Colombia Insurance day

Transcription

1 < Picture to go here > Colombia Insurance day 6 June 2013 Lloyd s 2012

2 agenda Welcome & opening remarks John Nelson The Critical role of insurance in Colombia Roberto Junguito Panel - Colombian insurance market: Experiences, perspectives and lesson learned Coffee & networking break Panel - British perspective of Colombian market, Reinsurance Panel - Bridging the two markets exsisting practice and challenges for the future < Picture to go here > Closing remarks Nigel Luson Networking & Coffee Lloyd s 2012

3 John Nelson Chairman, lloyd s < Picture to go here > Lloyd s 2012

4 The Critical role of insurance in colombia Roberto Junguito, president, colombian insurance association < Picture to go here > Lloyd s 2012

5 Colombian insurance market: experiences, perspectives and lessons learned Chair: Roberto Juanguito President, FASECOLDA < Picture to go here > Lloyd s 2012

6 Regulation and supervision issues Jorge enrique uribe President, Seguras Bolivar < Picture to go here > Lloyd s 2012

7 COLOMBIA INSURANCE DAY AT LLOYDS REGULATION AND SUPERVISION ISSUES Jorge Enrique Uribe June 6, 2013 London

8 AGENDA I. Colombia and its Development II. Regulation and Supervition Issues

9 COLOMBIA AND ITS DEVELOPMENT

10 Economic Data

11 Gross Domestic Product* Economic Data Unemployment Inflation per year External debt as percentage of GDP Source: National Bureau of Statistics-DANE * Figures in million USD

12 Economic Data Per capita Gross Domestic Product* Optimistic scenario Pessimistic scenario Adjusted to USD dollars of 2011 Evolution of middle class in Colombia Middle class: People who belongs to families with monthly income between 1 And 5 thousand dollars in * Source. Fedesarrollo (Local economical studies organization)

13 REGULATION AND SUPERVISION ISSUES

14 Regulation and surveillance of insurance companies is being strenghthened Financial soundness of insurance companies Competition Information - Transparency Financial Education Consumer Protection

15 Supervision Risk Management & Solvency Assesment PILAR I CAPITAL REQUIREMENTS BALANCE SHEET ASSET LIABILITY MANAGEMENT LIQUIDITY PILAR II SUPERVISION, CONTROL & RISK MNG. TECHNICAL RISK OPERATIONAL RISK MATERIAL RISKS REPUTATIONAL RISK STRATEGIC RISK ISSUES OF INTEREST FOR YEARS RISK TRANSFER RETENTION RI & POLICY CONDITIONS CLAIMS MANAGEMENT SUPPORT PROCESSES ACCOUNTING UNDERWRITING PRICING RESERVING DEFAULT RISK SECURITY TRANSFER OF KNOW-HOW & INFORMATION PILAR III DISCLOSURE & TRANSPARENCY. Adapted from a MUNICH RE Chart

16 Regulation and Supervision Regulation, surveillance and adoption of international standards will determine the path that the insurance industry will follow. Consumer protection regulations, financial literacy obligations and more adequate information requirements will be in the order of the day. The risk based supervision scheme is also being used by the Financial Superintendence, in line with the Canadian experience. The Colombian government is currently working on the adoption of a modern technical provisions regime, as well as of international accounting standards (IFRS).

17 Solvency Regime Evolution Before 1990, regulated tariffs implied the sufficiency of them to cover risks. There were minimum capital requirements to operate by line of business. With the Colombian financial liberalization of 1990, free competition and pricing implied the adoption of a Solvency I regime, with capital requirements depending on technical risks. During 2010, Colombia s insurance market updated its regulatory architecture in terms of solvency and investment regimes, introducing additional capital requirements to face market and credit risk.

18 Jun Sept Dic Mar Jun Sept Dic Mar Jun Sept Dic Mar Jun Sept Dic Mar Jun Sept Dic Mar Jun Sept Dic Mar Jun Sept Dic Mar Jun Sept Dic Mar Jun Sep Dic Mar Jun Non Life Insurance Companies Solvency Patrimonio Regulatory Adecuado capital Patrimonio Available capital Técnico Decreto Decree 2954/10 Cobertura Available / required requirement capital 3, , , , , ,5 0 0, Regulatory capital requirement: Whole set of requirements set by the solvency regime (Technical risk + asset risk + market risk) Available capital: Available capital resources to accredit capital requirements.

19 Jun Sept Dic Mar Jun Sept Dic Mar Jun Sept Dic Mar Jun Sept Dic Mar Jun Sept Dic Mar Jun Sept Dic Mar Jun Sept Dic Mar Jun Sept Dic Mar Jun Sep Dic Mar Jun Life Insurance Companies Solvency Patrimonio Regulatory Adecuado capital Patrimonio Available capital Técnico Decreto Decree 2954/10 Cobertura Available / requirement 2954/10 required capital 2,5 2,0 1,5 1,0 0,5 0, Regulatory capital requirement: Whole set of requirements set by the solvency regime (Technical risk + asset risk) Available capital: Available capital resources to accredit capital requirements.

20 Reserving 2013 Colombia s Ministry of Finance Decree Project Premium Reserves Unearned Premium Reserve Premium Deficiency Reserve Benefit Reserve Asset Adequacy Reserve Outstanding Claims Reserves Case Reserve IBNR/IBNER Adverse Deviation Reserve Catastrophic Risk Reserve New Reserve Important changes in Methodology Current status: Third draft being discussed.industry is performing impact on reserves tests. Government is expecting to issue This decree on 2nd semester of 2013.

