Despite increased competition, Latin American insurers will sustain growth and profitability in 2013, according to a new report from Ernst & Young, titled “2013 Latin American Insurance Outlook.”

"This is an exciting time in these emerging markets, with significant opportunities particularly in Mexico and Brazil, as well as some of the smaller markets like Peru," says James Littlewood , Ernst & Young LLP, who focuses on the Latin American market. "With the upcoming regulatory reform, countries such as Chile and Mexico are primed to integrate advanced risk and capital management measures for future compliance."

The report emphasized five crucial factors for growth in the market:

Capitalizing strategically on substantial compound growth opportunities: Brazil's booming economy and emerging middle classes throughout Latin America present tremendous opportunities for sustainable premium growth, according to the report. Also emphasized by Ernst & Young is the region's relative youth: 25 percent of the population is under the age of 15 in Brazil, Mexico, Columbia and Chile. This should enable greater asset growth and compound sales over the life span of these consumers.

Expanding markets through innovation directed by local expertise: The report also lamented the fact that insurers face higher distribution costs as well as the need to educate customers about insurance given the relatively little amount of market penetration. Yet if insurers have the flexibility and an impetus for innovation, the report claims that as consumers embrace new distribution channels and wider use of the Internet and social media, understanding customer behavior can guide new and expanded systems for insurance product distribution.

Exploiting advantages from competencies in technologies: Given decreasing investment returns, the report states that insurers are investing in technologies across multiple fronts to achieve process efficiencies, improve underwriting and claims analytics and target profitable customer segments.

Integrating advanced risk/capital management and transparency with regulatory reforms: In an insurance market where countries have different levels of sophistication, capabilities and structure, according to the report, effective risk and capital management may be the best long-term strategy to carve a competitive edge in traditional markets and expand into new ones through innovation.

Expanding and enhancing catastrophe risk markets: Most of Mexico, Central America, the Caribbean and South America are exposed to substantial catastrophic loss exposures from hurricanes, tsunamis, earthquakes and flooding. Ernst & Young points to these catastrophic risks as being generally underinsured across the region, which presents opportunities for insurance and reinsurance growth and requiring risk management tools and corporate governance that demand catastrophic risk management.

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