On February 19th, Daniel Castillo will complete one month in the Underwriting vice-presidency of IRB Brasil RE. Elected to the new position by the Board of Directors (BD) of the company in January, he occupied a chair on the collegiate until then. In this interview, the executive, who has been dedicated to the reinsurance market for more than 35 years, working in several countries and companies, tells how he landed at the largest reinsurer in the country and talks about his career. Check out:
How did you arrive at IRB Brasil RE?
I returned to Brazil in 2020, thinking I was going to retire and live in Bahia. But that was short lived. Months after the start of the pandemic, I received an invitation to return to the world of reinsurance, this time as an advisor to IRB. The first tip they gave me is that it should be ‘nose in, fingers out’. I confess that I did not imagine that ‘advising’ would be so difficult. Still feeling very active, I felt a huge need to be more executive. That’s when the new CEO, Marcos Falcão, my BD colleague, called me to lead the underwriting of the largest Brazilian reinsurer.
What strategy should be followed by the underwriting area?
To underwrite we don’t need big formulas, we just need to know how to add and subtract. In other words, the premium we receive must be enough to pay claims, expenses, taxes, salaries and leave a portion for our shareholders. If this simple equation is not positive, the business will not survive.
In this context, what is the role of the underwriter?
The underwriter needs to be a risk analyst. He must determine a clause that protects that asset and price it based on the exposure it will assume. There’s no secret. If it is a collection of individual risks, he should responsibly analyze the portfolio of risks and determine the fair price for the exposure he is going to take.
How not to fall into traps?
The big challenge is not to get carried away just by the volume of business. Pricing should be more science than art. Analyzing the past and predicting the future is essential. We must not fall into the temptation of believing that, without a solid foundation, this time will be better. It sounds simple, but it’s not. Maintaining discipline in some areas of business requires a complete analysis of what can happen, what can be claimed years later, properly reserving the risks we took in the past to try to predict the improbable: the famous ‘tail risk’. As Warren Buffett says, ‘only after the tide do we know who were those who swam naked’.
Does all this tranquility come from the experience accumulated over the years? How it all began?
I’ve learned a lot from the opportunities I’ve had throughout my career. I have a degree in Civil Engineering from PUC-RS, and my first job was at SulAmérica, as a risk inspector. Later, I took the same position at Bradesco Seguros. Soon came the years of high inflation in Brazil and, newly married, I decided to leave with my family for Canada. There, I was an engineering underwriter at Munich Re. I learned a lot. Typical German reinsurer, I was sent to Germany to learn the company’s language and culture. But shortly afterwards, I took on the position of manager of optional activities in Montreal, whose predominant language is French. One more language, one more culture, one more learning experience.
You also served at General Re.
When I thought the family was already established in Canada, General Re, an American reinsurer, offered me an opportunity in London, the world center of insurance and reinsurance, to develop the facultative operations on the European continent from there. There, I learned about the incredible market of the ‘Lloyds of London’, a unique experience for a risk underwriter. Already, in the 90s, the subject was the end of the reinsurance monopoly in Brazil. In 1997, I had the joy of returning to our country, to open the General Re representative office, but the unconstitutionality action came and the opening of the market was postponed. Then, after the difficult experience in Argentina in 2001, I returned to Germany, with the mission of managing the reinsurance business in Europe, Latin America, the Middle East and South Africa. I was the only Latin American to be part of General Re’s board of directors, a unique and immensely learning experience in a highly competitive world and with the news of Sarbanes-Oxley and Solvency 2.
