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Thursday, January 14, 2010
Today's News Headlines
* Govt to receive max CCRIF payout, but country "horribly underinsured" - Caribbean, Haiti
* Fitch ups outlook on banks, insurers, sees tough 2010 - Honduras
* Life insurers' consumer lending up 26.5% in January-November - Chile
* BB wants control of IRB before June - Rio de Janeiro brokers - Brazil
* Alfa books US$101mn profit in January-September - Colombia
* CAP stakeholder hopes for new partner to enter iron ore branch - Chile
* IN BRIEF CL Financial CEO resigns - Caribbean
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* Govt to receive max CCRIF payout, but country "horribly underinsured" - Caribbean, Haiti
The government of Haiti will receive the maximum US$8mn payout from its coverage with the Caribbean Catastrophe Risk Insurance Facility (CCRIF), but overall the country is "horribly underinsured," Matthew Pragnell, CEO of Caribbean insurance brokerage services group CGM Gallagher, told BNamericas.
A magnitude 7.0 earthquake struck close to Port-au-Prince, Haiti on Tuesday (Jan 12) evening, causing untold damage and still unknown loss of life.
CCRIF, which is managed by CGM Gallagher unit CaribRM and offers parametrically triggered coverage for natural catastrophes to 16 Caribbean countries, will make the largest possible payout - which is just over 20 times the US$385,500 Haiti pays in annual premiums - after a 14-day period, the group said in a statement.
However, because of the low insurance penetration in the country, there will only be minimal insured losses in Haiti and the event will likely not even constitute a major global insurance loss event, according to CaribRM CEO Simon Young.
LOW INSURANCE PENETRATION
CGM Gallagher's Pragnell said that the few Haitian insurance companies that do exist have very low levels of capital and do not take much advantage of reinsurance, but that Hannover Re will have some exposure, as will Lloyds, but on a facultative basis.
"There's a general distrust of insurance companies [in Haiti], because they're just not able to respond on large claims let alone a catastrophe of this nature," the executive, who is based in Jamaica, said, noting that the tragedy would likely push along some efforts in micro insurance from groups like the World Bank.
"Micro insurance will have more urgency, but you have to give the consumer the wherewithal to be able to buy it," Pragnell said. "[Haiti's] going to have to have enormous donor support [to begin recovery from the earthquake]."
RENEWED FOCUS ON EARTHQUAKES
CaribRM's Young also said there will be a renewed focus on earthquakes.
"Coming off a slow hurricane season, there will be a lot more talk about earthquake exposure in the Caribbean," he said. "This needs to be on the agenda all the time, but unfortunately it takes big events to bring it back to the forefront."
REGIONAL IMPACTS
While the Dominican Republic, Cuba and Jamaica felt the shake, there looks to be minimal damage in these countries.
"There's not going to be significant damage in the Dominican Republic," Young said. "But their portfolios are so much bigger that even a small level of damage on a percentage basis may be bigger than the total [insured] loss in Haiti."
The World Bank, the Caribbean Development Bank (CBD) and many other donors have assisted the development of CCRIF, which now counts Anguilla, Antigua & Barbuda, the Bahamas, Barbados, Belize, Bermuda, the Cayman Islands, Dominica, Grenada, Haiti, Jamaica, St Kitts & Nevis, St Lucia, St Vincent & the Grenadines, Trinidad & Tobago and the Turks & Caicos Islands in its member countries.
By James Newman
Business News Americas
* Fitch ups outlook on banks, insurers, sees tough 2010 - Honduras
Fitch has changed its outlook on Honduran financial institutions and insurance companies to stable from negative, and raised some ratings, the agency said in a report.
Fitch raised the outlook, which was listed at negative solely based on potential effects of the volatile political situation following the country's coup in June, because of recent improvements in the political and business environment in the country, the ratings agency said.
"It's difficult to distinguish between the effects of the financial crisis and those of the political crisis," Fitch director for Central American financial institutions René Medrano told BNamericas. "Banks' performance has worsened, but it's hard to say what can be attributed to the political crisis."
"[In 2010] banks will see relatively high levels of non-performing loans - as high as those in 2009 - not very high profitability ratios, low loan growth and stable deposits," he said, "No worse than what we are seeing right now, but also no better."
As for insurance companies, "There was an effect in terms of lower written premiums, which dropped 4% through the first 10 months of 2009, due to the combination of the economic and political issues," Eduardo Recinos, Fitch Central America insurance director, told BNamericas.
However, insurers were able to free up reserves in order to make up for the drop in written premiums, and they actually saw higher net profits as a result, he said.
Given that the effect of reserves is a one-time effect, this year insurers will need to improve both claim and efficiency levels, particularly in auto and medical lines, and likely raise prices in order to maintain profitability, Recinos said.
To see the full statement in Spanish, go to this link (http://www.bnamericas.com/reports/132812.pdf)
By William Schatz
Business News Americas
* Life insurers' consumer lending up 26.5% in January-November - Chile
Life insurers in Chile issued a combined 111bn pesos (US$224mn) in consumer loans in January-November 2009, up 26.5% on the same period 2008.
