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Emerging MarketsInsurance Seminar

Latin America

Aurelio Fernández-Concheso Clyde & Co Caracas

CountryCountryPolitical Political

RiskRisk

ShortTerm

LongTerm

BoliviaBolivia 62.8 39.3

ArgentinaArgentina 70.4 63.1

EcuadorEcuador 62.5 56.0

NicaraguaNicaragua 67.1 50.7

VenezuelaVenezuela 79.4 61.6

  2005 2006 2007 2008

Real GDP Growth, %        

Argentina 9,2 8,5 7,0 5,1

Bolivia 4,0 4,6 4,0 3,0

Brasil 2,9 3,7 4,2 4,5

Chile 6,3 4,0 4,9 4,4

Colombia 5,2 5,2 5,2 4,4

Ecuador 4,2 3,5 3,4 2,8

Nicaragua 4,0 4,7 3,6 2,9

Panamá 6,5 8,1 6,6 4,4

Venezuela 10,3 10,3 6,8 4,2

Insurance in Latin America

“ Insurance in Latin America IDB”

Premium Volumen ratio to GDP

Latin America 2.8Europe 9Asia 8US 11

90% Premiums Concentrated in 5 main Countries

0%

5%

10%

15%

20%

25%

30%

35%

Argentina

Brazil

Colombia

Mexico

Venezuela

Factors on Insurance Growth

- Distribution of wealth

- Legal System

- Property regulation

- Regulation

- Trust

- Risk awareness

- Cultural ( demographic, etc)

Overcoming for Growth

- Weakness in supporting infrastructure- Inmature markets- Inmature product delivery mechanisms and knowhow- Perception as complex- Over perceived as financial risk- To expand

VENEZUELA

General Information - Compulsory Insurance: 1-. Third Party Automobile Liability; 2-. Worker`s Compensantion (social security scheme)

- - Policy Wordings & Rates / Tariffs Controlled: Tariffs are set for Fire (property damage only), Automobile, Crime coverages. Forms must be filed with the Superintendency of Insurance.

- Policy Language: Spanish

- Types of Insurance Restricted to Government Institutions: Workers` Compensation (Social Security)

- Policy Currency: Bolivar (Bs). U.S. $ insurance available

- Currency Restrictions / Exchange Controls: Yes

- Policy Period: Anual. Longer term policies are not allowed unless specific request is made of

the Superintendency and approval given.

- Insurance Companies:

-. Open to foreign investment

-. Brokers:

Venezuela is a broker market. Brokers and Agents must be licensed and registered.

-. Brokerage Commissions:

Property Damage / Business Interruption – 30%

Automobile – 15%

Liability - 20%

Personal Accident – 25%

Commissions cannot be paid to foreign brokers not locally registered

-. Brokers of Record Letters: Recognized by the market when either an Insurance or Broker is replaced

-. Reinsurance: No longer restrictions on outward facultative business providing it is first

-. Property Insurance:

Note: Property Damage Policies are mostly written on First Loss Basis

( i.e., not to full value)

-. Fire:

Standard fire perfils include – fiere, lightning. Aircaraft, explosion, earthquake, flood, storm / tempest, burst water pipe, riot / civil commotion, malicious damage, windstorm / hurricane, vehicle impact are available for an additional premium charge. NOTE: Bolier Explosion is not covered under the Fire (property damage) Policy

-. All Risk:

Available for Contractor related risks following terms of international reinsurance market

-. Business Interruption: U.S. Gross Earnings more common than UK Loss of Profits. Local wordings

available.

-. Replacement Cost: Available.

-. Discount for fire protection equipment / systems: Negotiable (Fire tariff makes no allowance)

Boiler & Machinery / Machinery Breakdown / Engineering -. Wording: U.S. and UK wording form the basis of coverage. Machinery Breakdown and Business Interruption are available.

General / Public Liability -. Available Wordings: Comprehensive General / Public Liability forms available. -. Comments: Written on an occurrence basis and can provide coverage for Employer’s Liability, Product Liability, Hired and Non-Owned Automobiles, Contractual Liability, etc. Defense Costs are included.

