced tax systems. Also, with the Eurozone and Japan giving continuity during 2015 to the US Federal Reserve’s tapering on quantitative easing, the electorate in countries like Argentina, holding presidential elections in the next 12 months, could react sharply to liquidity constraints, prompting populist monetary policy measures. Insurance companies seeking growth in the region

or rebalancing their Latin American portfolio need to know which countries are amenable to reform and which ones are prone to sharp adjustments. A pivotal political year Latin America’s political outlook will be particularly important through 2015 because of the large number of presidential elections that are about to or have recently taken place. In the last quarter of 2014, presidential elections were held in Bolivia, Brazil and Uruguay, each having been governed by left-wing parties that had been in power for at least 10 years despite falling approval rates. Brazil and Uruguay chose to couple social redistribution measures with neoliberal economics and kept their business environment stable and attractive. In contrast and in spite of redistribution policies, Bolivia has struggled to reduce social unrest or significantly increase gross domestic product per capita. In the face of controversies, such as strong criticism about the 2014 Soccer World Cup costs, Brazil’s President Dilma Rousseff was re-elected last year by the smallest of margins. Her narrow victory and the nation’s incipient recession will put pressure on introducing reforms of rigid labour policies and the taxation system. Such changes could attract business and renew the demand for creative life insurance and annuity products. COUNTRY ANALYSIS ARGENTINA The long-term economic outlook for Argentina has always been promising and better than its short-term economic outlook, given its rich natural resources and agro-commodities, as well as a strong talent pool. However, in the short run, the country’s monetary policy and lack of investment have created long-term infrastructure issues and declining competitiveness. Unpredictable policies have directly impacted sustainable growth, with local talent and capital migrating abroad. Argentina’s default on July 30, 2014, (its ninth) hurt bondholders and will diminish this capital source if left unresolved. Alternative sources of capital, e.g. from China, may alleviate the issue, but with-

POLITICAL RISK 31

out a significant change in the country’s way of dealing with foreign capital, investment cannot be expected to increase sustainably. Although Argentina’s democracy remains stable, the country faces political stagnation. Approval rates have plummeted, driven partly by 40% inflation and restrictions to foreign currency trade. Following the 2013 mid-term elections, when President Fernandez de Kirchner received weak support, signs emerged of more moderate macroeconomic policies and initiatives to encourage foreign investment. Nevertheless, the risk of a renewed, sharp policy adjustment to increase approval in the short term before the 2015 presidential election remains high. BRAZIL Huge markets enable entrants in Brazil to generate large revenue, even with a small market share. Energy resources, commodities and a strong consumer base have nurtured 15 years of growth, fortifying Brazil’s service sector and financial services industry. Brazilian multilatinas (multinational companies rooted in Latin America) are expanding quickly and sustainably, including insurers with strong bancassurance channels. The 2016 Olympic Games and foreign direct investment (FDI) in the hydrocarbon and mineral industries will boost midterm growth. But sustainable growth also depends on structural problems being addressed, from inflexible labour laws and talent scarcity to a deteriorating balance of payments and high business costs. Although social inequity has diminished, with redistribution strengthening the lower-income populations, there is still reason for concern. Less emphasis on redistribution over the next five years, inflation, declining living standards, and corruption scandals are likely to increase social pressures. Political polarisation and internal power struggles between different industries could also escalate. Despite the country’s recent recession, Brazil’s political outlook is positive. Minimal policy disruption risk and reforms to strengthen investment and financial markets are expected. But this will only lead to moderate growth, with monetary tightening targeting inflation and a weaker

Real expected to hamper both real private consumption and GDP growth in 2015. COLOMBIA International Monetary Fund and rating agency assessments have improved Colombia’s business image. The country has a strong fiscal policy, while large public investments and lower inflation compared to its neighbours offer new investment opportunities. Still, long-term growth is at risk without structural reforms and strong credit growth of doubtful quality could reverse if Colombia’s economy slows. High exposure to US demand for goods and energy prices, and difficult negotiations with FARC, the country’s main insurgent group, are major weaknesses for Colombia. Although politically stable, the risk of armed civil violence and the power wielded by drug lords remain. President Santos was re-elected, in part, because of a commitment to lower crime rates and reform health care and education. His efforts may help to address the country’s high inequality and, unlike most Latin American countries, Colombia is expected to sustain its private-consumption-led growth in 2015. MEXICO Mexico attracts foreign capital with its huge market and strong business environment. FDI is drawn by free-trade agreements such as NAFTA, proximity to the US and strong economic fundamentals. Mexico also has a large, skilled talent pool, while its growing semi-skilled workforce is unique among neighbouring countries and is driving growth in key industries. Yet, Mexico is dependent on US consumer demand and volatile speculative foreign investments. Demographic pressures, poor public services and high crime rates constitute its main sociopolitical risks. Mexico’s political system is stable, displaying strong democratic principles and multi-partisanship in the last 15 years. Several reforms were passed in 2013, making certain industries (hydrocarbons and oil, and telecommunications) more appealing to FDI. A solid fiscal policy platform, together with e-literacy and digitalization programmes targeted at

