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The Argentine Reinsurance market to 31st March 2014

The development of the National Strategic Insurance Plan (PlaNeS, as per its Spanish acronym) also stirs new expectations for the reinsurance market, which is already regulated but seeks to have a specific law on national reinsurance considered when implementing the PlaNeS 2012-2020. “Mercado Asegurador” provides a monthly update of the current reinsurance market, its evolution and any new market entrants authorized reinsurers operating whether local or admitted.

A list of domestic reinsurers licensed to accept reinsurance in Argentina is shown in, whereas the interim list of admitted reinsurers that may accept reinsurance from their countries of origin appears in In turn, authorized reinsurance brokers can be seen in
The enforcement authority has noted that new domestic carriers will be licensed to do business once the pertinent resolution has been published in the Official Gazette and their data have been posted on the SSN Website. Only the reinsurers appearing on such web page are therefore authorized to do business. On account of various circumstances, not all domestic admitted and registered reinsurers were operating as at March 31st, however. Only 19 of all domestic reinsurers were actively accepting business, whereas the majority of the remaining carriers were not yet in this market, either because they had not finalized their organization or because they had not completed the formalities to register with the Inspección General de Justicia (Corporation Control Authority - IGJ, as per its Spanish acronym) and had therefore been unable to start operating in this market, or else because they still had to pay in additional capital.
One of the main reasons for some reinsurers still being non-operational is that (though already authorized by the SSN) some have not yet finalized the formalities to be registered with the IGJ and therefore with other agencies such as the Argentine Internal Revenue Office (AFIP, as per its Spanish acronym) or the Argentine Social Security Administration (ANSES, as per its Spanish acronym), among others, that in many cases is of a preliminary nature. In turn, it should be noted that section 9 of Resolution No. 35,794 provides for the amendment of the current minimum capital regime until June 30th 2012. Since July 1st 2012 the new minimum capital was changed pursuant to Resolution No. 36,350/2011 dated December 6th 2011 and published in our January/February 2012 issue (No. 379), establishing that reinsurers who start up proceedings in the SSN before 06/30/12, must increase, after July 1st, 2012, the minimum capital of $ 20 million to $ 30 million gradually (to 12/31/2013), while new operators who register on or after 1st July 2012 must incorporate a minimum capital of $ 60 million.
Under section 3 of Resolution No. 35,794, domestic reinsurers shall withhold at least 15% of issued reinsurance premiums for the whole portfolio of the year before. Additionally, pursuant to the new regulations Argentine insurers may only cede business to domestic reinsurers, unless the SSN may expressly authorize otherwise in the case of duly identified reinsurance transactions, as provided by Resolution No. 36,332 dated December 1st 2011. This exemption is reserved to risks for which no sufficient market exists in Argentina on account of their size or characteristics, or for the excess of risks with insured amounts over USD 50,000,000.

Reinsurance Market Composition at March 31st 2014
For ease of understanding, the following chart (on the next page) presents the reinsurance market breakdown in Argentina:

