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CORPORATE | 14.10.2020

Aviation: a business driver for MAPFRE Global Risks in Central America

Marta Villalba

José María Romero

CEO of the Central America and Dominican Republic Subregion

In MAPFRE Global Risks we know that trust is a key element for building long-term relationships: Transparency and communication with our clients are our raison d’être.

MAPFRE Global Risks offers insurance solutions for large companies and have a wide experience derived from leading international programmes through our service network that operates in over 100 countries worldwide.

Our position in the Spanish market and prominence in Latin America, together with our solid international growth in recent years, underpins our ability to develop tailored solutions for the most complex risks: Energy (Electricity and Oil & Gas), Industry, Telecommunications, Construction, Large Infrastructures, Aviation and Space, Marine, and the Services sector. We strive to exceed our clients’ expectations.

Along with Mexico, this subregion is part of the LATAM North structure, and its scope includes Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Panama, and the Dominican Republic. We are the number one private company in the sector, and we aspire to contribute close to 900 million euros in premiums and more than 40 million in profit to the group. This is thanks to a young, committed team with great management skills which, combined with a strong regional presence, helps us to continue offering a multi-country model to facilitate our clients’, brokers’, and providers’ daily operations with comprehensive, standardized, and cutting-edge service.

In our environment, our abilities as a multinational firm operating in all lines of the sector – including Finance, our Assistance and Credit Insurance subsidiaries, having our own Reinsurance Company with GRU, being a company specializing in major clients, and our presence on all continents are features that make us highly visible as we are the only multinational firm operating in all countries.

In the current context of reduced private investment, economic downturn, and production capacity decline, large companies in the countries where we operate are facing challenges in which – given the weight and potential in our countries’ portfolio – the reliability, solvency, business model, vision, experience, and technical and financial abilities of the Global Risk Unit will be crucial when it comes to addressing the challenges ahead with guaranteed success:

  1. Dependence on exports.
  2. Drop in commodity prices due to contraction of global demand and dependence on exchange rates.
  3. Significant decline in tourism. In some countries in our environment, tourism is the second largest source of revenue after remittances.
  4. Risk aversion, worsening financial conditions, and capital outflow from the portfolio.
  5. Geopolitical uncertainty.

Even in the foreseeable scenario of a decline in insurance business premiums, with an asymmetrical effect for each line, MAPFRE has made a decided commitment to Central America and the Dominican Republic as a region with a great deal of potential for future growth and one that operates largely as an emerging block that has been able to grow beyond other Latin American countries with excellent profitability and an appropriate return on capital. As a whole, Central America continues to have business appeal and, even with a number of social and structural problems, international connections have been made and significant tax incentives have bolstered the pull of foreign capital.

In the retail sector, low industry penetration and insufficient participation in the GDP of countries in our environment significantly impact economic growth. The limited protection for the majority of families/small and medium enterprises also contributes to this scenario, as they are forced to take on complex situations with their own equity. Within this frame of mind, this MAPFRE subregion is taking on its immediate future by focusing on the following challenges:

  • Digital transformation, technology, and a commitment to innovation and standardized models.
  • Narrowing the insurance protection gap.
  • Driving understanding of fiscal incentives based on the characteristics of each market.
  • Bolstering the life insurance penetration rate as a basic social protection measure.
  • Taking on new regulatory frameworks, Solvency II, Mandatory Insurance, etc.
  • The issue of pensions/an aging population. Working under the table is widespread, and the percentage of workers contributing to social security is insufficient
  • Commitment to professional mediation/Insurance culture.

Our presence in large companies and in GRU business development helps to reduce the social impact of the issues listed above, as it is a great channel for our insurance solutions and relationship models to gain access to other lines’ programs (benefits, customer loyalty, mass operations, etc.). Synergies with Solunion and our Assistance subsidiaries help us to offer unique products in a highly competitive market, where the banking industry and large international brokerage firms are the main distribution channel, requiring cutting-edge solutions as well as an incredibly fast time to market.

“We strive to foster the trust required to build long-term relationships based on transparency and continuous communication with our clients”

This year the “stars” are the new aviation businesses, which are seeing great results in Guatemala, Costa Rica, and Panama. Sixty-eight percent of our premiums come from this line. In the energy sector, the adjustment to minimum electrical capacity of 100 megawatts and the toughening of market conditions are helping us to enter into local operations. In construction, although there was a temporary shutdown of activity, we have worked with GRU to identify 12 major projects in the region with a total projected investment of over 22 billion dollars. We are quite hopeful about these projects.

We are facing more problems in industrial risks as this is the sector with the most competition, in addition to the characteristics and requirements of the local market.

With regard to opportunities, we must keep in mind that, despite its relatively small size, Central America and the Dominican Republic comprise a highly contested commercial territory, given its strategic value. Large sums of local, Latin American, North American, and European capital come together there in a number of sectors: finance, energy, tourism, telecommunications, logistics, food, etc. The 100 largest companies in Central America had revenues of over USD 70 billion in 2019, and they generally have shared characteristics such as brand recognition, organizational experience, production capacity, and know-how on the ground thanks to many years in operation.