Interview: Dino Mon
What impact has the new Law 12-2012 had?
DINO MON: The flexibility of the law is an interesting feature. It is open to new agreements and regulations coming from the Superintendency of Insurance and Reinsurance (SSRS), together with private sector players. Technical regulations are not written in the law. In fact, it covers only some basic structural and commercial aspects. Most changes or updates in regulation can now be done through a public circular or notice, avoiding complicated legal reforms. This will make it a long-term law as long as specifics can be easily updated through a consensus among various sector players. Law 12-2012 has the potential to allow the insurance sector to start a bigger development. For this to happen, and after concluding the regulations, the SSRS must become a supervisor and minimise its role as a regulator.
This government has reinforced the mandatory requirement for car insurance through new measures such as forbidding garages to work on uninsured cars or compelling construction companies to have their fleets insured before having any works permit approved. The development of this regulation has opened new opportunities for insurers regarding car insurance.
Another expected development of the law in 2014 will be the new regulation on the constitution of insurance company reserves in accordance with market valuation standards. We, the insurance companies, are expecting agreement drafts from the SSRS.
How can Panama enhance its long-term prospects in the reinsurance business?
MON: Reinsurance stabilises the insurance sector, although for Panama it will be key to first wait until the insurance sector is better developed. Through adequate regulation we can also start to develop and expand reinsurance. We need to learn how to walk before we run. Panama has to be ready and prepare everything to grow into a centre for reinsurance. The SSRS shall push for legal certainty, transparency and enabling incentives in reinsurance business. Insurance companies are currently focusing investment efforts on technology and corporate governance. This is aimed at strengthening their positions based on good financial information management regarding international rules and norms. These investments will guide the sector to the same level as international insurance regimes.
In what way do you expect the sector to develop over the next three to five years?
MON: The SSRS and the main private sector players are still working on the development of more than 20 aspects of Law 12-2012. The main challenge faced by the sector is how to remain sustainable after this era of massive infrastructure investment. The SSRS has been working on new areas to open in the insurance business in readiness for when these investments end.
Fire premiums are set to increase due to recent fires in the Colón Free Zone and a mall in Panama City, which caused more than $71m in damages. There will be a hike in car premiums too as a result of the rise in accidents, higher repair costs and the shortage of parts.
Sometimes drivers have to wait six-nine months before their cars are repaired because of this shortage. Meanwhile, with the approval of new alternative commercialisation channels and the rise in internet use we expect clients to buy more policies directly from insurance firms. This will likely increase the availability of low-premium insurance products currently unattended by intermediaries due to the low commission rates. Products like basic medical coverage can now be available for low-income families at an affordable premium.
Is the scarcity of skilled staff hindering development?
MON: The sector needs more qualified staff with excellent communication and analytical skills. Insurance firms have to retain these skilled workers, develop them and train them in leadership, using more resources than in other markets where we operate. Insurance firms need to start five- to 10-year talent management plans to retain talent and develop in-house workers.
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