New I.I.I. Paper Examines the Business Landscape for Private Insurers in Cuba’s State-Owned and Operated Market

Opportunities May Exist to Insure an Island Nation Facing Extreme Catastrophe Risks—But With Formidable Obstacles

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NEW YORK, March 14, 2016 The Insurance Information Institute (I.I.I.) today released a white paper on the prospects for United States property/casualty insurers considering doing business in Cuba—a country that has been almost completely off limits to business opportunities for more than five decades. 


With President Barack Obama’s history-making trip to the island later this month and the U.S. slowly reducing trade restrictions, the issue of insurance is particularly relevant.


The paper, Reopening for Business: What Renewed Ties between the U.S. and Cuba Mean for Property/Casualty Insurers, was co-written by I.I.I. President and economist Robert Hartwig and Lynne McChristian, I.I.I.’s Florida representative, who is also on the teaching faculty at Florida State University in Tallahassee.


Download the full paper here: Reopening for Business.


There may be opportunities for some businesses, the paper concludes, but there are significant obstacles, too—the most immediate being the current U.S. embargo on doing business in Cuba, which only Congress can set aside. Beyond that, there will be significant challenges in overcoming the impediments set by many years of communist rule. Diplomatic relations with Cuba were severed in January 1961, as noted by the White House when it announced President Obama would travel to Havana on Monday, March 21.


“The reopening of U.S. diplomatic relations with Cuba may in the future present intriguing commercial opportunities for U.S. businesses, including property/casualty insurers,” said Hartwig. “Cuba’s current economic and political situation may not create an ideal business environment for insurers today. But given Cuba’s risk profile, which we detail in the paper, the country needs the type of financial protection from natural disasters and other risks that insurers can provide.”


Cuba is vulnerable to a potent mix of catastrophes, including hurricanes, storm surge and earthquakes and the state generally takes responsibility for any resulting property losses. But the Cuban government is limited in its financial ability to mitigate against natural disasters or rebuild impacted communities after a significant event, Hartwig noted.


The insurance market that exists in Cuba in 2016 is limited. Two insurance companies are currently operating in in the country, organized under the banner of the Caudal Group, which is owned and operated by the state. The two companies are Empresa de Seguros Nacionales (ESEN), which writes auto, liability and travel insurance, but draws 70 percent of its premiums from agricultural concerns; and Seguros Internacionales de Cuba, S.A. (ESICUBA), the provider of coverage to Cuban businesses like transportation and construction firms. ESICUBA also insures foreign-owned interests situated in Cuba, such as hotels and resorts.


“The challenge for U.S. insurers will be to dissuade Cubans from the idea that the Cuban government owns and insures almost everything,” said McChristian.


“Cuba’s 11 million citizens have had little need to buy auto or property insurance,” McChristian said. “The Cuban government controls vehicle ownership,” she said, adding, “Cuban workers are restricted to one vehicle. The Cuban real estate market has its own restrictions as well, and that has hampered the formation of a vibrant homeowners or renters insurance market.”


Despite the formidable regulatory and cultural obstacles they’d face before doing business there, U.S. property/casualty insurers may be attracted to the Cuban market.


“Many U.S. insurers are interested in growing overseas, particularly in nations that are nearby and offer significant economic potential,” Hartwig said. “As Cuba’s economy potentially opens itself to private investments from around the world, insurers and reinsurers will carefully monitor developments and seek opportunities as economic, political and regulatory considerations allow.”


For more information on international insurance, download the I.I.I.’s 2016 International Fact Book.



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