This morning at RIMS 2010 Boston, I got the chance to speak with Swiss Re’s Ivan Gonzalez, who heads the company’s Latin America and Caribbean Single Risk business. In our talk about the increasing opportunities for insurers in the region, the focus quickly, and predictably, turned to Brazil, which presents great promise to the re/insurance industry for two main reasons.
First, Brazil is among the fastest-growing major economies in the world. With nearly twice the population of Mexico and a much larger economy, this prominent “BRIC” nation (the name du jour for the four most most-promising emerging markets: B = Brazil, R = Russia, I = India, C = China), is one of the “next big things” for many business sectors, and as the GDP continues to rise along with the per capita income, more and more companies and individuals will be purchasing insurance.
Second, Brazil liberalized its once-monopolized reinsurance market in 2008, and many companies have been eager to steal market share away from the state-run reinsurer.
Here’s what I wrote about the change not long after it happened.
With this sweeping change, the region’s largest insurance market is now poised for a commercial lines takeoff as outside players begin writing business previously reserved solely for the state-run Reinsurance Institute of Brazil (IRB), which was formed in 1939.
“We had the monopoly of the IRB for 70 years,” says Marcelo Homburger, vice-president of Aon Risk Services Brazil. “Companies could compete in the direct market, but then they had to go to IRB for their coverage.”
Companies including Swiss Re and XL Re rushed into the open market, bringing a capacity influx for eager primary insurers, who have historically struggled to gain coverage beyond the boilerplate terms, conditions and capacity offered by IRB. “[IRB was] determining all the prices and terms,” says Homburger. “It was not very creative and it was not very competitive. We will be able to provide products that we never could before.”
According to Gonzalez, however, the business hasn’t exactly exploded.
“A lot has happened — but very little happened,” said Gonzalez. “People thought the IRB would, in the first two years, lose a lot of business.”
And while those people overestimated the speed of change in what Gonzalez characterized as a “not fully liberalized” marketplace, he does still think it is coming — slowly but steadily. “I think commercial insurance is going to grow significantly,” he said. “We’re bullish on Brazil. We’ve been bullish on Brazil for 60 years … The magnitude of projects [now occurring] is creating a shift.”
Gonzalez also noted that next year will mark the 100th year that Swiss Re has done business in Latin America. Plan to hear a lot more about that going forward.
