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MEXICO CITY-Now that foreign insurers and reinsurers have intensified their presence in Mexico, the ensuing grab for market share, a capacity glut and tough economic times are making the country a tough place for insurers to turn a peso.

"Now we are living in a soft market," said Roberto Islas, a director of Skandia International Latin America in Mexico City. "It started in '93, but '95 was the worst for the soft market and renewal was incredible-very, very soft. It's not an easy market now."

Eduardo J. Sobrino, president of Chubb de Mexico, said he expects "tremendously soft" conditions for property and liability risks to continue through 1996. But eventually, low premiums and higher claims are bound to catch up with insurers, causing a market turn, possibly in 1997, he predicted.

For now, commercial buyers are shopping for the best property/casualty rates.

"Because right now there is this soft market and a tremendous amount of capacity available, the client is taking tremendous advantage in looking for price," Mr. Sobrino said. "It's totally a price-driven market and most commercial accounts request from their broker or from brokers up to five or six quotations because they know that there is capacity out there and they know they can get a better price."

Despite the low rates, some companies in Mexico that were hurt financially by the peso crash of December 1994 are forgoing property/casualty insurance coverage altogether.

In addition, demand for liability coverage among Mexican companies is not as great as with U.S. businesses because of a lower exposure to lawsuits.

Government deregulation of the industry in recent years, some of it made as part of the North American Free Trade Agreement, has brought many foreign insurers and reinsurers to Mexico. Indeed, insurers and analysts generally see a huge potential for premium growth in Mexico.

To date, however, the country's premium "cake is small," said Skandia's Mr. Islas. So the insurers and reinsurers vying for a limited piece of that cake are offering buyers lower rates and higher limits.

For example, some insurers say they once again are underwriting earthquake business interruption policies, referred to as "loss of profit" coverage. Such policies had become prohibitively expensive for many companies after the devastating 1985 earthquake in Mexico City and a tightening of reinsurance later in the decade.

But the recent soft conditions have meant a renewed availability of the coverage, with many companies now able to afford it, Mr. Islas said.

Some market observers predict insurers and reinsurers could have a tough time paying business interruption and property loss claims if Mexico were to face a large-magnitude catastrophe.

Mexico is susceptible to earthquake, volcano and windstorm activity, among other natural perils.

But competition led underwriters to throw some of their caution to the wind.

"Many reinsurers are trying to establish a market here, many (foreign insurance) companies are trying to establish here and the traditional Mexican companies are trying to keep market share. If you combine that with the soft reinsurance market, you have a price war on your hands," Mr. Sobrino said.

Yet, despite the generally favorable conditions, there are still some reasons for risk managers to tug at their hair as they struggle through renewals. For example, risk managers in the consumer products business report difficulties finding acceptable terms and conditions for transportation coverage of goods bound for retailers.

Truck hijackings and robberies in Mexico's metropolitan areas have driven insurers to increase deductibles and premiums for transportation policies, said Miguel A. Arriaga, technical manager for property lines for Asociacion Mexicana de Instituciones de Seguros, or AMIS, an insurer trade association.

Some risk managers have had success in reducing their losses and the cost of transportation policies.

Cigarette manufacturer Cigatam S.A. outfitted its trucks with satellite tracking systems in 1993, but the thieves quickly learned how to disable them, said Nora Leal, Cigatam risk manager in Mexico City.

Ms. Leal is also president of the Mexico risk management association, known as Instituto Mexicano de Administradores de Riesgos A.C., or IMARC.

In August 1994, the company began hiring armed guards to ride in chase cars that follow the contracted carriers hauling Cigatam's products.

That has worked well, Ms. Leal said. In 1994, the company paid about $2.5 million for its transportation policy, but in 1995, premium dropped below $1 million for similar coverage. Under the conditions of the policy, Cigatam must meet with underwriters every three months for a review of losses.

Ms. Leal said she is also working with the risk managers of other companies that manufacture consumer goods and trying to form truck convoys for self-protection.

"The amount companies have to pay (for protection) is really high, but it's lower than the cost of an insurance policy," Ms. Leal said. "And it gets products to market, which is more important than getting a loss paid for."

As for the insurers in Mexico, they say they are committed to the market regardless of current soft pricing woes.

"I think the foreign companies, such as ourselves, who are already here are very committed to the market," said Chubb's Mr. Sobrino. "And we feel that it may take longer to grow and be profitable, but we are here for the long term. We are not here to make a fast buck. We are here. We are positive. We feel this is just a stumbling block along the way and things will go on.

"I think some companies who, prior to December of last year,.*.*.were looking very seriously to coming down here may now be holding back and saying, 'Let me wait,'" Mr. Sobrino added.