Stable insurance markets in Colombia and Guatemala, says Best

AM Best is taking a positive view of the Colombian insurance market, giving it a stable market segment outlook. It said insurance companies in Colombia have maintained strong capital positions, and the market as a whole shows room for growth in a favourable economic climate backed by adequate regulation. Best said Colombia’s economic conditions have improved and the insurance market has demonstrated solid operating performance with diversified distribution channels. But while the country’s insurance penetration rate had been growing since 2014, it declined to 2.8% year over year in 2018. Premium growth expanded 1.6% in real terms last year, significantly lower than the 4.5% seen in 2017, mainly due to lower premium volumes of provisional, health and personal accident insurance coverages. However, said Best, the industry’s combined ratio improved in 2018, to 104.5% from 106.2% in 2017. The ratings agency noted that profitability was strong in 2018, and insurers generated a return on equity of 13.2%. For non-life insurers, compulsory automobile insurance benefited from the increase in minimum wage, as well as from adjustments to its price and the increase of new car sales during 2018. Overall, Best expects Colombia’s insurance market to build a larger business base while improving technical results and maintaining strong risk-adjusted capitalisation, helped by predicted economic growth for 2019, along with better trade terms and a reduced commercial deficit. Best is also giving a stable market segment outlook to the Guatemala insurance market, where insurance companies have demonstrated the ability to adjust underwriting strategies amid volatile economic conditions to maintain profitability, as well as strengthen their capital bases. Guatemala’s insurance market is the third largest in Central America, with the non-life insurance segment accounting for 79% of total gross written premiums, but the market remains top heavy, as eight of Guatemala’s 28 insurers account for 81% of market premiums, said Best. Additionally, the country’s insurance penetration rate has not changed significantly since 2013, and currently amounts to 1.2% of the country’s gross domestic product, below the Latin American average penetration rate of 2.9%. Premium growth contracted by 0.7% in real terms in 2018 despite lower inflation, owing to a decline in underwriting risk appetites, as well as economic growth that was less robust than in prior years, said the ratings agency. In nominal terms, the market grew 3.5%, below its five-year average of 5.8%. Profitability improved in 2018, generating a return on equity of 23.8%, up from 21.9% in 2017. Net income increased 17.8% due to stable underwriting performance and better financial products. Best said it expects current market conditions to prevail, and its preliminary estimate for economic growth is approximately 3.0% for 2018, just above the 2.8% recorded in 2017, and it expects Guatemala’s economy to expand at the same rate in 2019 as in 2018. “Companies are well positioned to maintain their product offerings in line with strict underwriting guidelines, and therefore maintain stable results. Additionally, the improving regulatory environment is positive, as it provides adequate guidelines to enhance liquidity and solvency,” said Best.

Stable insurance markets in Colombia and Guatemala, says Best

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