Business is booming in Latin America, and has been for the past decade, according to a recent report from Businessweek. That means there has been an increase in interest in the region from insurance companies, many of whom have set up offices in the South Florida city of Miami to better serve their growing Latin American customer base.
The lure of Miami
It may be easy to see why Miami has become a popular location for major insurance companies, particularly for companies who hope to engage clients in Latin America. "Miami has direct flights to most major Latin American cities , a multicultural population, and an ideal climate, it seems logical that it has grown into a hub for the region," says Bobby Vernon, Founder and Principal of Dual Specialty Underwriters.
As it turns out, the appeal of Miami has worked both ways. American and European companies have flocked to the city to reach out to businesses in Latin America. Now many Latin American businesses, such as Grupo Avadora, a marketing company from Brazil have come to Miami to reach out to American clients.
Miami appeals to Latin American companies for many of the same reasons it appeals to U.S.-based companies, a bilingual population. Many of the city’s residents speak a second language, so it is easier to hire people who speak both English and the language of the country the company is based in. U.S.-based companies also benefit from hiring employees who can speak Spanish or Portuguese.
Miami wasn't always a hub for insurance companies. Bobby Vernon was among the first to decide to focus on providing specialty insurance products to the Latin American market from a home base in southern Florida.
Vernon set up shop back in 2000 and stresses that the landscape was very different in those days. "Back then, Latin America was mostly a property insurance market with very few focused on specialty insurance. Distribution was highly inefficient and there wasn't much of a wholesale intermediary channel or professionals who knew much about specialty lines of insurance. For the market to grow it needed specialists who could bring product knowledge and new capacity to the market. There were a few halfhearted attempts at wholesaling from London at the time, but you had to speak English and work on London time. I felt with product knowledge, Spanish language skills and operating locally in Miami, there was an opportunity to create a new distribution model and change the market."
Since that time, many other major insurance companies, from AIG to Liberty International Underwriters, a division of Liberty Mutual, have followed suit. "When AIG, a market leader, decided to relocate 60 people from New York and transferred their entire Latin American Division to Miami in about 2004, it didn't take long for others to follow." Vernon said.
In 2006, Liberty International Underwriters (LIU) opened an office in Miami. Since that time, the company has seen growth between 30 and 40 percent annually in Latin America.
In addition to insurance and reinsurance companies, insurance intermediaries such as the Hyperion Insurance Group from the UK also took notice of Miami’s increasing importance. In 2002 Hyperion partnered with Vernon’s company and ultimately acquired his business in 2008 and subsequently changed the name to Dual Specialty.
The city continues to draw in insurance companies, including reinsurers, intermediaries, and those working in the specialty market. Companies that currently do business with Latin America have also recently expanded the products and services they offer in the area.
For example, in 2012, LIU began offering a new line of specialty insurance to the Latin American market, focusing on the environment. At the time of the announcement, the vice president of LIU Environmental, Rob Maier, stated that "Latin America continues to experience rapid growth in its insurance specialty lines. For that reason, I believe the environmental insurance market will experience an increase in demand during the next three years due to three synergistic reasons: greater awareness of environmental risks, stricter environmental laws that emphasize the economic guarantee for damages derived from licensed activities, and the general lack of specialized products in the commercial market to address environmental liabilities."
More recently, Aspen Insurance announced that it would be opening its own Miami hub, with the goal of serving the onshore energy market in Latin America. The energy market is just phase one of the insurance company's plans to expand into Latin America. According to its CEO, Mario Vitale, a number of other specialty products will also be introduced to the region.
Making the move to Miami hasn't just been a good deal for insurance firms. It's also playing a big role in improving the city's unemployment rate. Although the city's unemployment rate was more than 9 percent in 2013, it had fallen to less than 7 percent in July 2014. The combination of new jobs and increased tax revenue create a win-win situation for both insurance companies and Miami.