Infrastructure developments make Panama an attractive, if competitive, market

More recent regulations relating to insurance are:

• Agreement No.12 of October 15, 2014: Rules related to Mergers of Insurance and Reinsurance Companies;
• Agreement No.10 of September 10, 2014: Rules related to the Transfer or Assignment of the Brokerage, Insurance Reinsurance Companies and Brokers as well as Insurance Adjusters.

According to Tania Solis, an Associate from the Panama office of Central American law firm Arias & Muñoz, there are no barriers to foreign insurers, although companies must domicile in Panama and obtain an insurance licence in order to do business in Panama.

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She added: “Notwithstanding the above, insurance law provides that, in the following cases, insurance services can be obtained from a non-domiciled, non-licensed insurance company: If it is set out in an international treaty; If the insurance coverage does not exist in Panama; When it is impossible to obtain such insurance coverage, having been rejected by an authorised insurer in Panama.”

Growing market

According to Swiss Re, total premium volume in Panama in 2015 increased by 4.3% from $1.34bn in 2014 to $1.4bn in 2015. Non-life premium volume in Panama increased by 3.3% last year, from $1.03bn in 2014 to $1.07bn in 2015. That followed 6.9% growth in 2014.

There are 28 insurance companies in Panama, and a number of reinsurers. Leading non-life insurers, according to statistics from the Superintendence of Insurance and Reinsurance of Panama, are Compañia Internacional de Seguros, ASSA Compañía de Seguros, Mapfre Panamá, Seguros Suramericana Assicurazioni Generali, and Aseguradora Ancón.

Other multinational insurers operating in Panama include AIG and Chubb. The top ten insurance companies account for around 80% of the non-life market. There are over 350 registered insurance brokers in Panama.

AM Best pointed to the “relatively limited and increasingly competitive insurance market in Panama, which the rating agency considers to have an elevated level of country risk.” Tania Solis from Arias & Muñoz said that in terms of capacity, insurance companies are able to cover local market needs, including the risks involved in the construction and operation of Panama’s Metro System, a major infrastructure development.

“However, for the Panama Canal Expansion, the largest project at the Canal since its original construction, which creates a new lane of traffic along the Canal through the construction of a new set of locks, doubling the waterway’s capacity, participation of major global insurance companies such as Munich Reinsurance Co. was required in order to cover all the risks involved in this mega project,” she explained.

Competitive rates

In relation to rates, Ms Solis said that since Panama was an open economy with free supply and demand, each insurance company sets its own rates. She said the insurance industry in Panama was a very competitive marketplace with a variety of rates and policy coverage.

AM Best pointed out that Panama signed a free trade agreement with Mexico in 2014 in an effort to increase regional economic integration and pave the way for the country to become a full member of the Pacific Alliance, a Latin American trading bloc comprising Chile, Colombia, Mexico and Peru. It added that Panama has no central bank or formal lender of last resort. Best noted that the US dollar is legal tender in Panama which limits the country’s ability to manage monetary policy.

In 2016, the Financial Action Task Force (FATF) removed Panama from its grey list and confirmed that Panama has the legal, regulatory and institutional framework defined in the Action Plan for the prevention of money-laundering, the financing of terrorism and the proliferation of weapons of mass destruction.