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Multinational landscape in Latin America

Despite increasing geopolitical tensions and challenges, and an evolving risk landscape, global trade has not slowed, and there are clear pockets of opportunity in certain regions for multinational expansion.

During a recent webinar hosted by Commercial Risk, namely “Exploring risk horizons: Insights for multinational risk managers in Asia and Latin America”, Marsh leaders discussed the principal risks and emerging challenges that multinationals are encountering in two growth regions: Latin America and Asia.

Douglas Hardman, Marsh multinational leader for Latin America and the Caribbean, took a deep dive into the growth of multinational operations in Latin America and provided insight on how the insurance space is innovating to address the growing demand for global programs.

Multinational expansion in Latin America

Over the last decade, the Latin American region has seen an influx of investment from multinationals from the US, Europe, UK, and Asia. This move into Latin America has supported both growth strategies and helped multinationals to diversify their geopolitical risk.

As companies grow, so too does the level of complexity with regard to risk. This is the case for multinationals exploring expansion within Latin America as they are subject to the evolving regulatory environment of the region.

While the favorability of the region to multinationals has not slowed, the region is also seeing a boom in local activity — dubbed the “multi-Latina revolution”. These are often small family-owned operations that are undergoing expansion and now seeks to operate in other countries. Initially this occurs across the region, but recently the has been a trend for multi-Latinas to explore expansion into Europe and Asia.

With multi-Latinas expanding beyond the region, approaches to risk management have had to evolve and become more sophisticated. The connection between risk and corporate philosophy — alongside that of strategy and risk management philosophy — has been a growing trend. It is no longer enough to just buy insurance — building resilience is key to successful expansion. In many cases, the first step to building resilience lies in understanding the risks and being able to articulate them within the organisation as well as to key stakeholders.

Global programs in Latin America

The Latin American market presents a number of challenges for both multinationals and the insurance providers that service them.

According to Hardman, the region has seen substantial economic uncertainty relating to its political and social instability. While one root cause of this has been the rising inflation experienced around the world, in the Latin American region this has exacerbated existing challenges and increased volatility. That volatility is further amplified by the increase in natural catastrophes (nat cats) due to climate change.

These challenges have impacted the insurance markets, with the region seeing composite price increases of 8% in the last quarter of 2023, in comparison to the global average increase of 2% over the same period. Hardman stressed, however, that the markets were starting to see increases slowing in certain areas, giving way to many opportunities in the region for insurance providers to support the needs of multinationals in the region.

This support is materialising in two ways: through digital transformation and product innovation.

Through digital transformation, insurance providers and brokers are leveraging new technologies to increase efficiencies - the benefits of which can be passed down to clients. These technologies are also being used to improve customer experience.

Adding to this, the insurance markets are using product innovation to address emerging risk and mega trends. Microinsurance, for example, is being used within global programs to support vendors and workers, and in turn helps to support the supply chain of multinationals operating within the region. Providing low-cost insurance solutions, often built into existing infrastructure (such as mobile), increases resilience for all parties considerably.

In the same vein, parametric solutions are being used in the region to efficiently address nat-cat exposures, which are now critical to the region.

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Article

Multinational landscape in Latin America

Multinational expansion in Latin America

Global programs in Latin America

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Education needed for expansion of parametric insurance market

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Risk in Context Podcast: Mastering region-specific complexities amid multinational expansion

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Multinational landscape in Latin America

Multinational expansion in Latin America

Global programs in Latin America

Related insights

Key risk considerations for companies expanding into new markets

Education needed for expansion of parametric insurance market

Tailoring insurance to business models crucial for limiting gaps in global programmes

Risk in Context Podcast: Mastering region-specific complexities amid multinational expansion