In this chapter of our Annual Insurance Review 2019, we look at the main developments in 2018 and expected issues in 2019 in Latin America.
Key developments in 2018
There is an emerging trend for major (re)insurance companies to delegate authority via local branches or by creating local hubs to deal with claims in the region. In addition, it is now more common to find reinsurance placements placed in different regional markets, i.e not London markets only. We have encountered situations in which most of the placement is reinsured in the London market but with a local reinsurer taking the biggest share, resulting in the local reinsurer being the overall leader of the placement and London market reinsurers together covering the largest percentage of the risk. Several practical difficulties arise from such situations, notably a lack of co-ordination between the overall leader and co-reinsurers, particularly if those various London market reinsurers each have their own slip. We have also faced reluctance from some brokers to allow direct contact between reinsurers and cedants when dealing with claims.
In those instances, we have noted a degree of reluctance on the part of local reinsurers to join the appointment of a London law firm made by their co-reinsurers in London. If the insurance policy and the reinsurance contract(s) are subject to local law and jurisdiction, local reinsurers prefer the appointment of a local lawyer to advise on their share.
In our experience, this approach presents several challenges. In the same way a London lawyer needs a local lawyer to assist on local matters, local lawyers need a London lawyer to handle and advise on London market practices and standards. Local lawyers lack daily and direct exposure to London market intricacies, and London-based lawyers don't have the same local exposure. Different backgrounds mean that London and local lawyers' approaches to things differ, and this has been the classic cause of problems over the years – even if those lawyers are part of the same law firm. Wrong advice contributes to building a bad reputation and it is common to hear complaints about bad experiences dealing with both the London market and Latin American jurisdictions.
What to look out for in 2019
The London market has the opportunity to consolidate and enhance its leadership and presence in the region. However, if the London market wants to maintain its leadership in the region, London reinsurers need to look at ways to promote and improve direct communication with local players. In our experience of dealing with complex claims in the region, there is nothing better than direct communication between the relevant parties.
The London and Latin American markets have evolved in different ways, shaped by different factors. Both sides need to work on common strategies and to learn from each other. An effective and productive interaction between the London and Latin American markets will be only possible if it is made from an approach based on the acknowledgment of diversity (ie there is no unique and standard insurance practice).
As regards the handling of claims, choosing the appropriate experts with experience in both markets and implementing channels of direct communication among the relevant parties will be of crucial relevance in order to successfully adjust and pay a loss without delay, engage with the insured in mitigation actions if required or reject coverage when appropriate.
Download our full Annual Insurance Review 2019 for more insights.