D&O not extensive use

Worker’s Compensation -. Comments: All employees (including Maritime workers) benefit fron the Social Security Plan. Workers’ stationed abroad are included. Medical Expenses and Occipational Disease benefits are included.

Marine -. Available Wordings: U.S. and Institute of London Underwriters forms are available. War and Strikes risks rates follow London scale.

Crime -. Available Coverages: Fidelity, Burglary, Money & Securities, and Surety.

Foreign reinsurers can market through local presence subject to registration

-. Policies subject to registration

-. In doubt favor the reinsurances

-. Local law applies

-. Arbitratrion clauses valid generally but subject to challenge under certain Supreme Court decisions (Not common in reinsurance)

-. Exchange control & controlled rate unofficial rate 2.3 times.

-. Premiums in foreign currency subjecty to extensive requirements.

Colombia

General Information

· Compulsory Insurance:

1. Third Party Automobile Liability;2. Workers' Compensation (part of Social Security Scheme);3. Personal Accident for inland public transport vehicles;4. Professional Liability / Indemnity for insurance brokers;5. Earthquake for mortgaged property;6. Aviation Third Party Liability;7. Bonding for Government projects / work.

Non-Admitted Insurance:

Prohibited unless coverage / capacity not available in the local market and then permission must be obtained from the Superintendency

Policy Wordings & Rates / Tariffs Controlled:

Large commercial risks are allowed quite a bit of freedom of form and rating.

· Policy Language:

Spanish

· Policy Currency: Colombian Peso (CP). U.S.$ insurance available for Marine Exports / Imports and large risks (usually Government Projects and oil related ventures). U.S.$ insurance also available for Life and Personal Accident policies.

· Currency Restrictions / Exchange Controls: The Peso is not freely convertible and any transfers must be channeled through the Central Bank. Policies must be issued in local currency unless prior authority has been granted by the Superintendency. In this latter case, claims can be paid in the previously agreed currency.

· Policy Period:

Annual. Long Term Agreements (LTAs) are available and the resulting discount.

· Cancellation Provisions: By the Insured: None required but check policy language as prior

written notice may be required.By the Insurer: Legally 10 days but custom allows for 30 day notice.

· Premium Tax, etc. paid by Insured: 15% for all classes except life, health and accident which are nil.

· Insurance Companies: National and Foreign Insurers are allowed to operate in Colombia. Foreign investment in Colombian insurance companies is now allowed up to 100% (a few restrictions may apply).

· Brokers: Broker market. Brokers must be registered with the Superintendency in order to be paid commissions. Non-registered brokers will not be paid.

· Brokerage Commissions: Commission examples: Fire - 27.5%; Liability - 17.5%; Marine Cargo - 20%.

· Broker of Record Letters: Usually required for large commercial risks.

Reinsurance: The Superintendency levies a 1% fee on all reinsurance ceded abroad. Local Insurers may not cede more than a certain percentage by line of coverage (e.g., fire - 40%).

Property Insurance

· Fire: Standard fire perils include - fire and lightning. Aircraft, explosion, earthquake, flood, storm / tempest, burst water pipe, riot / civil commotion, malicious damage, windstorm / hurricane and vehicle impact are available in the market for an additional premium charge.

· All Risk: Available for Builders Risk, Contractors Equipment, Machinery Installation and larger property policies.

· Coinsurance: None known at this time

Blanket Insurance:

Available.

· Business Interruption: UK and U.S. forms available.

· Replacement Cost: Available.

· Discount for fire protection equipment / systems: Available.

General / Public Liability

· Available Wordings: Comprehensive forms available and can be endorsed to include Product Liability, Contingent Automobile Liability and Employer's Liability.

· Comments: Product Recall cover is not available in the Colombian market. Policies are issued on an occurrence basis.

Workers' Compensation

· Comments: All employees (including Maritime workers) are protected by the Social Security Scheme. Extra-Territorial Benefits are available. Medical Expenses and Occupational Disease coverage is included. Employees have the option to sue. Death Benefits are also included.

Marine

· Available Wordings: Cargo rates are subject to local tariffs. Coverage for imports must be written by locally admitted Insurers. War risks follow London scale.

Crime

· Available Coverages: Fidelity and surety bonds use local wordings. Free tariff rates apply.