by Luiz Carlos Couto, Latin America Financial Institutions Sales Executive, Bank of America Merrill Lynch and Moises Vidal, Director, Treasury Sales Manager, Latin American Financial Institutions, Bank of America Merrill Lynch
Non-bank financial institutions and public sector entities, while different, are both significant market segments seeking greater efficiency in their global treasury activities.
Strong economic growth in Latin America, positive demographics and a broad trend towards transparency and efficiency is driving a growth in demand for innovative banking solutions in the region. Two of the most important groups actively pursuing opportunities in Latin America are non-bank financial institutions (NBFIs) – such as insurance companies, pension funds and stock exchanges – and public sector entities, including federal/state entities, central banks, development banks and multilateral agencies.
NBFIs drawn to new opportunities
Deregulation and changing demographics have created opportunities for NBFIs to respond to an increased demand for services. A recent report from the World Bank notes that for the first time in history, Latin America’s middle classes will outnumber the region’s poor by 2016 . This prosperity has led to an increase in consumer spending, particularly on auto, health and other insurance products.
Brazil and Mexico, which are the largest insurance markets in Latin America, represent more than 55% of the gross insurance policies written in the region, and are already sizeable markets. However, they are continuing to grow rapidly. Total direct premium in Brazil increased 14% in 2013, higher than the 10% nominal increase in GNP. Total insurance in Mexico grew at 11% (excluding the impact of a Pemex multiyear property renewal) – well above the country’s 7.5% nominal GDP2. Robust premium growth is also occurring in other Latin American countries: Colombia’s premium growth was 8% in 2013, while total insurance premiums in Peru grew 16% .