21 THANK YOU

22 Liberalisation of the Colombian market act 1328, 2009 Fernando Quintero arturo President seguros colpatria < Picture to go here > Lloyd s 2012

23 Contents 7 de Junio de 2013 Background Legal Framework Considerations / Impact Future steps

24 Background 7 de Junio de 2013 In Colombia 1990: Economic Opening Environment ( Act 45 ) 100% foreign capital, regulated rates and commissions release, strengthening supervision 1994 : Act 170 Joining to WTO Worldwide 1986 : Creation of WTO 1994 : Signing of NAFTA ( México, United States and Canada.) 1995: WTO GATS. Protection framework and promotion of services world trade. 4 modes of service supply: Cross-border trade, consumption overseas, commercial presence and movement of businessmen. Concept of Most Favored Nation Treatment : DOHA Round with the Financial Leaders Working Groups ( FLWG ) and independent insurers - Model Time Schedule to Liberate Insurance Services.

25 Background In Colombia Worldwide: June 7, : Commencing negotiations of FTA between Colombia, Ecuador and Peru with the United States : FTA between Chile and the United States comes into force. 2005: Within FTA between USA and Colombia, the agreement of the financial services chapter is closed (insurance). 2007: With Act 1143 / 1166 the FTA is incorporated in the Colombian Law. 2009: Act 1328 Financial Reform. ( Unilateral liberalization includes modes for the supply of financial services) 2007 : Brazil eliminates local reinsurance monopoly : FTA between Peru and United States comes into force. 2011: The US Congress approves FTA between Colombia and the United States 2013: Comes into force Act 1328, 2009 ( Protection to the financial consumer )

26 Legal Frame 7 de Junio de 2013 Mode Definition Comments 1-Cross-border trade Services provided from one territory to the other without the parties being displaced Authorized lines : International marine transportation, international commercial aviation and space transportation. Risks covered: those related to the goods subject to international transportation, vehicle transporting the goods and general liability arising them, insurance covering goods in international transit 2. Consumption abroad Consumer is displaced and consumes services abroad All individuals or companies residents in the country may acquire abroad any type of insurance. Exceptions: Related to social security Those requiring previous mandatory insurance Mandatory insurance When the Government is the Insured, Police holder or beneficiary Except for MAT, prohibition to sell, offer, promote and advertise insurance policies issued by foreign companies

27 Legal Frame 7 de Junio de 2013 Mode Definition Comments 3. Commercial Presence Establishment in the country where service is supplied as a company or branch Branch Same capital requirements, investments and solvency and surveillance by the Financial Superintendence required for subsidiaries 4. Individuals displacements Temporary entrance of staff supplying the service to the territory where it will be purchased. Insurance dealers abroad may perform intermediation tasks in the Colombian territory only regarding authorized types of insurance

28 Considerations/ Impact 7 de Junio de 2013 Emphasis in the protection to the consumer Creation of a Foreign Companies Register. (Cross-border trade) Except for MAT, clarity in the scope of the prohibition to offer in Colombia insurance from foreign companies. Except for the exceptions, allowance to acquire insurance overseas by means of displacement. Individuals displacement (intermediaries) allowed only for MAT insurance. Branches as an innovation in the presence model. Environment of higher requirement levels for service and products. Greater competition for major risks (medium size and major companies / global) Approximately 50% of the Colombian market is exposed to risk.

29 Next steps 7 de Junio de 2013 Creation of a secondary regulation / guidance (Registration of Foreign companies MAT insurance, report of insurance operations with foreign insurance companies, regulations in order to enforce prohibitions, control of money laundering). Continuous search for higher levels of education to the consumer (regulator, government, universities, schools, etc.) Avoidance of fiscal asymmetries. Agreements between supervisors from different countries

30 Internationalisation EXPERIENCE OF Grupo Sura as a transnational company in emerging markets David Bojanini President, Grupo Sura < Picture to go here > Lloyd s 2012

31 Experience of a british company in the Colombian market LILIAN PEREA President, RSA < Picture to go here > Lloyd s 2012

32 < Picture to go here > Lloyd s 2012

43 Experience of a foreign insurance company in Colombia: Lessons and challenges Juan Carlos Realphe Vice President, Mapfre colombia < Picture to go here > Lloyd s 2012

44 Our History 7 de Junio de Seguros Caribe receives first investment from MAPFRE INTERNACIONAL MAPFRE INTERNACIONAL becomes the main Shareholder of Seguros Caribe Seguros Caribe changes its name to MAPFRE SEGUROS GENERALES DE COLOMBIA MAPFRE COLOMBIA VIDA SEGUROS S.A. begins operations. Integration Process of MAPFRE GENERALES and MAPFRE VIDA.

45 MAPFRE COLOMBIA 7 de Junio de 2013 Written Premiums: 2012 USD750 million Pre-tax Profits: USD21,2 million Equity MAPFRE Life: USD83,2 million Equity MAPFRE Non Life: USD55,8 million ROE: 12,12% Employees: 787 National Network: 173 branches Retail Business Brokers : 2.130

46 Lessons 7 de Junio de 2013 Corporate Culture, Values, Core Business Market Knowledge Colombia: Professional Insurance Market Local Team Operation Empowerment, Autonomy, Delegation Reliability and Trust Brokers Close Relationship with Insured (Clients) Specialized Corporate Clients

47 Opportunities and Challenges 7 de Junio de 2013 Low Penetration 2,48% of GDP (10% Family Housing, 5% Life, 28% Vehicles) Economic Growth High Demand Financial Incursion, Microinsurance Infrastructure Projects Insurance Agricultural Development Climate Change Market Liberalization Legal Environment - Requirements Sustainability: Information, Financial Education, Financial Consumer Protection

48 Thank You 7 de Junio de 2013

49 Colombia Infraestructura.. 7 de Junio de 2013