Premium volume down 12% in Latin American insurance market – Mapfre report

The Latin American insurance market saw an 11.9% decrease in premiums during 2020 to $134.361bn, of which 57% ($77.055bn) came from non-life insurance and the remaining 43% ($57.305bn) from life insurance, according to a new report from MAPFRE Economics and published by Fundación MAPFRE. The consolidated net result of the region’s insurance market fell by 30.1% to $9.316bn in 2020, according to Mapfre.

The report, The Latin American insurance market in 2020, says premium volume was heavily impacted by the pandemic and the effects of exchange rate volatility in the region as the major currencies saw devaluation. The economy of Latin America and the Caribbean contracted greatly in 2020, at about -7% (compared to limited growth of 0.1% in 2019).

Life insurance saw a sharp decline in Brazil, Mexico, Chile and Colombia, and overall, premiums in the life insurance segment in Latin America fell sharply by -18.7% in dollar terms (compared to +5.1% in 2019). Non-life business proved more resilient but still dropped by -6.1% (compared to -1.1% in 2019).

The report states: “In the aggregate, the non-life segment in the region performed in line with this business segment in other regions of the world, with a significant downturn in auto business volume, which was partially offset by the health business performing counter-cyclically, as is usually the case with major economic crises and particularly in this health-related one. The auto line of business, representing 16.2% of all premiums in the region, contracted -16.1%, more than in 2019 (-8.5%) when the economic slowdown in Latin America was quite marked, on top of the abrupt contraction of the economy in 2020 as a result of the pandemic.”

As a result, the total global share of the Latin American insurance market fell again in the past year, reaching 2.1%. The report notes that the declines in premium volume affected most of the major markets in Latin America. It says the Chilean market fell the most (-15.3%), followed by Ecuador (-5.3%), Mexico (-3.1%), Peru (-2.4%) and Brazil (-2%). However, it notes there were some exceptions, with Puerto Rico (13.7%) standing out for its growth due to the strong performance of health insurance.

The report also reveals that the region’s average penetration rate (premiums/GDP) was 3.1% in 2020, higher than the previous year by 0.17 percentage points. This indicator improved in the non-life segment (1.8% compared to 1.6% the previous year), but worsened in the life segment (1.3% compared to 1.4% the previous year).

In the decade 2010-2020, there was an increase in penetration of 0.7 percentage points (in terms of GDP). The report notes that “the sharp decline in GDP in 2020 due to the pandemic and the resilience shown by some lines of the insurance business with great weight in the region, particularly the health sector, undoubtedly contributed to this result”.

The report also analyses the insurance protection gap (IPG), which it says “represents the difference between the insurance coverage that is economically necessary and beneficial to society and the amount of coverage that is actually acquired”. The estimated IPG for the Latin American insurance market was $206bn in 2020, 16.7% lower than in the previous year.

Mapfre adds in the report: “Determining the IPG allows us to measure the region’s potential insurance market, or the size that the market could achieve if this gap disappeared. The potential insurance market in Latin America in 2020 (the sum of the actual insurance market plus the IPG) therefore stood at $340.4bn, 2.5 times larger than the current regional market.”

Latin America: Non-life premium volume ($m) by country

Country Non-life premiums ($m) Growth 2019-2020 (%)
Argentina 10,350 7.2
Bolivia 369 -0.6
Brazil 16,339 -21.5
Chile 4,978 -6.4
Colombia 5,758 -9.0
Costa Rica 1,224 2.9
Ecuador 1,278 -6.3
El Salvador 462 -0.7
Guatemala 795 3.7
Honduras 309 2.5
Mexico 14,401 -11.1
Nicaragua 161 -0.6
Panama 1,119 -3.7
Paraguay 348 -5.4
Peru 2,268 -2.6
Puerto Rico 14,642 13.8
Dominican Rep. 1,088 -4.4
Uruguay 794 -8.6
Venezuela 373 1.9
Total 77,055 -6.1

Source: MAPFRE Economics (based on data from supervisory bodies in the region)

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