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Insuring the island, insuring the world

Companies in Puerto Rico target Hispanics on the U.S. mainland, tap new markets in Latin America and Europe for both insurance and banking


July 4, 2002
Copyright © 2002 CARIBBEAN BUSINESS. All Rights Reserved.

No room to grow: With the local market saturated, the only place for insurers to grow is off island

The island’s shores are no limit for Puerto Rico's insurance companies. Many insurers are aggressively seeking business opportunities on the mainland, in Latin America, and throughout the world.

We have what it takes

"The Puerto Rico market is highly competitive, and those insurers that want to continue to grow and survive must increase business. Entering other markets is an alternative many are considering or have already considered," said local Insurance Commissioner Fermin Contreras.

According to the Insurance Commissioner’s Office, in 2000 there were 350 nonlocal insurers and only 50 locally owned insurers in Puerto Rico. More telling, however, are the premiums each segment subscribed that year. Nonlocal insurers subscribed $840 million in premiums, whereas local companies subscribed almost $4 billion.

"I think our industry can expand efficiently because it has highly capable human resources. It is an industry that is financially solid despite the catastrophes, such as hurricanes, that have occurred here. We have always been able to pay claims. Also, the Hispanic market in the U.S. mainland is not being targeted effectively, which presents opportunities for domestic insurers. Many of the products offered here are already in Spanish, which makes it easier to reach this market," said Marcos Genemaras, president of Professional Insurance Agents of Puerto Rico.

National Group, Puerto Rican American Insurance Co. (Praico), and Cooperativa de Seguros Multiples (CSM) are some of the locally based companies that have entered or will be entering the mainland U.S.

Markets to explore

Many companies are exploring first the booming U.S. Hispanic market on the mainland. "In 2002 the largest minority is the Hispanic segment, which represents approximately 38.6 million, or 13.4%, of the U.S. mainland population," according to the 2002 U.S. Hispanic Market Report by the Miami-based Strategy Research Corp. "In the year 2020 one out of every five U.S. residents will be Hispanic." And these numbers do not include the Puerto Rico population.

Further, the report indicates, "Only 52% of Hispanics in the U.S. have some sort of insurance policy. Overall, 42% reported having health insurance and 33% life insurance. These numbers are significantly lower than for African-Americans and Non-Hispanic Whites. Insurance. . .is another industry that can benefit in marketing to Hispanics and in exploring the opportunity to expand its presence within this segment."

Some local insurance providers are already diving into this fertile market.

National Group

In 1984, National Insurance Co., now a subsidiary of holding company National Group, opened an office in Florida to offer property & casualty insurance. Three years later, National Life Insurance Co. also opened its doors in the Sunshine State, using its Coral Gables offices as a launching pad for expansion into other markets on the U.S. mainland, in Latin America, and beyond. In fact, it already has a strong presence in Argentina, Brazil, Chile, Costa Rica, the Dominican Republic, Ecuador, England, Peru, Spain, Uruguay, and Venezuela, according to President Carlos M. Benitez Jr.

A new company to be established in Florida, National Insurance Co. of Florida, will have the same owners as National Insurance Co. in Puerto Rico but will be registered in Florida as a separate entity, explained Benitez. It will integrate the existing property & casualty business in Florida. The life insurance business, meanwhile, will remain a branch of the Puerto Rico operation.

"In about five years, we expect our Florida operations to obtain $30 million in written premiums," predicted Benitez.

National Group is also venturing into banking services, said Benitez, "thanks to the passing of the Gramm-Leach-Bliley (GBA) Act in 1999. We are creating National Financial Group, under which we will integrate all the new financial services we plan to offer."

"In the next 60 to 90 days we should be set to begin operating National American Mortgage Corp. We expect this subsidiary to have $5 million in mortgage loans in its first year of operations."

The names of future financial subsidiaries have already been registered, said Benitez. They are: National Leasing, which will lease office and commercial equipment, and National Auto Leasing.

National Group has been involved in financing premiums through its subsidiary National Premium Finance since 1969. Insurers were allowed to offer such service before the implementation of the GLB Act, explained Benitez, adding that National Group as a whole achieved approximately $200 million in written premiums in 2001.

Puerto Rican American Insurance Co.

Antonio Huertas, Puerto Rican American Insurance Co. (Praico) COO and senior executive vice president, said the company is about to merge two U.S. mainland insurance firms it purchased last year. "Last year we began operating Amstar Insurance. This company was operated from Mapfre, our holding company in Spain, but now is operated from Praico in Puerto Rico. In 2001 we also purchased Florida-based Consolidated Insurance for $7 million. We will merge the two and operate them from our Puerto Rico offices." The company has obtained approval by the Insurance Commissioner’s Office to finalize this process.

Consolidated Insurance’s specialty, said Huertas, is commercial policies such as auto insurance and property & casualty, though it does offer personal policies.

"We always looked at the U.S. stateside market from Puerto Rico. We are also looking at other markets, such as the Dominican Republic and Venezuela. But it is easier to jump into the States from Puerto Rico because these two markets have a lot in common with respect to regulations and requirements."

Praico is Puerto Rico’s 5th largest property & casualty insurance company, reporting more than $110 million in direct written premiums for 2000.

SBLI USA Mutual Life Insurance Co.

