Risk and insurance do not escape the sweeping changes taking place in Latin America, explains Stavros Costarangos.

What is happening in Latin America? Everything! From globalisation, automation, deregulation and competition to privatisation, and risk and insurance are part of that process.

Risk management as a discipline and management process is not very well known throughout the region, but there is a growing need for these issues to be discussed and researched. The insurance market is now almost completely deregulated in the region, allowing competition take its way to benefit consumers. Little by little those involved in the process of buying insurance for corporations are adding the risk management ingredient to their performance.

Although there are not many full time "risk managers" in Latin America, other corporate officials are fulfilling the risk manager's duties in a partial manner. Such is the case with those in charge of industrial safety and engineering, comptrollers, finance directors, general managers, etc.

Only multinationals that have a presence in Latin America have their local people deal with risk management issues at the time when the corporate risk manager instructs on insurance placings and fronting arrangements (if they apply), as well as with loss prevention and safety programmes.

There is a lack of formal education in risk management, which is not typically seen as part of higher level university courses. Literature, books and other written information are not readily available, and when they are, they are written in English, not Spanish or Portuguese.

We must remember that Latin Americans are not insurance oriented individuals, as is the case with US Americans who carry at all times to some extent their five basic coverages: homeowners', car, life, health and liability. Local culture considers insurance as a luxury instead of a necessity. That is the case with insurance, so you can imagine what risk management has to go through to be learned, accepted and implemented.

Nonetheless, there were pioneers in this aspect of promotion who are true risk managers. In 1993 at the annual conference of RIMS in Orlando, Florida, a group of risk managers from several Latin American countries joined together and formed the Latin American risk and insurance management association - Alarys, which stands for Asociacion Latinoamericana de Administradores de Riesgos y Seguros. (See pages 30 and 31 for a message from the current president of Alarys in English and Spanish.)

Alarys was originally formed by member associations from Argentina, represented by Adara (Asociacion de Administradores de Riesgos de la Republica Argentina); Brasil, represented by Abgr (Associaçâo Brasileira de Gerência de Riscos); Mexico, represented by Imarac (Instituto Mexicano de Administradores de Riesgos y Seguros) and Venezuela, represented by Asvars (Asociacion Venezolana de Administradores de Riesgos y Seguros). A year later Panama joined Alarys through Aparys (Asociacion Panameña de Administradores de Riesgos y Seguros).

In November 1994 Alarys hosted its first congress in Cancun, Mexico attended by almost 400 participants. This year Alarys holds its third congress, which is taking place in Buernos Aires, Argentina from 22 to 25 November.

There are many interested in promoting risk management in Latin America, and there are many Latin Americans interested in learning about risk management. It is a meeting of the minds that has to take place between those with the "know-how" and those with the "know-who".

The language barrier must be overcome and cultural differences must be taken into consideration. Efforts must be made by all involved to attend the different conferences, seminars and congresses that the Latin Americans organise. Translations of published information already available should be promoted, as with El Proceso del Manejo de Riesgo by Dr. George L. Head, already in Spanish.

The internet gives a good way to increase knowledge of the Latin American market. You are just a couple of clicks away from visiting the following sites:







There are local and regional publications to which one must subscribe to keep updated on developments in the region on a business perspective as well to know what is going on the insurance market.

Our emerging markets are in constant change, making the management of our risks very particular to our countries with exposures that are somewhat similar to those in other areas. When analysed in depth, these risks can be addressed with the proper "atención".

Panama as a captive domicile

Considered the first Spanish speaking domicile in the captive insurance business, Panama enacted legislation in 1996 to allow the formation of captive insurance/reinsurance companies in its territory, and has this year registered its first captive.

The development of captives in Panama comes at a time where we think it to be just right for what is happening elsewhere in the Latin American region, through the continuing privatisation of large government operated concerns in the telecommunications, energy and transportation areas, as well as in the insurance field where few state owned monopolies remain.

Panama's advantages include an international banking system that hosts over one hundred banks of US, European, Asian and from Latin American origin. It holds the US dollar as legal tender, giving it one of its strongest advantages not only for the formation of captives, but also for the enormous trade and economic activity that has been going on for decades at the Colon Free Zone Trade Area, one of the largest of its kind in the world.

The international and business community is bilingual in Spanish and English and those involved in the financial areas of Panamanian and regional development, are often multilingual as well as professionally trained in their particular fields of insurance, banking and finance.

With the international business community eyeing Latin America as the untapped market for new opportunities, corporations that have and will be establishing branches and/or regional operational hubs in the area will most surely look into alternative risk transfer/retention options, undoubtfully making captive formation a possible choice of action.


A one time application fee of US $1,000 must be presented to the Insurance & Reinsurance Superintendency, as the local regulating authority, with a $2,000 annual license fee. Capital requirements have been established as follows:

US $150,000 for general lines.

US $250,000 for long term


With no taxes on premiums, capital gains or profits, captives incoporated in Panama will also enjoy the non-existence of double taxation treaties with other countries.

A minimium of 35% of reserves must be invested in locally authorised instruments.

A solvency requirement of a 5:1 ratio between net premiums and capital must be met when presenting audited financials every year.

An insurance/reinsurance risk report of operations must also be presented.

Panama has been jointly promoting this new law between the government and Aparys, the local risk management association, as well as through the efforts of individuals who have been guest speakers at different forums and who have been travelling the region.

Panama, known to many as "the land bridge of the Americas" at "the crossroads of the world" expects to become the "natural choice" of those in the region and elsewhere that are selecting the proper domicile for captive company incorporation.

Stavros Costarangos is regional director, Qstion Managers Corporation, Panama. E-mail: qmanagers@pananet.com. These articles appeared in their original form on the captive.com web site, (http://www.captive.com), which is very useful source of information about captives and captive domiciles.