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Alberto Avila, CEO of Mapfre Re Argentina Twenty Years Reinsuring Risks in Argentina

In this interview, Alberto Ávila, CEO of MAPFRE Re Argentina, notes that in the latest renewal period that extended throughout June and July, international reinsurance terms and prices for argentine risks suffered no major changes. Additionally, the executive raised his concern regarding the market’s technical loss, especially in the Motor business, and celebrated the first 20 years of the office he leads in Buenos Aires.

In Argentina, the direct insurance market reinsured 12.6% of issued premiums during fiscal 2008-2009 (close to USD 873 million). This total is broken down into Non-Life (87%) and Life (the remaining 13%).
In the last 15 years, reinsurance cessions have gone through various cycles. The ratio between outward reinsurance and total direct insurance issued premiums reached its peak in 2000 and 2003 (20.4% and 20.2%, respectively), but has been in decline since then, as evidenced by the following percentages: 16.5% in 2004, 14.4% in 2005, 13.7% in 2006, 13.2% in 2007, and 13.5% in 2008.
Ceded premiums are allocated to Treaty and Facultative Reinsurance (65% and 35%, respectively). Forty-three per cent of these premiums are brokered, while the remaining 57% is placed directly with reinsurers.

Reinsurance renewals reach their peak in June and July each year.
When analyzing the prices and terms at which reinsurance contracts were renewed in June 2010 in Argentina, Alberto Ávila concluded that: “Overall, renewals have been negotiated quite smoothly, with sufficient capacity being offered by qualified reinsurers.” But he went on to note that “there is some reluctance in the international market to reinsure certain lines such as Workers’ Compensation”.
Motor insurance holds an outstanding share in Argentina’s overall insurance business. Between January and December 2009, it accounted for 37.75% of total production (a category which includes both Life and Non-life). In notional terms, motor insurance production (issued premiums) amounted to almost USD 2,844 million in 2009, i.e. 46% of total Non-Life insurance production.
In connection with reinsurance terms and prices for Motor Insurance (Hulls and TP Liability), Mr. Ávila noted: “No developments worth mentioning have taken place regarding Motor TP Liability covers. We are constantly following up on the valuation of death and/or injury losses. As to Hulls, the market was significantly impacted by the hailstorm that took place in April 2010, which replicated a similar event back in 2006. Its consequences have led to an adjustment in cat cover terms for this line of business, with changes in priorities and limits”.
Ávila went on to voice his concern about the significant price competition in the Motor business “because successive technical losses in this line, the most important in the market in terms of production, may affect carriers’ bottom line, not precisely because the loss is transferred to the proportional reinsurance covering it, i.e., above the priority per loss”.
The argentine insurance market has booked technical losses in the past ten years. Financial gains offset technical losses in the past four fiscal years (2006, 2007, 2008 and 2009), with the bottom line being a surplus. In fiscal 2008-2009 the technical loss was of about USD 177 million, USD 80 M of which correspond to Non-Life (as reported by SSN (Argentine Insurance Department) Circular Letter EST No. 528 dated January 21, 2010).
20 Years

Along other lines, Ávila recalled that the MAPFRE Re office in Buenos Aires is celebrating its 20th anniversary this year, and, with its uninterrupted market presence “enjoys a privileged position among reinsurers”.
Lastly, Mr. Ávila noted that “the inclination to be close to cedents is part of the MAPFRE Re culture, which not only supports the market by offering different capacities and term proposals, but also other services most appreciated by clients, such as the structural design of reinsurance programs, classroom and distance education programs, prompt response, compliance with its obligations when and as due, and reading material on our activities in spanish language”.

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