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Latin America has been hit particularly hard by the pandemic, but economic recovery is underway in the region, and it should return to its pre-pandemic GDP level in 2022. The new sigma report released recently by the Swiss Re Institute, "Turbulence after lift-off: global economic and insurance outlook 2022/23“ states that the regional economic growth is expected to be slower in 2022 and 2023 compared to 2021.
The regional real GDP is projected to grow by 6% in 2021, followed by a more moderate growth of less than 3% in 2022 and 2023.
Differently from the economy, insurance premium growth should outpace that of GDP due to the rising risk awareness:
We estimate Latin America L&H insurance premiums to grow at a real rate of 10.7% in 2021, before returning to the near trend growth rate of 5.1% in 2022 and 3.8% in 2023.
For P&C premiums in the region, we project growth of 5.6% in 2021, and around 5% and 4% in 2022 and 2023.
During the pandemic, the number of deaths per million people has constantly been higher than that of the global aggregate. As a result, life insurers have faced an unprecedented increase in life claims.
In Brazil, the life insurance loss ratio more than doubled in April 2021 compared to the same period in 2020. By September 2021, 15% of all COVID-19 deaths in the country were covered by life insurance policies. We see that investment returns will likely be challenged by ongoing low interest rates that do not fully compensate for inflation, making underwriting discipline crucial.
For Mexico, a country with high exposure to damaging natural catastrophes such as earthquakes and hurricanes, COVID-19 is the costliest event ever recorded for the local insurance industry. Pandemic-related insured losses over 18 months total USD 2.5 billion as of September 2021, surpassing the USD 2.4 billion loss from hurricane Wilma in 2005.
Of the total COVID-19-related losses, 57.5% stem from life insurance payouts and the remainder from health insurance. The average COVID-19-related life insurance payout in Mexico to date is USD 11,287, and for medical expenses it is USD 24,096. The number of life insurance claims related to the pandemic almost triples that of health insurance claims, highlighting the low penetration of health insurance in Mexico, which is representative of the region at large.
The report also identifies three global structural trends that will shape the longer-term path of the world economy and that will impact Latin America as well, the three Ds:
The current scenario continues to generate more demand for insurance protection and we as part of the re/insurance industry can do more to help societies become more resilient.
