Lloyd’s of London executive: Risks will increase in the Americas, Caribbean

Daniel Revilla, Lloyd’s of London’s regional president for Latin America and the Caribbean, jokes that his current address could be “on a plane.”

That because he’s commuting between his current base in Mexico City and his temporary office in Miami and locations throughout Latin America and the Caribbean. In September, Revilla, Lloyd’s former regional president for Latin America, added the Caribbean to his portfolio.

He’ll move to Miami permanently in July, and Lloyd’s new Latin American and Caribbean headquarters will be in the Brickell area.

The insurance executive recently sat down with the Miami Herald in Miami to discuss the new office and the challenges facing the insurance industry in the Americas, the region that is the top revenue producer for Lloyd’s.

Rather than an insurer, Lloyd’s is an insurance marketplace and it supervises managing agents who make the decisions on underwriting. “The managing agents are the ones making decisions on whether they want to take a risk or not,” Revilla said. Brokers are the ones who deal with clients and bring in business from all over the world. Lloyd’s makes sure all the procedures are in place for processing claims and keeps the market working smoothly.

Through the years, Lloyd’s, which got its start in the 1730s underwriting marine insurance, has insured everything from guitarists’ hands and sommeliers’ noses in the Americas to polo ponies and America Ferrera’s smile when she played “Ugly Betty” on the television series. Because Lloyd’s works with so many insurance syndicates, it can usually find someone willing to take on such specialized risks.

Q: So why Miami for your new office?

A: The reason for moving here is the Caribbean. My position before didn’t include the Caribbean. That changed last September. Lloyd’s has three offices in the region. We have the Mexican office where I’m based now; we have the Brazil office, which is the oldest, and we have an office in Colombia. Those three offices are going to keep on delivering the work they have been doing, but the inclusion of the Caribbean in my agreement has made it necessary to move across to Miami.

The reason for it is simply logistics. Bermuda, for example, is a very large market for us. But the travel time from Mexico City to Bermuda or the Bahamas sometimes take more than 20 hours. The connections are not great.

The second part of the equation is that in Miami, we have more than 10 managing agents and reinsurance companies that work across the Lloyd’s market to serve different parts of Latin America and the Caribbean. I came here to Miami to make sure I have access to them and can help them develop their participation in Latin American and Caribbean markets more efficiently. We have more managing agents in Miami than we have in the rest of the region in its entirety.

Q: The past three years have been relentless in terms of natural disasters in the Americas — hurricanes, earthquakes, wildfires, floods. What has this unending parade of calamities meant for Lloyd’s business?

A: We do a report every so often called the City Risk Index. It’s very interesting because it gives you a sense of the risks that are out there. It analyzes 279 cities and looks at 22 risks across the world in a broad sense from cyberattacks and pandemics to civil unrest and war, earthquakes, volcanoes, windstorms and all that. When you look at risks in that way, you see that 59 percent of the risks or the cost of risks that are expected to afflict these main cities are associated with man-made events, and only

41 percent will be catastrophic events of the kind you just mentioned.

What kind of risks are we talking about? In Chile, for example, we just had a big disruption in the economy caused by protests, and this civilian unrest is not by any stretch of the imagination a catastrophe of natural creation. You have wars, cyberattacks such as WannaCry [a 2017 ransomware attack that targeted computers around the world]. That kind of attack tells you cyber is a risk that will have implications worldwide much faster than other types of risks. The likelihood of a pandemic affecting the whole world will take weeks or months to evolve, but the impact of WannaCry was instantaneous. Now we have the new coronavirus that is scaring everyone. The fact that pandemic is mentioned in the report as a top risk is significant.

Q: But the natural disasters seem to get everyone’s attention?

A: Exactly, and I get that. I live in Mexico City so thinking about earthquakes certainly gets my heart going, but earthquakes in Mexico City only rank sixth in terms of revenue loss.

Q: What is the biggest risk?

A: It is usually market crash, believe it or not. When we look at Latin America in the last report we produced in October 2018, there was $546 billion in exposure worldwide and out of that $44.73 billion of that exposure was in Latin America. Market crash represents a bit more than a third of that exposure with $15.21 billion. No. 2 is earthquake with $4.75 billion; then civil conflicts, $4.5 billion; $3.59 billion related to sovereign default; pandemics, $3.1 billion, and then you go down to tropical windstorm with $2.8 billion; $2.57 billion for floods, and then $1.62 billion, volcanoes. With the overview I just gave you, you have a fairly clear view of what could impact the region and certainly the world economy as well.

Q: How have you been handling the Dorian-related claims? [Through October 2019, the most recent period for which it has data, Lloyd’s had paid out $138 million in claims related to Hurricane Dorian, which stalled over the Bahamas in September and caused an estimated $3.4 billion in damage.]

A: In every one of the catastrophes we’ve had in the Caribbean this year and in years past, we’ve done a very good job, authorities in the islands have said, in our response and the commitment we’ve had. [During the spate of Atlantic hurricanes in 2017, Lloyd’s paid out $1.6 billion in claims for Harvey, $2.1 billion for Irma-related claims and $1.1 billion in claims related to Maria].

It’s a very important area of the world for us. The Americas overall represents 54 percent of revenue for Lloyd’s. It is an area where we take a lot of the risks from hurricanes and other catastrophes, so we need to be on top of events when they happen and make sure we pay back as quickly as possible.

Q: How is climate change impacting the insurance industry? It certainly seems to have an impact on the frequency and intensity of weather events.

A: We’re seeing a trend of increasing amounts that we’re paying out for catastrophes like hurricanes, but that also has to do with more development and more exposure. The frequency and severity of storms may increase over time and that is something we’ll have to be very cautious about as well as the fact that when they reach land, the beaches are now full of beautiful buildings.

I think the risks will increase with sea level rise. The risk of flooding will increase. As the oceans get warmer, the intensity and frequency of hurricanes will increase.

Q: What is the insurance penetration rate in Latin America and the Caribbean? Has it increased in the wake of all the natural disasters in the region in the last few years?

A: Immediately after the fact it does increase; you see an uptick in insurance penetration. But there’s still a long way to go. The insurance penetration rate in the United States is more than double that in the region. So regional insurance penetration is growing, but not as fast as I would like to see it grow.

This story was originally published March 2, 2020 at 6:00 AM with the headline "Lloyd’s of London executive: Risks will increase in the Americas, Caribbean."