Earthquake Risk Reinsurance in Latin America: a London Market Perspective

Abstract eng:
Lloyd’s and its syndicates underwrite an ever-increasing variety of risks and, in particular, they provide coverage for high severity and low frequency risks, such as those associated with natural catastrophes. London is a leading market for companies and governments that need (re)insurance protection for large, complex or bespoke risks. It benefits from its setup as a subscription market, where more than one carrier can take a share of the same risk, letting them diversify their risks efficiently and giving insureds access to a deep pool of capital with global reach enabled by the various London Market brokers. Much of the future growth in the reinsurance market is expected to come from Latin America. The region currently accounts for 3.8% of global (re)insurance premiums. Local insurance companies are continually expanding and many infrastructure projects are underway that will require financial protection. This evolution is expected to trigger an increase in the region’s participation on the international reinsurance stage. This study analyses the Latin America earthquake risk market from a London standpoint. Leveraging access to MS Amlin’s broad experience in the region as a leading syndicate at Lloyd’s, the authors describe how the market currently manages and transfers earthquake risks from Latin America to the global financial networks, and how the reinsurance companies share these risks. Local authorities such as the National Insurance Institute (INS) in Costa Rica are discussed in the context of the different countries in the region and their respective approaches to managing their catastrophe risks. The paper also revisits the experience of the Chile 2010 event in Maule and how it reverberated through the reinsurance markets.

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