Competition to temper rate hikes in Mexico as insurers seek to pass on reinsurance costs: AM Best

AM Best has held its outlook on the Mexican insurance market as stable, despite deteriorating technical results following losses from Hurricane Otis.

The rating agency said significant improvements in premium growth, up 11.2% as the country’s economy recovers, offset the lower technical result.

It also recognised the sector mitigated the full impact of Hurricane Otis losses, which raised the industry’s loss ratio by 3.4 percentage to 79.6% in 2023, on the technical result by containing operating expenses.

The sector’s combined ratio was dented by 2% last year.

AM Best said it expects premiums to maintain momentum in 2024, although at a slower pace than last year, based on projections for economic growth of 2.4%.

The agency added that reinsurance costs will be the main driver for rate increases as insurers seek to pass the costs on to buyers.

“The segment’s capacity to shift a portion of the expected increase in reinsurance costs to policyholders will play a key role in premium sufficiency in 2024,” AM Best said. “Nonetheless, a stronger competitive landscape, in line with a decline in inflation, will prove a challenge to adjust tariffs over the next year.”