Latin America ripe for growth
Latin America is experiencing double digit growth in captives as well as an expanding role in risks covered and Bermuda has much to offer this emerging market.
At the 2024 Bermuda Captive Conference, this subject was discussed in a panel moderated by Eduardo A Fox, Consultant in Appleby’s Corporate and Private Client & Trusts practice groups in Bermuda, and for the global Latin American and Latin European team. He was joined by panellists Andres Carmona, Vice President, WTW, Tara Miller, Consulting Actuary, Milliman and Gabriel Rueda Barrera, General Manager, Inversiones Y Consultorias Rueda Y Barrera S.A.
The panel agreed that while there has certainly been growth in the number of captives, the main growth has been in the increase in premiums and the retentions due to market conditions. However, there has been an increase in interest in forming captives in the region, which for some countries is still a relatively new concept. It has often taken years to get from initial discussions to actually forming a captive, but this timeframe is decreasing.
Initially, the primary driver for setting up captives was to provide access to the reinsurance market. However as captive owners saw those lines were profitable and were seeing all the money that was going to the reinsurers, they started to increase their retentions. As far as risks covered, property is still the biggest line of business but there is increasingly coverage for credit warranty, terrorism and cyber. While there is currently minimal liability coverage, that coverage is also growing.
Another recent driver of growth was the COVID pandemic, which prompted insurance companies to clarify pandemic exclusions in policies resulting in losses being uninsured.
The Latin American market is also seeing an increased need for fronting and double fronting with captives, even single parent captives, getting a rating and offering insurance for corporates which can create efficiencies and sharing of risk. This is especially prevalent for captives that operate in multiple jurisdictions. Some of the issues that need to be agreed include letters of credit and guarantees of requirements from the fronting companies.
In the past few years, Colombia has seen the fastest growth in captive formation and growth. The panel agreed that the LATAM market is ripe for further growth and jurisdictions like Bermuda have much to offer as the market evolves and matures.
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