The path forward

The COVID-19 pandemic has forced companies to get creative in how they offer products, as well as the variety of their offerings.

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THE GLOBAL OUTBREAK of the COVID-19 pandemic and the efforts to minimize its spread have and will continue to have considerable impacts across all sectors, especially insurance and reinsurance. Colombia is no exception: local providers, users, and investors are changing their demands and expectations as the pandemic continues to reshape traditional offerings and methods of delivery.

In light of developments ushered in by the pandemic, Colombia has made innovation and development of insurance products. The country established a regulatory sandbox for insurance, as well as financial, technology innovation products. As part of this decree, firms are eligible to apply to the FSC for an expedited temporary license that will allow them to test their new products with less intense regulatory requirements for up to two years.

The COVID-19 pandemic has forced insurance and reinsurance companies operating in Colombia to activate their business continuity plans (BCPs) to ensure cover and services remain uninterrupted. In March 2020, the Financial Superintendent of Colombia (FSC), the government organization responsible for the sector, released governance guidelines on BCP arrangements, which included a stipulation that regulated financial institutions create an emergency response committee responsible keeping the FSC informed of the results of BCP implementation. Financial institutions are also required to maintain in-branch services as long as such activity is not affected by lockdown measures.

The FSC has also announced that submission deadlines for supervisory reporting such as resolution plans and stress testing have been postponed until 2021. In order to soften the impact pandemic-induced market volatility may have on balance sheets and solvency ratios, the FSC has allowed a number of changes to the accounting treatment of invested assets. The regulator is also showing an increased form of tolerance in terms of meeting solvency requirements and liquidity standards, and the FSC is considering getting rid of the practice of automatically applying sanctions if a firm violates solvency requirements. As Colombia imposes limits on investment allocations, the regulator has adopted greater flexibility in terms of holding off on sanctions for firms violating their investment limits. Additionally, insurance providers are being encouraged, or in some cases required, to inform policyholders and other customers in all relevant lines on coverage and potential exclusions in regard to losses related to the COVID-19 pandemic.

The FSC has also mandated that firms strengthen their digital offerings and infrastructure without increasing transaction costs for customers, allowing more services to be offered through digital channels. This comes alongside the FSC’s request that firms increase security and attention in terms of the cyber security risks associated with increased use of digital services.

Insurance and reinsurance firms were far from the only businesses to off increased digital services; businesses in sectors across the economy have seen considerable upticks in customers accessing digital services, Specialist insurance provider Beazley was among the first firms to debut a product in the country designed specifically in response to increased use of digital platforms. Its “Virtual Care” policy is aimed at providing protection from risks inherent with increased technological access of healthcare and wellness services. With cybercrime and other types of digital attacks significantly on the rise since the start of the pandemic, the London-headquartered insurer now offers clients in Colombia

first and third-party protection, cybercrime cover, and will include costs for managing cyber-attacks and data breaches.

The Colombian workers compensation market has also been affected by the COVID-19 pandemic, with a great deal of employment uncertainty coming along side nationwide lockdowns. The development of this segment has been the backbone of insurance sector growth in recent years, seeing an annual average growth rate of 11%. The impact of the coronavirus pandemic has stunted growth of the segment; while premiums were growing at a rate of 10% in March 2020, just three months later that figure fell to -2%. The implementation of lockdown measures aimed at curbing the spread of the coronavirus brought much economic activity to a standstill, forcing many companies to find ways to reduce operating costs. This encouraged the government to enact legislation related to aimed at combatting the spread of the virus. In March 2020, the government mandated that 7% of premiums earned from workers compensation products be directed towards prevention and education efforts for companies with workers on the front lines.

The Colombian health insurance market has also been making advancements in 2020, some of which have made it a global leader in some segments. In late 2020, the government extended health care coverage to include THC and CBD medical cannabis products, representing a major step forward for patients, medical research, investors, and the instance industry. The move by the government removes some economic obstacles to medical cannabis and increases patient access. The industry has seen strong growth and investment in recent years, and Colombian cannabis companies have extended their footprint into North America and Europe.