A few days ago, the governments of Cuba and of the United States announced the full reestablishment of diplomatic relations between both nations.

Since 1977, Cuba and United States have operated diplomatic missions called "interests sections" in each other's capitals, under the legal protection of Switzerland. From 20 July 2015, those interest sections will become embassies. This, together with the removal of Cuba from the list of countries sponsoring terrorism, are signs that the restoration of economic affairs between EEUU and Cuba may be closer than what was initially thought.

Although it may be soon to see any clear opportunity for the insurance business in Cuba, international insurers have been keeping an eye on the island and agree that the hotel industry, agriculture and travel related products are the areas where opportunities may first surface.

Travel risk business

An important change that took place after the review of the Cuban Assets Control Regulations by the Department of the Treasury and Commerce of the United States in January 2015 was that non-tourism categories of travel were expanded. This means that travellers are no longer required to submit a specific license request for travel, which before usually took several months to obtain.

The ease of these restrictions will certainly result in more people interested in travelling to Cuba, who will need travel insurance and assistance in the island if something goes wrong. The recent approval by the EEUU Commerce Department of several fast ferry companies to offer transportation of passengers and cargo to Cuba has not gone unnoticed. One of these six companies is the Spanish corporation Balearia, which plans to operate two routes to Havana from Key West and Port Everglades in Florida.

As per Cuba’s regulations, all travellers visiting the island are required to have mandatory insurance to cover all medical expenses during their stay. Such coverage must be provided by an insurance company “recognized” in Cuba, as per the terms of the regulations.

In practice, ASISTUR, S.A. Asistencia al Turista (Assistance to the Tourist), which acts as broker for travel and auto insurance policies, holds agreements with international insurers who provide travellers with medical coverage. In these cases, local authorities have accepted the involvement of international insurers, which have no legal restrictions to make payments and to be involved in any financial transaction with Cuban entities.

In Cuba, these type of policies are offered by Empresa del Seguro Estatal de la Nacion (ESEN) and Seguros Internacionales de Cuba (ESICUBA) and the daily premiums range from 2,5CUC to 3,5 CUC. [1]

Agroinsurance

Although perhaps not as immediate as travel insurance, another industry of interest in Cuba for the international insurance markets would be the agriculture sector.

Today, in Cuba, insurance coverage for agro is offered exclusively by the ESEN and this line of business represents almost 70% of its portfolio. Most of the premium and indemnities are paid in Cuban pesos (CUP), except for programmes issued to the tobacco industry, which are paid in convertible pesos. [2] The reasoning behind this is that tobacco is an export product and any potential claim (particularly in respect of Business Interruption) would be made in CUC, given that their revenue is also obtained in hard currency.

Hotel business

Another potential sector of growth where there is already a presence of the international reinsurance markets is the hotel industry. Currently ESICUBA, which is one of the state owned insurance companies operating in Cuba, provides coverage to any foreign interest located in Cuba, including hotels and resorts. Some third party liability risks related to the hotel industry, insured by ESICUBA, are usually reinsured with the European and Canadian markets.

A challenging market

Foreign carriers interested in playing a role within the Cuban insurance market will face two important challenges: on one hand, with very limited access to capital or finance, insurance may not be a priority for the Cuban people. On the other hand, the coexistence of two official currencies, the convertible peso and the Cuban peso highlights the fact that the adoption of a hard currency strategy for other than the fortunate few is yet work in progress.

In October 2013, the Cuban government announced its plan of a single currency system and in February 2015, the Central Bank started to circulate higher denomination Cuban pesos’ bills, in preparation of the currency unification. This would definitely be a critical step in preparing the economy for the opening to global markets.

On the insurance culture side, the Cuban authorities have become aware of the work that needs to be done, in order to promote the need of insurance among the Cuban people. This would be, with no doubt, a difficult task in a country where the State has assumed the role of the one and only insurer.

This article was first published on 13 July 2015 by Insurance Day.