The Americas

Non-fungible tokens have the potential to transform the aviation landscape

2024 is likely to see more airlines in Latin America using non-fungible tokens (NFTs) to transform the passenger experience. The use of NFTs by airlines is an exciting approach to ticketing, as NFTs are unique digital assets that can be linked to a passenger’s identity, making ticket transactions secure and personalised. They also offer unprecedented flexibility to passengers when exchanging or gifting tickets. Flybondi’s forward-thinking initiative is likely to inspire other airlines in the region and has the potential to modernise not only the passenger experience but also the operational landscape of aviation.

Inflation and currency devaluation will shape insurance market and court decisions

Argentina has been grappling with rising inflation and devaluation of the Argentine Peso over the past few years, as a result of, among other things, the global recession, the ongoing foreign exchange control restrictions and emergency taxation regime. As sums insured for mandatory insurance (such as motor) have not been properly adjusted to reflect inflation and devaluation of the currency, it is very likely that in 2024 we will continue to see court rulings in excess of the sum insured and that declare high deductibles denominated in foreign currency unenforceable. Finally, because of the crisis that the local insurance entities are suffering, they may also look for alternatives to maintain their net worth, such as portfolio divestments and M&A.

New controversial Insurance Law expected in 2024

After a decade of discussion in Congress, a bill for a new insurance law in Brazil may finally be about to be passed. Currently, the legal framework of an insurance contract is governed by 46 articles of the Civil Code of Brazil. The new law will revoke the Insurance chapter of the Civil Code and replace it with a more detailed and comprehensive set of rules which will predominantly provide protection for insureds. Examples of the changes include: restricting the opportunities to void cover on the basis of aggravation of risk; disclosure of an adjuster’s report to the insured; a requirement for insurers to provide guidance on salvage and mitigation of damages; a requirement for insurers to confirm, within 120 days, their position on coverage for “large losses” (as provided by regulatory rules to be set by SUSEP (Superintendência de Seguros Privados)); for “non-large losses”, a requirement for insurers to carry out claims adjustment within 30 days, failing which coverage will be automatically confirmed; a 2% penalty for delay in making payment to the insured; and Brazilian law and jurisdiction to be mandatory even where an arbitration clause applies. The proposed rules are highly controversial as they set out strict rules which will apply to an insurance contract, as opposed to the civil code which is structured in terms of general principles. The new law will also apply to arbitration and reinsurance, and conflicts with existing regulation. The final draft of the bill is still under discussion, but it is expected to be approved soon.

New economic crime legislation will increase demand for D&O cover

A new law enacted in August 2023 has reclassified around 230 current crimes as “economic crimes” and introduced different and higher penalties. This is relevant for the insurance market both locally and abroad, in particular in relation to D&O policies. There will be more criminal exposure for directors and officers, which could mean a higher take up in D&O cover and a greater willingness to pay higher premiums. Other existing covers will also be key: defence costs (administrative and criminal), environmental damage, experts expenses, administrative penalties, unintentional homicide, freezing of assets and deprivation of liberty. Insurers and reinsurers should ensure they have sub-limits in place for these or relevant deductibles. Another significant issue will be the adequacy of the questions asked of the insured prior to cover.

Rise in ransomware attacks will lead to stricter underwriting

The indisputable rise in ransomware attacks in recent years has led to stricter underwriting in respect of cyber insurance. As a trend, we have seen higher insured coverage limits for ransomware attacks, but also for other types of incident, such as denial of service attacks. Increased ransomware attacks are likely to increase the cost of insurance policies, but also impact the costs of coverage for defence costs in respect of regulatory investigations which may be undertaken against an insured following a ransomware incident. Cyber risks are definitely representing an increasing share of the market today.