Mr José Joaquín Riesen Alvarado has recently been appointed to head the Superintendence of Insurance and Reinsurance of Panama (known by its Spanish acronym “SSRP”). Following his appointment, Panama is undergoing a thorough reorganisation of the regulatory framework in reinsurance.
Panama’s insurance and reinsurance market has grown rapidly in the last year. By the end of 2014 the Panamanian insurance industry was worth US$ 2 billion and the value of direct insurance premiums was US$ 1.3 billion, which represents a rise of 8.1% from a year earlier in 2013. This growth has been fuelled by the recent enactment of a new insurance law (Law 12 of 3 April 2012). It authorised new marketing channels for insurance products (apart from traditional brokers) such as insurance sales agents.
By contrast, there are currently only eight local reinsurers registered with the SSRP. In a bid to attract more reinsurers to establish themselves locally, the SSRP is proposing to also overhaul Panama’s reinsurance law. The existing law dates back to 1996 and is no longer considered fit for purpose.
The main objective is to update local reinsurance regulation so as to align it more closely with other international markets. No details of the proposed amendments have yet been published although we are told a draft has been prepared. The SSRP is visiting reinsurers in the United States and Europe in order to canvass their opinions before publishing the new proposals.
Although many international reinsurers deal with the Panamanian market, the SSRP would like more reinsurers to establish themselves there and serve not only the Panamanian market but the region as a whole. Lloyd’s of London is in the process of registering as a foreign reinsurer in Panama and it is hoped that the new law will encourage other international players to follow suit.
A new reinsurance law is sure to attract some attention but whether it will lead to more reinsurers establishing themselves in Panama is unclear. Many of Panama’s neighbours (e.g. Colombia) have already introduced reforms and are arguably further ahead in this process. It is ambitious for Panama to believe it can overtake them in this process. In Panama’s favour are its marine insurance heritage (there are many good professionals and established knowhow from its maritime past) and its reputation for stability.
A new anti-money laundering bill is also before Parliament. The draft bill’s provisions strengthen the existing control and supervisory systems in the financial services market. They also introduce a risks based approach for regulated entities and regulators. The SSRP has been tasked with enforcement of the proposed law in the insurance and reinsurance sector. Dulcidio De La Guardia, Minister for Economy and Finance, said that implementing the law would pave the way for Panama’s removal from the Financial Action Task Force’s (FATF) “greylist” of “Improving Global AML/CFT Compliance” countries.
On 26 February 2015, the SSRP and the Financial Superintendence of Colombia signed a Memorandum of Understanding (MoU). Its main objective is to strengthen the exchange of information, mutual cooperation and cross-border supervision between both countries. The MoU was the first to be signed by the SSRP with a foreign regulatory body. The SSRP has said that more are planned with other foreign regulatory bodies.
In summary, Panamanian insurance and reinsurance legislation is set to evolve considerably during 2015. It remains to be seen whether the reinsurance market can grow in the same way as the insurance market has done in the last couple of years. At first glance this seems unlikely but until the new proposals are published it is difficult to assess what their impact will be.