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Custody for Colombia: A “gold standard” for regional insurers
Custody for Colombia: A “gold standard” for regional insurers
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Custody for Colombia: A “gold standard” for regional insurers

12/09/2018

Francesco Rossini

Francesco Rossini

Head of Client Development, Hispanic LatAm

BNP Paribas Securities Services

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Francesco Rossini, ‎Head of Client Development, Hispanic Latam for ‎BNP Paribas Securities Services, discusses the merits of having a globally recognized custodian providing localized services for Latin American insurance firms

Having successfully weathered the recent turbulence affecting the Latin American region, today Colombia remains in good financial standing and is increasingly viewed as a stable environment by global investors.  Among those benefiting locally have been the country’s top insurance providers, which have continued to thrive as economic conditions improve.

Despite recording double-digit gains of late, observers believe that the industry's relatively low penetration rates and growing consumerism can support additional growth going forward. Meanwhile the government's ambitious infrastructure plans under the fourth generation (4G) initiative are also likely to boost insurers’ fortunes over the near-term.

Regulatory rule revisions have made it easier for foreign interests to become involved in Colombia’s insurance market, through both, acquisitions of and partnerships with, local firms. As the market grows more crowded, leading insurers will find it necessary to sharpen their skill sets in order to remain competitive. As noted by Ernst & Young in a recent report, companies lacking system-wide integration due to outdated legacy systems will face significant technology upgrades required to improve distribution, analyze client data and handle other integral tasks.

Though not yet mandated by local regulators, partnering with a reputable custodian can help Colombia’s insurance firms achieve best practices around daily operations, risk management, reporting and other activities, allowing managers to fully focus on their key objectives.

Enhanced communications

As the market in Colombia is not yet SWIFT-compliant, bolstering insurers’ communications competency remains a key objective. This involves replacing outdated IT systems with agile, state-of-the-art platforms for generating reports and other critical information, while using automation to compile data across multiple sources, thereby reducing the likelihood of siloed activity.

For instance, a central feature of our custody program at BNP Paribas is Neolink, a web portal that streamlines the process of sending order instructions to the custodian, following strict standards for its execution.

Improved risk awareness

Enlisting a third party to help monitor risk is also paramount, particularly given the increase in data demands within the insurance segment. At BNP Paribas, our data navigation analysis tools are capable of delivering highly granular risk and performance analysis even when processing massive volumes of data. Over the near term, we believe this kind of benefit will become even more valuable to a wider range of regional insurers.

 A local presence

While market reforms have made it easier to access Colombia’s insurance market, we believe that having a local presence is the only real way to ensure consistency of client communications and service excellence. 

BNP Paribas Securities Services maintains an operational support hub in Bogota, offering account management not only to Colombian clients, but to those throughout the Hispanic Latam region. Offering this kind of centralized access ensures that clients have round-the-clock, real-time operational assistance in their own language, greatly improving transactional efficiency in the process.

Added insurance

Despite the myriad benefits available, a number of insurers have yet to take advantage of outsourced custody resources at their disposal. As key participants in a leading frontier market, however, these companies have much to gain by moving non-core activities to expert third parties.

Though not yet mandated by regulators, partnering with a custodian not only gives insurance firms access to an array of cutting-edge solutions and technologies, but also boosts investor confidence by adding a layer of operational independence. Rather than self-settling through a local CSD, having an intermediary that uses automation to process daily tasks provides firms with a level of safety and assurance that is well worth the extra investment, particularly over the longer term.

Since entering Colombia in 2013, BNP Paribas has offered foreign and domestic sell-side and buy-side clients a full slate of custody, clearing and settlement services. Today, Colombia is one of 27 countries in BNP Paribas’ expanding proprietary network, which includes access to over 90 markets worldwide.  With $11.5 trillion in assets under custody, BNP Paribas remains one of the globe’s fastest-growing custodians.

Colombian insurers are embracing best practices for asset safety

BNP Paribas is partnering with several leading Colombian insurance firms to implement best practices for asset safety.

Recently, Zurich-based Swiss Re Corporate Solutions enlisted BNP Paribas to implement best practices, already utilized in other markets, on behalf of their Colombian entity, Compañía Aseguradora de Fianzas S.A. Confianza (a.k.a. Confianza S.A.), which they had acquired in 2014.  Leveraging our global relationship with Swiss Re, we were able to implement custodial solutions in an efficient manner that met their requirements.

Partnerships, like the one with Confianza, underscore our ability to help insurers automate risk management, reporting and other capabilities, allowing firms to reduce costs, while prioritizing core business activity. Having on-the-ground operational support was central to securing this relationship, as it enabled us to demonstrate first-hand the benefits of having locally-based managers who can respond to client needs in a timely manner.

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