In this chapter of our Annual Insurance Review 2018, we look at the main developments in 2017 and expected issues in 2018 in Latin America.
Key developments in 2017
The trend for implementing stricter and tighter rules on adjusting losses continued in many Latin American countries in 2017. This trend has an impact on handling complex losses.
Chile was the first country to impose a strict time frame for the adjustment of a claim. Some people believe the Chilean insurance market is one of the most advanced in the region. Nonetheless, Chilean insurance law imposes almost unworkable deadlines for the adjustment of complex claims. For example, insurers (and,arguably, their reinsurers) have only 10 days to challenge the conclusions of the adjuster’s final report. This is a very short period if the placement is a pure fronting (requiring reinsurers to obtain a translation of the adjuster’s conclusions before they can make any determination).
Peru approved a law in 2013 that imposed strict time limits, resulting in a drastic reduction of the adjusting process. Without establishing a channel of direct communication with cedants, it is very likely that reinsurers will fail to comply with some of those short deadlines.
Ecuador is one of the most challenging jurisdictions for (re)insurers in Latin America in terms of handling contentious claims. (Re)insurers’ failure to comply with the strict deadlines set by Ecuadorian insurance law may result in economic penalties or revocation of their licence to trade.
What to look out for in 2018
The time frames introduced by Chile, Peru and Ecuador will continue to present huge legal and practical challenges in 2018 to all parties involved in adjusting major losses, such as contractors all risk, delay in startup and financial institutions claims. As far as we are aware, they are yet to be challenged in court.
In our opinion, this trend in imposing difficult deadlines is evidence that there remains a significant misunderstanding between the London and the Latin American markets. Reinsurance is a complex business that involves several parties at several levels: insureds, reinsurers (leaders and followers), local brokers, cedants, reinsurance brokers, adjusters, forensic accountants and lawyers. To suggest that a determination is possible in complex cases within some of the time limits set by local laws shows a lack of understanding of how international reinsurance works.
Claims protocols are of great help to deal with short deadlines imposed by Latin American jurisdictions.We will continue in 2018 to advise clients of the benefits of their implementation.Claims protocols provide certainty to the insured and the insurer (and reinsurers) as regards what documents the insured needs to provide to the adjuster (or the insurer) following the occurrence of a loss. As such, we may say that a deadline is not triggered if there are still some documents that need to be submitted.
In addition to the recommendation above and according to our experience over the years, there is nothing better than teamwork – including claims handlers, adjusters and lawyers – to beat the short deadlines to adjust complex losses, and this is not limited to Latin America. It is therefore crucial, now more than ever,to choose the correct expert, and ideally adjusters and lawyers who understand the benefits of working together as a team.
Download our full Annual Insurance Review 2018 for more insights.