Miami is joining the ranks of London, Hong Kong, Singapore and Hamilton, Bermuda as a hot spot for insurance and reinsurance business. The "Manhattan of the South" is the place to be if you're a broker, insurer or reinsurer looking to do business in Latin America.
"Miami is the gateway to Latin America for more than just the insurance industry," said Andrea Keenan, assistant vice president of economic and industry research at A.M. Best. "Most multinational companies that seek a presence in a number of Latin American countries must include a Miami office as part of their strategy. Its proximity to Latin America, its use of the Spanish language and its business infrastructure make it well suited for Latin American business."
Miami is the "capital of Latin America for your business needs," said Aidan Pope, chief executive officer of Guy Carpenter's Latin American and Caribbean operations. Like London, it's possible to visit several brokers, insurers or reinsurers in a single afternoon in Miami without ever getting into a car, he said. Many are located on or nearby Brickell Avenue in the heart of Miami's financial district.
"We're so close to Latin America and Central America," said Soraya C. Regalado, executive manager of the Miami-based Latin American Association of Insurance Agencies. "We have the weather, the culture and the language."
The diversified Miami-Dade County economy is improving faster than the Florida economy as a whole, led by international business, according to Greater Miami Area Chamber of Commerce. International business comprises more than one-third of total economic activity in the county, the chamber said in 2010.
Many of the major international brokers and reinsurers, including Odyssey Re, Transatlantic Re, and White Mountains Re have had Miami offices for some time. In the past two years or so, they've been joined by Aspen, Catlin, Endurance and Validus. But it's not just the reinsurance industry. Ace, Liberty Mutual and Chartis all have offices in Miami, too, Pope said.
"In the last 10 years, there's been a trend towards hubbing of resources and people, and it's partly to do with the regions themselves coming of age," Pope said. "Reinsurers are following the insurers, who have been blazing a trail into these new emerging markets. You find that in Europe as well, in Dublin or London or Zurich."
He compared Miami to Singapore in Asia. "If you're not in Singapore, you aren't going to see any business from the Far East," Pope said.
Miami doesn't have quite the same draw as Singapore yet, but it's fairly straightforward to establish an office in Miami, and it's easier to attract talent in the region than in certain countries in Latin America.
"You speak Spanish in the streets of Miami," said Thais Kirschner, vice president of Latin American operations for Liberty International Underwriters.
It's also just a few hours away from many Latin American and Caribbean countries, she said. "All the brokers have offices in Miami, as well as other global reinsurers. It's a very close community."
Liberty Mutual also has offices in Brazil, Argentina, Chile, Colombia and Venezuela. "Latin America is in the sights of every company. It's one of the regions of the world that is not supposed to be affected by the Euro crisis," Kirschner said.
Liberty International Underwriters, a division of Liberty Mutual, is growing by 30% to 40% a year in Latin America, she said.
Latin America is ripe for growth. The insurance penetration as a percentage of gross domestic product in Latin America and the Caribbean is 2.7%, a fraction of the 7.9% of North America or the 6.9% worldwide average, according to a Swiss Re study.
The biggest Latin American markets are Mexico and Brazil, but other countries are showing potential for growth as well.
For instance, Panama, the largest insurance market in Central America, grew by 9.5% in 2009 and by 8.5% in 2010, according to a March 14, 2011, Best's Special Report, "Development, Regulatory Reform Boost Outlook for Panama Insurers."
Of special interest are markets including Brazil and Costa Rica, which recently have transformed from state-run monopolies to free markets.
Brazil, which represents about half of the Latin American insurance market, has a "shortage of qualified people because reinsurance is a new thing," Pope said. The Brazil government had a state-owned monopoly on reinsurance until it opened the market in 2007. It's a restrictive market yet, but insurers and reinsurers see great potential for growth.
"It's an emerging middle class in Latin America that we haven't seen before," Pope said. "There's low inflation, government stability, and for the first time, there's a middle class that is buying insurance as well as white goods and flat-screen TVs. They recognize the importance of protecting their families and assets, and insurers want to tap into this new vein. It's business that you don't have to take off the competitor. It is true organic growth."
In addition to personal lines growth, commercial lines are expanding to support Latin America's expanding infrastructure, said Kirschner.
"Each country in Latin America is unique and I wouldn't say that they're all growing in tandem," said Keenan. "Some countries have lower growth rates but higher penetration, for instance. But those with high GDP growth rates and low penetration will see relatively high P/C premiums growth. Brazil, in hosting the World Cup and the Olympics, and having some development of oil infrastructure, will definitely be in need of P/C insurance."
Insurers are very interested in Brazil beyond the World Cup and Olympics. Brazil's real gross domestic product increased 30% in 2010, according to a Swiss Re Sigma report, which noted "the demand for insurance is likely to rise as wealth in the emerging markets increase".