Admitted Reinsurers
As previously noted, admitted reinsurers are licensed to accept retrocessions from domestic reinsurers, any excess reinsurance in contracts with insured amounts exceeding USD 50 million, and reinsurance falling under the exemption regime provided for by Resolution No. 36,332 dated December 1st 2011, which provides for the minimum eligibility requirements to request exemption under item 19 of Annex I to Resolution No. 35,615.
As indicated by the SSN Website, there were a total of 74 admitted reinsurers registered as of March 31st 2014. This list for some time was temporary and was refined gradually. Today is practically definitive and open to new additions. The theme that delay regularization of many reinsurers was the requirement to register with the Corporation Control Authority in order to comply with new regulations, which provide that they must comply with the requirements of Companies Law No. 19,550 (as provided by subsection g), item 20 of Annex I to SSN Resolution No. 35,615 (pursuant to section 3 of Resolution No. 35,726).
Approximately 74 admitted reinsurers had started registration formalities with the IGJ as of March 31st 2014, 50 of which were still pending approval. Registration is expected to materialize shortly. Some started these filings more than one year and a half. Those already registered are 29 in addition to Lloyd’s, which has been authorized to do business as an Exempt Corporation: 1) ACE Property and Casualty Insurance Co.; 2) Allianz Global Corporate & Specialty (France); 3) Allianz Global Corporate & Specialty AG; 4) Allianz World Wide Care Ltd.; 5) American Bankers Insurance Co. of Florida; 6) American Home Assurance Co. (Suc.); 7) American Life Insurance Co.; 8) Aspen Insurance UK Ltd; 9) Atradius Reinsurance Ltd.; 10) Berkley Insurance Co.; 11) COFACE pour le Commerce Exterieur; 12) Federal Insurance Co.; 13) International Transport Intermediaries Club Ltd.; 14) IRB-Brasil Re; 15) John Hancock Life Insurance Co. (USA); 16) MAPFRE Re Compañía de Reaseguros S.A.; 17) Mitsui Sumitomo Insurance Company Limited; 18) Münchener Rück; 19) Odyssey Re Co.; 20) QBE Reinsurance Co.; 21) Scor Global P&C SE; 22) SCOR Reinsurance Co.; 23) Scor UK Company; 24) Starr Indemnity & Liability Co.; 25) Swiss Reinsurance America Corp.; 26) Tokio Marine & Nichido Fire Insurance Co.; 27) TT Club Mutual Insurance Ltd.; 28) Virginia Surety Company Inc.; 29) Zurich Life Insurance Company Ltd.; y 30) Lloyd´s.
Those who have started the process but have not yet received approval from the IGJ at March 31th are: : 1) Allianz Global Risks US Insurance Co.; 2) Allianz SE; 3) Alterra Europe PLC; 4) American Bankers Life Assurance Company of Florida; 5) Arch Insurance Co. (Europe) Ltd.; 6) Arch Reinsurance Underwriting; 7) Assicurazioni Generali S.p.A; 8) Axa Corporate Solutions Assurance; 9) Axa Versicherung Ak.; 10) Axis Re Public Ltd.; 11) Best Meridien Insurance Co.; 12) Cardif Assurance Vie.; 13) Chartis Europe S.A.; 14) Factory Mutual Insurance Co.; 15) General Reinsurance AG; 16) Generali España S.A. de Seguros y Reaseguros; 17) Hannover Rück; 18) HDI-Gerling Industrie Versicherung AG; 19) HDI-Gerling Welt Service AG; 20) Liberty Mutual Insurance Co.; 21) Liberty Mutual Insurance Europe Ltd.; 22) MAPFRE Asistencia Compañía Internacional de Seguros y Reaseguros S.A.; 23) MAPFRE Global Risks Cía. Internacional de Seguros y Reaseguros S.A.; 24) National Union Fire Insurance Co. of Pittsburgh PA; 25) Nationale Borg Reinsurance N.V.; 26) Paris Re America Insurance Co.; 27) Partner Reinsurance Europe Public Limited Company; 28) R + V Versicherung Ag(1); 29) Reaseguradora Patria SAB; 30) Royal & SunAlliance Ins. PLC; 31) Royal & SunAlliance Reinsurance Ltd.; 32) SCOR SE; 33) Sirius America Insurance Co. (Ex-White Mountains Re); 34) Suiza de Reaseguros; 35) Torus Insurance UK Ltd.; 36) Transatlantic Re Co.; 37) Travelers Casualty and Surety Company of America; 38) Travelers Property Casualty Company of America; 39) Unum Life Insurance Company of America; 40) W.R. Berkley Insurance (Europe) Ltd.; 41) XL Insurance Company Ltd.; 42) XL Re Latin America Ltd.; 43) Zurich Insurance Co.; y 44) Zurich Insurance Public Ltd. Co.
It is worth mentioning that admitted reinsurers that decided to establish a domestic reinsurance company as a subsidiary or branch of their parent companies need not register with the Corporation Control Authority, since it is the branch (i.e., the domestic reinsurer) which represents the admitted reinsurance carrier that is already registered. This requirement has been a roadblock to many admitted carriers’ decision to register, as they find no reason to keep accounting records, file balance sheets and register with AFIP and ANSES since they do not provide advisory services in the country and their transactions are accepted from abroad. It should also be noted that starting July 1st 2012 the SSN keeps a record of all reinsurance transactions executed in Argentina and are informed by local reinsurers or admitted and reinsurance brokers when involved in placements.
Lloyd’s of London and the Mutuals are empowered to do business as an admitted reinsurer without complying with the IGJ registration requirement. The current capacity of admitted reinsurance companies is therefore enlarged if this organization is included.

