Reinsurance rates in Latin America have been increasing on average by about 2 percent, Mueller, Swiss Re’s president of reinsurance in Latin America, told The Insurer TV.

“There was at one point this discussion that primary rates were going up but reinsurance rates didn’t move as much, and that dynamic has changed - we’re seeing reinsurance rates move upwards as well,” said Mueller.

The increases have been more pronounced in property than in casualty, while countries such as Brazil, Chile and Colombia have seen rates harden more than others, while Mexico, Mueller said, has been “somewhat more flattish”.

The global reinsurance market has been hit by significant catastrophe losses in 2021, notably in Europe and the US. Latin America, however, has not been a significant source of pain for the industry this year, but Mueller said rates will still rise.

“We’re expecting hardening rates in the region, yes, but it’s not because we have had flooding in Europe or we had a winter storm in Texas. It’s ultimately risk-adjusted because the risks are increasing,” Mueller said.

“The exposure is increasing, there’s more urbanisation, and so yes, we do expect that rates are going to go up,” he added.

While rate rises will support reinsurance premium growth in the region, Mueller said cession rates have also been increasing in Latin America in recent years.

Kaspar Mueller, President Reinsurance, Latin America, Swiss Re

“Cession rates have been going up since 2018,” said Mueller.

“The pandemic has clearly accelerated that. When cession rates move by one percentage point over the last year, that doesn’t sound like much, but when you think of the volume that’s behind it, that’s actually quite substantial.”

Further fuelling premium volume growth across the region is the desire from corporations and primary carriers to build out their programs of protection in light of the growing risk environment.

“We are seeing clearly that primaries and corporations are looking to buy more protection,” Mueller said.

The demand for more protection is most pronounced in the agriculture space where there is double digit growth, Mueller said, largely because it is most exposed to the impacts of climate change.

“The more north you go [in Latin America], the more wind-exposed you are,” Mueller said.

“Weather – both too much or too little rain – goes across the continent. When we see that in 2020, more than 70 percent of losses were driven by secondary perils which are typically augmented by climate change, it’s clear that the region is affected and realising it,” he added.