Wednesday, October 3, 2018

Inflation, Devaluation and Underinsurance: Impact and Possible Solutions

Anyone doing business in, living in, or familiar with Latin America would be aware of how often these phenomena affect the region, with Argentina and Venezuela leading the charge. While currency devaluation and ever-increasing inflation have plagued the region for decades, most economies in the region have stabilized and begun to grow at a constant rate. However, this has not been the case for these two nations. As currencies lose value and prices climb at an alarming rate, underwriting risks becomes more difficult. In this post, we look at some ways in which these phenomena affect the underwriting of (re)insurance, and some suggestions to address the problem.

Thursday, August 23, 2018

Puerto Rico Approves Appraisal Standards: Let’s Play Ball

At the start of the 2018 Atlantic Hurricane Season, we provided an overview of Puerto Rico’s codified prohibition against alternative dispute resolutions, such as arbitration and appraisal, in connection with insurance matters.  (See When It Comes to Insurance Disputes: No ADR in PR!). Subsequently on June 12, 2018, the Office of Commissioner of Insurance (OCI) for the Government of Puerto Rico issued Ruling Letter No. CN-2018-241-D, exercising its vested authority under 26 L.P.R.A. § 235(16), to formally establish the standards and procedures for the appraisal process as an alternative conflict resolution method in the insurance industry. 

Wednesday, May 30, 2018

When It Comes to Insurance Disputes: No ADR in PR!

Friday, June 1, marks the official commencement of the 2018 Atlantic Hurricane Season.  This year, the season begins with concerns about what is yet to come – particularly in light of the passing of Subtropical Storm Alberto through the Gulf of Mexico – and the lingering impact of the last hurricane season.  This is particularly true in Puerto Rico.  The 2017 Atlantic Hurricane Season was unkind to “La Isla del Encanto.”

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Wednesday, May 2, 2018

Back to Back Cats

In the last week, there have been several news stories about the recent island-wide power outage in Puerto Rico, the tenuous condition of Puerto Rico’s power grid, and the fact that hurricane season is right around the corner. Last Wednesday, a construction vehicle removing a fallen electrical tower got too close to an energized line and caused an electrical ground fault that led to an island-wide blackout. Luckily, power was not out across the island for long, but the outage once again drew attention to Puerto Rico’s efforts to rebuild following Hurricane Maria. Puerto Rico faced difficulties with its power grid even before Hurricane Maria made landfall, but Maria’s high winds and flooding damaged 75 percent of the island’s distribution lines. Despite the progress that has been made since Maria struck, it is clear that Puerto Rico has not fully recovered from Maria’s devastation.

Wednesday, April 25, 2018

More (Chinese) Money, More Problems: Will Increased Chinese Investment In Latin America Have Unintended Consequences?

Data from the Economic Commission for Latin America and the Caribbean reveals that Chinese foreign direct investment to the region increased from a total of $5 billion during the timeframe from 1990-2009 to an average of $10 billion per year between 2010 and 2012.  In 2016, China became the second largest investor in Latin America after the U.S., and in 2017, China represented around 15% of the total foreign direct investment in the region.  New Chinese acquisition appears to focus on a few sectors, such as energy and mining.  Argentina, Brazil and Peru are the biggest beneficiaries, having received more than 80% of overall Chinese investment since 2005.  Brazil alone has received approximately 55% of Chinese investment in Latin America during this timeframe according to data from the World Economic Forum on Latin America.  It is anticipated that China’s penetration into the Brazilian economy and the economies of other countries in the region will continue, which begs the question: what other consequences will this rapid grown acceleration have for the region?  It seems likely that the ripples will be felt in the insurance industry. With the increase in industry and market expansion, an increase in the demand for energy coverage in these markets, and a larger number of claims, would also be expected.  

Friday, March 30, 2018

Maria, Where Are The Claims?

In the six months since Hurricane Maria devastated Puerto Rico, much progress has been made.  Water service has been restored to 99% of the island and electricity to 93%.   Of the total losses in the Caribbean from Maria, about 85% are in Puerto Rico, which the local government estimates at $100 billion.  Insured losses are estimated between $40 and $85 billion.  

Wednesday, January 24, 2018

Natural Disasters in Latin America: A Look Back at 2017

2017 saw approximately USD 330 billion in losses from natural disasters worldwide, of which around USD 135 billion were insured, according to a Munich Re report. It was the second costliest year on record, only surpassed by 2011. Latin America was no exception to the trend, as a number of natural catastrophes hit the region last year.