This article was first published on 13 July 2015 by Insurance Day.
A few days ago, the governments of Cuba and of the United States announced the full reestablishment of diplomatic relations between both nations.
Since 1977, Cuba and United States have operated diplomatic missions called “interests sections” in each other’s capitals, under the legal protection of Switzerland. From 20 July 2015, those interest sections will become embassies. This, together with the removal of Cuba from the list of countries sponsoring terrorism, are signs that the restoration of economic affairs between EEUU and Cuba may be closer than what was initially thought.
Although it may be soon to see any clear opportunity for the insurance business in Cuba, international insurers have been keeping an eye on the island and agree that the hotel industry, agriculture and travel related products are the areas where opportunities may first surface.
Travel risk business
An important change that took place after the review of the Cuban Assets Control Regulations by the Department of the Treasury and Commerce of the United States in January 2015 was that non-tourism categories of travel were expanded. This means that travellers are no longer required to submit a specific license request for travel, which before usually took several months to obtain.
The ease of these restrictions will certainly result in more people interested in travelling to Cuba, who will need travel insurance and assistance in the island if something goes wrong. The recent approval by the EEUU Commerce Department of several fast ferry companies to offer transportation of passengers and cargo to Cuba has not gone unnoticed. One of these six companies is the Spanish corporation Balearia, which plans to operate two routes to Havana from Key West and Port Everglades in Florida.
As per Cuba’s regulations, all travellers visiting the island are required to have mandatory insurance to cover all medical expenses during their stay. Such coverage must be provided by an insurance company “recognized” in Cuba, as per the terms of the regulations.
In practice, ASISTUR, S.A. Asistencia al Turista (Assistance to the Tourist), which acts as broker for travel and auto insurance policies, holds agreements with international insurers who provide travellers with medical coverage. In these cases, local authorities have accepted the involvement of international insurers, which have no legal restrictions to make payments and to be involved in any financial transaction with Cuban entities.
In Cuba, these type of policies are offered by Empresa del Seguro Estatal de la Nacion (ESEN) and Seguros Internacionales de Cuba (ESICUBA) and the daily premiums range from 2,5CUC to 3,5 CUC. 
Today, in Cuba, insurance coverage for agro is offered exclusively by the ESEN and this line of business represents almost 70% of its portfolio. Most of the premium and indemnities are paid in Cuban pesos (CUP), except for programmes issued to the tobacco industry, which are paid in convertible pesos.  The reasoning behind this is that tobacco is an export product and any potential claim (particularly in respect of Business Interruption) would be made in CUC, given that their revenue is also obtained in hard currency.
Another potential sector of growth where there is already a presence of the international reinsurance markets is the hotel industry. Currently ESICUBA, which is one of the state owned insurance companies operating in Cuba, provides coverage to any foreign interest located in Cuba, including hotels and resorts. Some third party liability risks related to the hotel industry, insured by ESICUBA, are usually reinsured with the European and Canadian markets.
A challenging market
Foreign carriers interested in playing a role within the Cuban insurance market will face two important challenges: on one hand, with very limited access to capital or finance, insurance may not be a priority for the Cuban people. On the other hand, the coexistence of two official currencies, the convertible peso and the Cuban peso highlights the fact that the adoption of a hard currency strategy for other than the fortunate few is yet work in progress.
In October 2013, the Cuban government announced its plan of a single currency system and in February 2015, the Central Bank started to circulate higher denomination Cuban pesos’ bills, in preparation of the currency unification. This would definitely be a critical step in preparing the economy for the opening to global markets.
On the insurance culture side, the Cuban authorities have become aware of the work that needs to be done, in order to promote the need of insurance among the Cuban people. This would be, with no doubt, a difficult task in a country where the State has assumed the role of the one and only insurer.
 CUC stands for convertible peso and is one of the two official currencies in Cuba. The CUC was implemented to take all the dollars out of circulation and it is exchangeable only in the country. The CUC is a “tourist currency” since it is mainly accepted in tourists related establishments. Today, CUC1 equals USD1 and it is subject to a 10% tax by the time of conversion.
 Cuban pesos are fixed at around USD25.
LORENA ÁVILA Associate at Kennedys Latin America & Caribbean
Qualified in Venezuela
Lorena is a qualified professional with a wide range of experience in the legal insurance sector. Previous to join Kennedys’ Miami office in June 2012, Lorena worked in a boutique law firm in Venezuela for 6 years.
She has been assisting our director on international major reinsurers and insurers on large and complex claims in Venezuela and Latin America. Lorena has experience on regulatory matters and providing legal assistance to international banks, multinational agencies and corporations, drafting legal opinions regarding to corporate, tax and labour matters such as, foreign investments regulations, agreements to avoid double taxation, income tax, among others and corporate due diligences to oil and steel companies.
Lorena is the main researcher of the 3rd edition of The Guide of insurance and reinsurance law in Latin America and Iberian Peninsula.
ALEX GUILLAMONT. Director at Kennedys Latin America & Caribbean
Alex Guillamont is the director of Kennedys Latin America and leads the Latin American and Caribbean practice at Kennedys. He handles disputes on behalf of leading international insurers and reinsurers, having represented clients across the region. With 15 years of experience, Alex is an acknowledged leading expert on insurance and reinsurance matters regionally. After serving the market with claims in Iberia from our London and Madrid offices, he relocated permanently to Miami in June 2010. The industry has voted him year on year into the LATAMIR Power 50 list, Latin American insurance sector most influential professionals.
Kennedys’ Latin America and Caribbean office is based in Miami to help international insurers and reinsurers manage claims and non-contentious issues across the region. Our dedicated multilingual team is well placed to support our clients, and we also draw on the skills and experience of Kennedys globally.
The Miami team works with our network of Latin American and Caribbean law firms. Kennedys have associated offices in Brazil, Chile, Colombia, Chile and Mexico and long-standing relationships with leading insurance and reinsurance law firms in the rest of the region.
Our lawyers in Miami are also supported by our international insurance team, including the London Market division and other offices around the world who handle some of the most significant insurance and reinsurance matters worldwide.
Having been recognised as the market’s choice in 2013 and 2014, Kennedys´ Latin American operation has once again been voted by industry leaders as Best Latin America (re) insurance law firm for 2015 by Reactions Magazine.
The award honours institutions and individuals who have achieved marked excellence in their profession with unique insight into the direction of growth and key developments in the Latin America (re) insurance market.