SBLI USA Mutual Life Insurance Co. Inc. is similar to Praico in that although their holding companies are based outside of Puerto Rico, their local operations serve as the springboard for an expansion into Hispanic markets in the U.S. mainland. New York-based SBLI USA plans to use the advertising and marketing strategies it develops in Puerto Rico to target Hispanics in the U.S.

"Our marketing experience in Puerto Rico will serve as a launch pad to develop business in the Hispanic markets of the U.S. All marketing, advertising, and sales strategies will be developed in Puerto Rico and then launched on the mainland. In April, we plan to take the advertising campaign we developed here to New York," said Ignacio Sarro, vice president & general manager of Hispanic markets for SBLI USA.

Cooperativa de Seguros Multiples

Rene Campos, president of Cooperativa de Seguros Multiples (CSM), recently announced the cooperative’s plans to open a branch in Orlando, Fla., at an investment of more than $1 million.

"This is the first time that a Puerto Rican-owned co-op insurance company goes outside of the local market in search of new and bigger business opportunities. We have just received authorization from the Insurance Commissioner’s Office of Florida to market and sell our two principal products, private automobile insurance and homeowners’ insurance. I expect the branch to write about $2 million in premiums each year," said Campos.

The new Florida branch will employ about 10 people and will be supported by two leading insurance agencies in that state: Sykes Insurance Agency in Orlando and Atlas Insurance Agency in Kissimmee.

CSM is ranked Puerto Rico’s 4th largest property & casualty insurance company in the CARIBBEAN BUSINESS Book of Lists 2002, with more than $138 million in directly written premiums for 2000.

"The cooperative movement in Puerto Rico was allowed by law to enter the financial services area before the GLB Act was passed. We have more than 160 savings & credit cooperatives throughout the island," Campos told CARIBBEAN BUSINESS.

Other companies cooking expansion plans

United Surety & Indemnity Co. (USIC) is another locally owned insurance provider that is about to jump into the Florida waters. "We plan to expand to Florida and create a new company to offer homeowners insurance in alliance with a stateside company with which we will share risks. That company has all the infrastructure necessary to get this plan going," said President Frederick Millan.

Meanwhile, Popular Insurance, a subsidiary of Banco Popular, is in negotiations to expand into the U.S. Virgin Islands, said President Angela Weyne.

Ramon Ruiz, the newly appointed president of Triple-S Management Corp., told CARIBBEAN BUSINESS that he intends to take the company’s services, which include health, life, and property & casualty insurance, to markets outside Puerto Rico.

The art of networking

Insurance Commissioner Contreras and others in the industry all agree that Puerto Rico needs to remain the insurance powerhouse it has become. To accomplish that, the industry must reach beyond the island’s borders. Who better to set the example than the Insurance Commissioner’s Office?

Contreras told CARIBBEAN BUSINESS that his office is forming strategic alliances with the Dominican Republic, the U.S. mainland, and Latin America.

In March, the Insurance Commissioner’s Office signed a Technical Collaboration Agreement with the Superintendence of Insurance of the Dominican Republic "to strengthen relations between both institutions and to contribute to the development of the insurance industry in both islands by exchanging ideas and experiences," Contreras said.

The agreement establishes both parties’ intentions to collaborate on seminars, conferences, internships, and other activities to promote this desired exchange. Contreras and Domingo Batista, the Dominican Republic’s Insurance Superintendent, have agreed to meet periodically to follow up on measures for the economic development of their respective industries.

"We have chosen to form this alliance to make it easier for local companies to enter the Dominican market," said Contreras.

According to the Superintendence of Insurance of the Dominican Republic, net premiums for insurance companies in that country increased 23% from 1999 to 2000, with subscriptions of more than $6 billion in premiums.

Contreras said he has also formed alliances with the National Association of Insurance Commissioners of the U.S. (NAIC). "Puerto Rico is already on two committees, the Committee for the Modernization of Financial Services and the International Committee, which is headed by the Insurance Commissioner of South Carolina. Tom Gallagher, the chair of the southeastern zone, which includes Puerto Rico, believes our industry has great potential."

The NAIC, established in 1871, is the organization of insurance regulators from the 50 states, the District of Columbia, and the four U.S. territories. The NAIC provides a forum for the development of uniform policy when appropriate.

That’s not all though. Contreras said his office is also interested in participating in the Association of Insurance Superintendents of Latin America (Assal), which includes Portugal and Spain. "We want to build a bridge with other jurisdictions and to understand the markets of other countries," he said.

Contreras will attend the next Assal meeting in San Pedro Sula, Honduras, in July, where member countries will be able to discuss the regulation and supervision of their insurance industries and to exchange ideas and experiences.

Some locally based insurance companies, however, have anticipated the Insurance Commissioner’s Office and have already made the jump to other markets.

The implementation of the Gramm-Leach-Bliley Act (GLB) in 1999 helps these companies diversify their offerings by entering the financial services arena. Conversely, banks such as Banco Popular are allowed to enter the insurance business. So not only are local insurers popping up outside of Puerto Rico, but they are offering new products. 

Industry insiders agree this is just the beginning of a wave of expansions originating in Puerto Rico and reaching not only the U.S. mainland but the entire hemisphere.

This Caribbean Business article appears courtesy of Casiano Communications.
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