Insurers began to worry about the lack of dollars to pay reinsurance premiums, a service that covers them for the most serious claims.
“The lack of foreign currency in the Argentine economy is a serious problem that can bring greater inconvenience, not only to the country’s insurers but also to people and companies that rely on insurance as a tool to be able to respond to the possibility of a risk that concerns them”, indicated the companies belonging to the Argentine Insurance Committee.
In the note, the companies underline that “the national government has blocked access to foreign currency for the payment of international premiums.” Reinsurance is the key to the solvency of insurers, because thanks to them insurers transfer part of the risks to reinsurers and can deal with claims that are more serious than the risks the occurrence of which it would represent millions of dollars that the local system could not cover with their capital,” the companies said.
Depending on the industry, there are countless examples of claims that generally involve reinsurers, such as large area fires such as factories, port accidents, large production losses in agricultural campaigns, climate risks such as floods, Droughtserious accidents with many victims, among others.
In the event that Argentine insurers fail to meet their commitments with international reinsurers, this would have very serious consequences for the sector, they said.
Insurers enter into commitments with policyholders for very long periods in based on a reinsurance scheme that they estimate to maintain. Payment interrupt events cause the decrease in these reinsured covers but the impossibility of automatically transferring it to the insured, which suggests the insurers a risk for which they have no capacity, could cause the bankruptcy of companies, as well as the impossibility of insurers to respond with the commitments undertaken with customers.
In this framework, the Chambers dialogue with the national authorities, expressing their concern about the lack of foreign currency.
“If the international market cannot be satisfied, the consequences can jeopardize the solvency of the sector,” they said. And they added: “As insurers, we will not be able to cover large companies due to international distrust, the consequent reduction of future capacity and the increase of future costs, while another unintended effect will be the consequent lower participation of the sector as an institutional investor in the financing of the public and private sector with direct implications for the real economy”.
According to the companies, it is the Superintendency of Insurance that should be responsible for any pre-approval system for access to the dollars and not other agencies (such as the Central Bank, the Ministry of Commerce or the AFIP) “that may not be able to knowledge of the risks the sector is facing,” they warned.
However, the insurance companies have admitted this there is still time to avoid risks.
NEITHER
Source: Clarin
