The third annual Latin American Claims (re) Insurance Forum, held on 15-18 May 2017 hosted by Kennedys and QLDG at the Conrad in Miami, was attended by in excess of 170 delegates from around the globe. The mix of delegates included as many as 50 industry-leading speakers from companies, including AIG, AGCS, Chubb, FM Global, Liberty, several Lloyd’s syndicates, Munich Re, QBE, Scor, Sura, Swiss Re, Talbot, Trans Re and Zurich. This year welcomed more cedents from the region, which provided greater insight into the local issues on the ground in various countries coupled with the larger international re-insurance perspective and how the two intertwine.
The conference opened with a discussion on major challenges and opportunities foreseen by carriers in Latin America in the next 5-10 years, with a panel consisting of presidents and SVP’s from the largest players in the local market. With technology identified as one of the key risks and also opportunities, further panels also focused on technology.
For example, one of the key risks we face on a global scale is cyber-crime, as was illustrated only days earlier with the Wannacry Ransomware attack, a cyber-attack that hit organizations in more than 100 countries within the span of 48 hours. More than 130,000 systems were compromised. This is one example of how cyber-attacks have recently become a real threat and nowadays are seen as one of the most profitable forms of crime in the world. There was therefore an essential cyber session about the main distinctions between crime/BBB and cyber. As Latin America and the Caribbean have the fastest growing Internet population in the world, but still lack domestic regulation and there is also a gap in terms of taking a coordinated response to cyber-attacks, this panel was especially thought provoking for those attending from the region and they summarized the main steps that should be followed when a breach is discovered. The panel also provided some examples of the consequences of a data breach, like fines imposed by regulators and shareholder derivative actions and they analyzed real cases of cyberattacks in the US. Some cases have already been scrutinized by the US Courts, and the decisions held so far can be used as a parameter to engage a legal discussion about the interpretations of Cyber wordings and, also, to support the move towards better policy wordings and products.
There was also a panel on some new developments in technology such as how drone usage presents unregulated risks and the risks associated with that. Additionally, there was a captivating and engaging panel on Insuretech, which gave us a peek into the future world of tomorrow by not only depicting technological advances in the insurance industry but the arising challenges that accompany them. Juxtaposing the agricultural and industrial revolutions, the Ai revolution, despite being in its infancy, proves to have the potential to change not only the face of insurance markets but also the wider world. Exemplified by Ai software that within a matter of seconds manages to underwrite risks and process claims, such advances strike with a double-edged sword. On the one hand, they offer faster, cost-efficient options devoid of human error, but this needs to be weighed against the other end of the scale, where such technological advances come at a cost as certain roles within centuries-old professions become obsolete to a certain extent. Ultimately, Insuretech ponders the question: on the balancing scale, does the price of progress outweigh its benefit?
Panelists also addressed catastrophic losses, which looked at all sorts of risks, including the recent riots in Mexico, for example, where lessons learned in the handling of the resulting losses, as well as related underwriting topics were discussed. The practical side of The Forum also discussed pitfalls identified by claims handlers on losses at manufacturing concerns which ultimately ended up in arbitration tribunals.
The Forum also presented real case studies on complex property damage and time element scenarios prevalent in LatAm. In a panel called “the Perfect Storm” panelists donned their umbrellas and raincoats to discuss what was perhaps the largest claim in LatAm during 2016. The case discussed was a representative example of a major property loss which occurred at a critical time resulting in a very large property damage and time element exposure. As in the movie of the same title, insurers and their appointed experts worked together to reinstate the affected operation in record time. With the rapid development in the region, the risk of other “Perfect Storms” is always present. Most lessons learned on that case apply to all losses.
The Forum closed with the annual discussion on construction risks in LATAM which sought to introduce concepts and products (such as professional indemnity insurance, decennial cover, latent defects insurance and the like) that are used elsewhere in the USA and in Europe, which should, in certain projects, be required and which may help to avoid some of the recurring problems encountered in the region. As always, significant discussion surrounded the problem of lack of design cover in high value complex projects, and lack of preparation at the outset such as the use of scale models. Other ways to improve pre-construction planning were discussed and this included Building Information Modelling (“BIM”) and how it could be used more in LATAM, and a healthy debate ensued regarding the benefits and the challenges of using BIM.
The final session on surety also gave delegates an insight into the way the “Seguro de Caución”, a new and relatively untested form of surety product in Mexico regulated by the Ley de Instituciones de Seguros y Fianzas, would operate in comparison to the traditional form of surety bond seen in Mexico. This was illustrated by analyzing the underwriting and claims position, using a case study of Line 12 of Mexico City’s Subway. In summary, the conclusion was that the underwriting process was substantially the same but the nature of the bond would change from being a conditional surety bond to an unconditional “on-demand” Seguro de Caución. The main goal of the Seguro de Caución being the immediate payment of the claim.
Finally, whether it was the engaging panels or the networking opportunities at lunch, coffees or cocktails, there was always a sense of positive energy about the future of the industry in Latin America that reverberated around the room. The save the date for the fourth annual Latin American Claims (re) Insurance Forum will be announced soon.