Aon’s Ferreira: LatAm (re)insurance market “very resilient” in inflationary environment

While challenging macroeconomic factors continue to weigh on Latin America, the region’s (re)insurance market has demonstrated its ability to withstand the pressures from inflation and recession, Aon’s Paula Ferreira has said.

Speaking to The Insurer TV, the Latin America CEO for Aon’s Reinsurance Solutions praised the way the (re)insurance market in the region has adapted to a macroeconomic environment marked by inflationary pressures and a shrinking economy.

“The macroeconomic aspects globally are affecting Latin America, but Latin America is very used to having inflation,” Ferreira noted.

“I would say they are proven to be very resilient,” she added.

Ferreira noted that Aon’s role in preparing clients to withstand such pressures has been in providing more comprehensive solutions and informing them how inflation might impact them.

“We’re starting to see increases in retention and structural solutions combining with that. We are very positive – this market has proven to be resilient already amid an inflationary environment and recession,” Ferreira added.

She pointed out that market conditions in the region have posed similar challenges to the industry as seen in other parts of the world.

Hardening market conditions have developed across the natural catastrophe part of the market, especially in wind-exposed areas.

Ferreira noted that there are some “flat markets”, including Argentina and Brazil, in contrast with areas such as Chile and the Caribbean which have greater wind exposures and are therefore facing capacity constraints.

“What we’re doing is helping those clients to prepare, but they have to be as predictable as possible, to have discipline in underwriting, explaining how they’re transferring the reinsurance pricing that’s going up into the regional pricing, how they’re talking to their clients about the effects of inflation and adjusting some insurances,” Ferreira noted. 

Increasing the footprint in LatAm

Ferreira spoke to The Insurer TV in the context of Aon’s acquisition of risk assessment modelling firm Evaluación de Riesgos Naturales (ERN), announced today.

ERN has a specific focus on regional and highly specialised models in LatAm, and it will complement the capabilities offered by Impact Forecasting, Aon’s catastrophe modelling arm, in the region.

Ferreira mentioned Aon’s existing relationship with ERN, which spans over two decades, as a reason for the acquisition.

In addition, its people, values and commitment to the industry, and expertise and experience in natural catastrophes in the region are also of value to Aon.

“This is very much in line with what we do in LatAm. We’ve been investing heavily in the property business, in the natural perils [modelling]. Because of all that is happening, there’s increased demand for those capabilities,” she added.

According to Aon data, over the past decade the LatAm region experienced $64.4bn in insured losses, mainly driven by tropical cyclones, earthquakes, droughts and flooding.

The new acquisition will enable Aon to add earthquake and hurricane modelling for LatAm and the Caribbean.

Ferreira also praised ERN’s innovative nature, and cited its development of triggers for parametric covers which helped bring additional capital into the space and build alternative solutions for governments.

She added that ERN has a strong network and relationship with regulators and governments, which aligns with the work that Aon and its Impact Forecasting division is doing in collaboration with these bodies, as well as academic institutions.

“We’re very related to academia, to governments, because we’re seeking solutions that in the end are going to help not only insurance companies, but the people that are in those countries,” Ferreira concluded.

In this 12-minute interview, Ferreira also discusses: