Latin American Insurers Poised for Profitable Growth In Spite of an Increasingly Competitive Landscape, EY report
New York, 15 January 2013 – In spite of increased competition in the Latin American market, insurers will sustain growth and profitability in 2013 due to emerging middle classes, knowledge-driven innovation in products and distribution, and advanced risk and capital management, according to EY’s new Global Insurance Center 2013 Latin American Insurance Outlook.
“This is an exciting time in these emerging markets, with significant opportunities particularly in Mexico and Brazil, as well as some of the smaller markets like Peru,” says James Littlewood, Ernst & Young LLP, who focuses on the Latin American market.“ “With the upcoming regulatory reform, countries such as Chile and Mexico are primed to integrate advanced risk and capital management measures for future compliance.”
In organization’s first Latin American insurance outlook, EY talks about compound growth opportunities, slow-to-mature insurance market development and the rising need for catastrophe risk cover. EY believes these five pursuits are critical in these growth markets:
- Capitalizing strategically on substantial compound growth opportunities: Brazil’s booming economy and emerging middle classes throughout Latin America present tremendous opportunities for sustainable premium growth. The region’s relatively youthful population (25% under the age of 15 in Brazil, Mexico, Columbia and Chile) offers potential for greater asset growth and compound sales over the life span of these consumers. As these markets develop, consumer protection authorities are focusing more on insurance and related pricing, commissions and customer rights.
- Expanding markets through innovation directed by local expertise: Flexibility, innovation and strategic alliances that improve cost efficiencies and respond to emerging customer preferences can enhance market positions and technical strength. With market penetrations less than in developed countries, insurers face higher distribution costs and the need to educate customers about insurance. As consumers embrace new distribution channels and wider use of the internet and social media, understanding customer behavior can guide new and expanded systems for insurance product distribution.
- Exploiting advantages from competencies in technologies: Investment returns are decreasing and squeezing margins, which affects insurer business models, product development and investment strategies. Consequently, leading insurers are implementing clearer risk appetite measures and reinforcing their internal audit, actuarial and risk management functions. They are also investing in technologies across multiple fronts to achieve process efficiencies, improve underwriting and claims analytics and target profitable customer segments. Access to the necessary expertise and experience will be critical.
- Integrating advanced risk/capital management and transparency with regulatory reforms: As solvency regulation develops throughout the region, sound and transparent risk management can be a competitive advantage, and ERM can assist the development of an insurer’s capital management execution and strategic value proposition. In an insurance market where countries have different levels of sophistication, capabilities and structure, effective risk and capital management may be the best long-term strategy to carve a competitive edge in traditional markets and expand into new ones through innovation.
- Expanding and enhancing catastrophe risk markets: Most of Mexico, Central America, the Caribbean and South America are exposed to substantial catastrophic loss exposures from hurricanes, tsunamis, earthquakes and flooding. These catastrophic risks are generally underinsured across the region, creating opportunities for insurance and reinsurance growth and requiring risk management tools and corporate governance that demand catastrophic risk management.
To download a copy of the EY 2013 Latin American Insurance Outlook, visit www.ey.com/insurance.
About EY’s Global Insurance Center
Insurers must increasingly address more complex and converging regulatory issues that challenge their risk management approaches, operations and financial reporting practices. EY’s Global Insurance Center brings together a worldwide team of professionals to help you achieve your potential — a team with deep technical experience in providing assurance, tax, transaction and advisory services. The Center works to anticipate market trends, identify the implications and develop points of view on relevant industry issues. Ultimately it enables us to help you meet your goals and compete more effectively. It’s how EY makes a difference.
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