About 98% of the new loans were issued in pesos, with the remainder in the country's inflation-indexed unit UF, according to figures from securities and insurance regulator SVS.
Locally owned insurance group Consorcio remained the largest consumer lender among life insurers with 37.0bn pesos at end-November.
Second and third came locally owned Penta Vida and Bice Vida with 21.8bn pesos and 10.8bn pesos, respectively.
SVS allowed insurers in 2007 to use up to 2% of their technical reserves and risk-adjusted equity for consumer lending, giving life insurers an additional US$510mn for consumer lending as of March 1, 2008.
By Business News Americas staff reporters
* BB wants control of IRB before June - Rio de Janeiro brokers - Brazil
Federally controlled Banco do Brasil (BB) is trying to conclude a deal to get management control of former monopolist and still leading Brazilian reinsurer IRB-Brasil Re, according to a release from the Rio de Janeiro brokers association Sincor-RJ.
The bank hopes to avoid political outcry over the deal, which would transfer control between two state-controlled enterprises, in the campaign season preceding the presidential election in October, the group said.
The private sector shareholders in IRB, which include Bradesco (NYSE: BBD) and Itaú Unibanco (NYSE: ITUB), would still likely have to approve any change in management, Sincor-RJ said. However, the fact that BB is federally controlled may be advantageous, given current regulation on IRB.
IRB had a monopoly on reinsurance in Brazil for 69 years and still takes just under 80% of the market, even after the end of its official monopoly in April 2008.
By Business News Americas staff reporters
* Alfa books US$101mn profit in January-September - Colombia
Colombia's third largest life insurer, locally owned Seguros de Vida Alfa, booked net profits of 199bn pesos (US$101mn) in January-September 2009 thanks to strong premium growth and higher investment gains.
The insurer had booked a 40.0bn-peso loss in the same period 2008, according to figures released by financial watchdog Superfinanciera.
Net paid claims rose 31.9% to 191bn pesos. The insurer booked a 13.7bn-peso underwriting loss in the period compared to a 103mn-peso gain in the same stretch 2008.
Seguros de Vida Alfa's net written premiums rose 26.1% to 401bn pesos in the nine months for a 10.4% market share as of end-September.
The insurer had 2.10tn pesos in assets and 1.33tn pesos in reserves as of end-September.
The company is owned by local holding group Grupo Aval, which dominates the country's banking system with a chain of banks.
Alfa also operates under the same brand in the P&C sector.
By Business News Americas staff reporters
* CAP stakeholder hopes for new partner to enter iron ore branch - Chile
AFP Habitat, a Chilean private pension provider that has a stake in local iron and steel group CAP, hopes the steelmaker will hold a public bidding process to choose a partner to participate in its iron ore mining business CMP in light of an ongoing deal whereby Mitsubishi will acquire 25% of CMP through a restructuring transaction, according to a report by Santiago daily Diario Financiero.
Last month Mitsubishi finished due diligence on the restructuring of its participation in CMP. Presently the Japanese company owns 50% directly in CMP's Minera Huasco mine but wishes to swap that for a direct 25% in CAP's mining division.
Chile's largest iron and steel producer, CAP sold 3.21Mt of iron ore and 276,747t steel during last year's third quarter. The company took a US$52.5mn net loss in the first nine months of 2009 due to lower year-on-year steel prices and demand.
By Business News Americas staff reporters
* IN BRIEF CL Financial CEO resigns - Caribbean
The CEO of Trinidad & Tobago-based financial group CL Financial, which was rescued by the country's government in January 2009, has resigned and will leave the company at the end of this month, local press reported.
Steve Bideshi led the company since July 2009 and had "completed his obligations," according to a statement from CL Financial chairman Shafeek Sultan-Khan.
By Business News Americas staff reporters
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In-deph interview
* 2010: Investment returns back down to earth, caution the name of the game
Gonzalo de las Casas
Chief investment officer
AFP Integra
Peru
http://www.bnamericas.com/interviews/insurance/Gonzalo_de_las_Casas_,AFP_Integra,/169884064
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Main companies covered in today's news
* Hannover Rückversicherung AG
http://www.bnamericas.com/company-profile/en/Hannover_Ruckversicherung_AG-Hannover_Re/169884064
* Penta Vida Compañía de Seguros de Vida S.A.
http://www.bnamericas.com/company-profile/en/Penta_Vida_Compania_de_Seguros_de_Vida_S,A,-Penta_Vida/169884064
* Banco Bilbao Vizcaya Argentaria S.A.
http://www.bnamericas.com/company-profile/en/Banco_Bilbao_Vizcaya_Argentaria_S,A,-BBVA/169884064
* Administradora de Fondos de Pensiones Capital S.A.
http://www.bnamericas.com/company-profile/en/Administradora_de_Fondos_de_Pensiones_Capital_S,A,-AFP_Capital/169884064
* Administradora de Fondos de Pensiones Habitat S.A.
http://www.bnamericas.com/company-profile/en/Administradora_de_Fondos_de_Pensiones_Habitat_S,A,-AFP_Habitat/169884064
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