Interview : Alejandro Simón
How would you assess the sector’s practices compared with international standards?
ALEJANDRO SIMÓN: Argentina is relatively underdeveloped when it comes to best practice in the areas of risk management and corporate governance. However, it is also true that since 2015 the National Superintendency of Insurance (Superintendencia de Seguros de la Nación, SSN) has made significant advancements in both of these fields.
Having said that, we are still far from reaching not only international standards, but also regional ones, when compared to more advanced neighbouring countries like Chile, Uruguay and Brazil. Nevertheless, international investors in the sector should look at Argentina with a new set of eyes, considering the reforms that the government is pushing forwards for the overall modernisation of the sector.
What role can the financial market play in the development of domestic insurance companies?
SIMÓN: As the sector with the greatest liquidity, our assets are more short term, while our liabilities are more long term. This is precisely the opposite for the banking sector, and thus the synergies are obvious. It is impossible to imagine a healthy and robust insurance sector without a financial market accompanying its growth and vice versa. Indeed, we are seeing more companies collaborating with local banks, utilising their distribution channels in order to reach a higher percentage of the population.
In general, the entire business model is going to change drastically, not only due to these synergies with the financial market, but also because of disruptive technologies that are changing the way we communicate with clients and creating value through the sharing economy. This is where the world is heading, and the insurance industry and Argentina itself needs to be aware of such changes, for those who do not adapt shall be left behind.
With around 170 companies currently active in the sector, to what extent can we expect a period of market consolidation in the medium term?
SIMÓN: It is unsustainable to have such a large market with a population of only 45m people. Therefore – with the exception of certain niche segments – it is inevitable that consolidation will occur. The lion’s share of the local industry is concentrated in the top-15 companies, and we expect continued consolidation following stricter regulations from the SSN. This could lead to interesting opportunities for mergers and acquisitions among both local and foreign insurance companies.
It is important to mention that Argentina will host the 46th annual general assembly of the Geneva Association, in May 2019. This will bring the CEOs of some of the world’s leading insurers and reinsurers together, which will be a historic milestone for the domestic insurance sector.
What segments would you highlight as having the most prominent opportunities for growth in Argentina’s insurance sector?
SIMÓN: The opportunities are mostly in the life insurance segment, since this area is the most underdeveloped. The level of investment in relation to total GDP in the life segment is only 4%, compared to 23% in Chile. This is easily explained by Argentina’s historic imbalances and high inflation, which have impeded instruments promoting long-term savings.
Nevertheless, the room for growth is tremendous, and we could see the life insurance segment grow four- or five-fold in the next decade. There are also interesting opportunities in the field of agriculture. However, none of these opportunities will materialise if we continue to not have a long-term development plan that promotes a widespread savings culture, and if we cannot change the perception of insurance from being a cost to an investment tool.
