European insurers have warned that “discriminatory” market access barriers are causing “dangerous concentrations” of risk to build up in Argentina.

Argentina

The country was flagged as one of five jurisdictions – including Brazil, Canada, India and Indonesia – which Brussels-based lobby group Insurance Europe said presented a “major” challenge for European insurers.

In a policy note on Monday, the trade body said foreign (re)insurers in Argentina face several barriers to entry, including restrictions on cross-border (re)insurance, compulsory investment constraints and foreign exchange restrictions on reinsurance payments.

Despite some positive developments regarding the registration and licensing of foreign reinsurers, Insurance Europe noted that European firms continue to face significant barriers when placing business in Argentina.

“While a number of positive measures related to the reopening of the Argentinian market were introduced in 2017, the scope of these provisions does not foresee the full opening of the market at the end of the planned implementation timeline,” it explained.

The trade body said compulsory investment constraints – brought in by the Argentinian Insurance Plan in 2012 – continue to negatively affect (re)insurers’ ability to make investment decisions in line with their business model and appropriate risk management.

The plan was designed to spur investment in government-approved Argentinean infrastructure projects. It set out a mandatory requirement for 18 percent of an insurer’s investment portfolio to  be pledged to such projects.

New reforms in 2016 and 2017 aimed to partially reopen the market for registered foreign insurers, but Insurance Europe said the reforms don’t go far enough.

The new requirements prevent local insurers from transferring abroad more than 75 percent of premiums to subsidiaries or companies belonging to the same financial conglomerate.

The trade body noted that to become a local reinsurer, a foreign reinsurer must set up an Argentinian subsidiary or branch with capital of more than €7.7mn, with 16 percent of premiums retained or 40 percent of gross written premiums, whichever is higher.

Admitted reinsurers are also required to submit proof of credit rating.

“Insurance Europe considers that these requirements should be abolished, in order to take into account the specific characteristics of the global (re)insurance market, which relies on the diversification of risks by geography, line of business,” Insurance Europe said.

It added: “In the spirit of trade liberalisation, Insurance Europe supports the removal of all market access barriers and discriminatory requirements applied to foreign (re)insurers in order to fully open the Argentinian (re)insurance market.

“Restrictions on cross-border reinsurance, including on investment and the foreign exchange of reinsurance premium payments should be eliminated.”