Reinsurance Brokers
The following table presents a list of reinsurance intermediaries authorized to March 31st, 2014 to operate the reinsurance market in Argentina:

The Current Reinsurance Market
The Argentine reinsurance market is clearly far from being consolidated. The products supplied by approximately 19 domestic reinsurers that are active in the business have sufficed to renew reinsurance contracts coming due on June 30th 2012 and expired renewals on June 30th 2013, but a more streamlined process is required to place contracts such as Hail, Aviation, Workers’ Compensation and other risks with a high litigation rate or facultative perils with significant exposures such as aircraft fleets, petrochemical companies, large infrastructure works, etc. This necessarily requires the support of large international reinsurers which for the most part have opted for operating as admitted reinsurers, thus giving rise to a very interesting retrocession market. In contract renewals at July 31st 2013, foreign reinsurers’ branches or domestic capital reinsurers with adequate support from admitted retrocessionaires and which had led contracts in the past were unarguably at the lead. Despite the growing number of domestic reinsurers - whether owned by individual insurers or insurance groups or foreign reinsurers’ branches, the number of international reinsurance carriers establishing branches is still negligible.
In this scenario, renewals through domestic reinsurers run smoothly in July 2013. There were some agreements executed with traditional admitted reinsurance carriers that supported acceptances from domestic reinsurers. Reinsurance brokers are playing their role efficiently. In ascertaining their involvement, it is important to look into statistical information on direct placements and those made via brokers, as it was in the past. However, and given the possibility given to workers to accumulate benefits, a difference should be drawn between brokerage of reinsurance transactions and retrocession.
We may assert that the young reinsurance market has successfully passed its first tests and, despite the larger costs resulting from the involvement of new market players and of a heavier tax burden, some domestic reinsurers have on several occasions offered highly competitive terms that have somewhat offset these two factors, aided by an international market with ample supply and significant capacity.
Table IV shows a 1.92% decrease in ceded reinsurance vis-à-vis the preceding period (from 11.26% to 9.38%). Premiums ceded abroad amounted to only 5.96% (63.57% out of 9.38%) Nonetheless, it is also important to determine the balance of transactions placed abroad after deducting ceded premiums, paid and outstanding claims, commissions and outstanding loss reserves.
Outstanding loss reserves and pending claims should be considered in Table VI to determine the results from reinsurance. Based on Information prepared by the Argentine Insurance Department (SSN, as per its Spanish acronym), statistics are provided on Treaty and Facultative Reinsurance transactions for the fiscal year running between July 2012 and June 2013, broken down into Proportional and Non-proportional according to the way they were purchased (i.e., directly with reinsurers or through reinsurance brokers). Ceded premiums classified by purchase method show that Treaties accounted for ARS 5.5 billion (72.8% of the total), whereas Facultative contracts amounted to ARS 2 billion (27.2%). As for the placement method, Direct Reinsurance totalled ARS 5.6 billion (74.5%), while covers placed through brokers totalled ARS 1.9 billion (25.5%). It should be noted that some tables may present some confusing information, as they may have mixed up reinsurance premiums and those obtained from retrocessions, which should be considered separately. If this information is correct, it warrants some clarification.
After clearing the doubts regarding the development of the chart of accounts and of specific reserves, concerns still remain regarding (1) how the market will protect itself from high catastrophic perils or exposures in Group Life; (2) what the construction will be of retrocession transactions as they relate to the purchase of services from abroad, and its importance in terms of the VAT, as well as the financial impact on local reinsurers as a result of the mismatch between input and output tax; and (3) the consequences of delays in or non-payment of retrocessions abroad when and as due. These and other aspects are being analyzed by the Regulatory Authority and working on these and other issues in order to continue with the “fine tuning” process so as to have a well set market in order to efficiently place and renew reinsurance treaties that both the insurers and the consumers so badly need.
The strategic and policy lines to be included in the PlaNeS 2012-2020 aim at consolidating the domestic insurance and reinsurance market. A new strategic coverage approach is therefore proposed which is partly covered by national carriers, and an increase in risk retention capacity by Argentinean reinsurers is encouraged.
As far as reinsurance is concerned, the PlaNes initially comprises the following topics:
- Market reserves.
- Retention levels.
- Holding group: Limitations on intra-group retrocession and reinsurance.
- Inefficient reinsurance. Effects.
- Contractual terms. Arbitration. Regulation. Argentine jurisdiction.
- Insurers’ and reinsurers’ liquidation.
Consideration should also be given to any adjustments in terms of capacity and solvency that may be required in order to have a sound, sufficient and agile domestic market.

Pedro Zournadjian

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