Fix late overseas reinsurance payments, global insurers ask Argentina
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Insurance trade bodies around the world have asked Argentine authorities to remove regulatory barriers that are holding up payments of reinsurance premiums to foreign firms as other regions are now experiencing a similar issue.
This week the Global Federation of Insurance Associations, which represents 40 re/insurance trade bodies, wrote to the Argentinian insurance supervisor (SSN) saying the situation could result in lower or no reinsurance coverage and retrocession of existing business with Argentine re/insurers.
The letter said the issuance of the Joint General Resolution of the Federal Administration of Public Revenues (AFIP) and the Secretary of Commerce No. 5271; and Communication "A" 7622 of the Central Bank of Argentina, “has resulted in major restrictions and delays” in the payment of reinsurance premiums abroad.
Payments were delayed since October, the letter said, with the exception of some facultative reinsurance and/or retrocession treaty payments that were released in early December.
Brad Smith, chair of the GFIA Trade Working Group, told mallowstreet that all international reinsurers operating in Argentina are affected by this delay and approximately 200 payments are pending approval.
“Payments are not rejected, they are only pending,” he said.
Argentina’s foreign exchange rules have been in place since 2019 but Smith said the GFIA is raising this concern because a similar issue is now arising in Africa, Asia and the Americas.
He explained the country requires two levels of approval, one from AFIP and the other from the trade secretary, the body in charge of imports in the economy.
AFIP requires the first set of approvals because the currency needed to pay global reinsurers is the US dollar, Smith said, but all insurance accounts in Argentina are in Argentine pesos: “Because of that, we need to ask for approval that allows us to get the dollars for the payment.”
What are the wider implications?
The GFIA warned that these restrictions risk affecting the functioning and continuity of the Argentine re/insurance market and its relationship with the international reinsurance market.
“This jeopardises the solvency of those insurers and their policyholders. It also means that the international reinsurance market will lose interest in accepting risks from Argentina, which in turn would make it more difficult for local insurers to place their risks at competitive prices”, Smith wrote in the letter.
He argued delaying payment puts local re/insurers at risk as in most cases they are not in a financial position to face the entire risks alone. In addition, the restriction creates risk concentration within Argentina and decreases coverage capacity, as well as access to new products and distribution channels.
Smith said: “These are ultimately detrimental to individual policyholders and companies and the development of Argentina’s domestic insurance industry.”
The GFIA called on the SSN to “urgently remove any regulatory barriers” to the payment of reinsurance premiums to foreign firms.
The SSN has been approached for comment.
Is local reinsurance the solution for cedants?