all population segments, also has strong implications for insurers. Since January 2014, strong efforts to modernise and reform Mexico’s financial system and strengthen banks’ credit channels have also been announced. However, Mexico’s congressional elections in 2015 risk creating a power shift that may hamper Peña-Nieto’s governability, given his approval rates took a big hit after the disappearance and death of almost 50 students, as well as a slower than expected economic recovery and falling oil prices. PERU Recent growth and comprehensive tax reform have generated a fiscal surplus, while an investment grade from rating agencies has renewed Peru’s attractiveness for FDI. Investment in infrastructure has also increased. Modest diversification efforts and continued privatisation of state-owned enterprises could boost mid-term growth. However, Peru’s export-led growth depends largely on declining Chinese demand and obsolete infrastructure is constraining capacity in key sectors. Highly skilled talent is scarce and social unrest has increased. There is also a high dependence on the mineral industries, where working conditions are under pressure from indigenous groups and non-governmental organisations. President Ollanta Humala has kept a strong fiscal policy, strengthened Peru’s institutions and focused on creating an investment-friendly climate, combined with a less rigid labour market. But this has not prevented Humala’s approval rating from falling due to the slow pace of reform and failure to address key problems such as health, education and inequality. Increasing corruption, strong political polarisation and shifting alliances in parliament make it unlikely these challenges will be addressed soon. For insurance companies in emerging markets such as Latin America, understanding, measuring and managing political risks go beyond good governance and enterprise risk management. They relate directly to the core underwriting and asset management functions of their businesses. Q

LATAMIR

32 SPONSORED FEATURE

AIG TALKS CAPTIVES IN LATAM Robert Gagliardi (left) and David White of AIG Global Risk Solutions, review how companies in Latam can beneﬁt from captives

he Latin American region has received considerable attention from the business community searching for growth. The insurance industry is no different as carriers develop more presence in this region. The captive insurance industry has developed over the last 50 years, particularly in the US and Europe in response to commercial markets of limited capacity and high prices. It is likely that over time, the Latin American insurance market will experience similar cycles. Companies with a long-term view and the capital to withstand some volatility should consider a captive. Captives operate in much the same way as commercial insurance companies do. The captive accepts risk, receives premium, and is obligated to pay losses incurred in accordance with an insurance policy. Captives in Latin America – Who? The successful operation of a captive depends upon many factors, including: • Long-term senior management commitment Captive ownership should be viewed as no less than a ﬁve-year commitment. Given the initial costs, coupled with the possibility of suffering initial larger-thanexpected losses, no less than ﬁve, and preferably a 10-year horizon should be used. • Strong and capable ownership However capable the manager of the captive, it is ultimately the assets of the owners that are at risk. The captive manager will provide services and advice to

the captive owner. However, it should be emphasised that the owner must make the major decisions, such as coverage terms and retention levels. • Sufficient annual premiums Given the financial commitment required for the formation and annual operating costs, it is generally acknowledged that a company should be paying in excess of $1m annually for total insurance costs. • Management of loss control The financial viability of a captive will ultimately rest with the ability of the owners to control losses, so a commitment to controlling potential claims and losses is essential. • Financial security of insurance partners Critical to the success of the captive is engaging third-party insurance partners who have demonstrated a solid financial foundation and expertise in their respective industries. This is especially true of the fronting company and the reinsurers in the local country. We have been receiving more and more inquiries from companies in the region interested in a captive programme. Conversations with their risk management personnel are revealing that these companies have the sufficient size and more importantly, the sophistication to make a captive programme work. With operations in 15 countries and over 3,500 employees serving the region, AIG is well positioned to help clients assess and implement a captive programme.