The Latin American insurance market shows strong signs of recovery after the pandemic
Latest figures show growth of 11% vs. 2020 for all lines
2021 has been a year of important recovery for the Latin American insurance market (life and non-Life), reaching USD 151.3 billion, a growth of 11% vs 2020. However, compared to 2019 (USD 158.5 billion), the market is still 5% down.
The countries with double digit growth were Mexico and Peru (17% each; for Mexico partially due to the Pemex 2-year policy), Chile and Colombia (15% each) and Argentina (12%, but inflated by the gap between inflation and foreign exchange rate). Compared to 2019, the biggest growers were Bolivia (9%), the Central American Countries (as a region +7%), Peru (6%), Mexico (5%), Colombia and Uruguay (3% each). At the same time the countries with the biggest reductions were Brazil (-16%) and Chile (-10%) due to lockdown and local currency devaluations.
Brazil, Mexico, Argentina, Chile, Colombia, Puerto Rico and Peru account for 91% of written premiums while in 2019 these same countries concentrated 94% of the premium. Thus, the smaller countries grew more than the larger ones in 2021.
In terms of penetration (premiums vs GDP), the value of 3% for 2021 is similar to 2015, showing that the insurance sector in Latin America is having a slower recovery than other sectors (in 2019 it was 3.1%).
The density index (premiums per capita) shows the second lowest value for the last 10 years (USD 241), better only than 2020 when it reached USD 219, and 21% lower than the peak value of USD 306 obtained in 2013.
In the top five, Puerto Rico Leads theses indexes with 6.3% and USD 2.309 respectively, followed by Brazil (3.8% & USD 285), Chile (3.7% & USD 599), Colombia (3.1% & USD 186), and El Salvador (2.9% and USD 127).
Compared to written premiums, ceded premiums behaved differently: in 2020 there was only a 2% reduction and in 2021 there was a significant growth of 16%, reaching USD 23.9 billion, which is the highest value in the last decade. This amount reflects the hardening of the reinsurance market. Therefore, since ceded premiums grew faster than written premiums in 2021, the percentage cession increased from 13.3% for all lines in 2019 to 15.8% in 2021.
By country, the same top 7 for written premiums (Mexico, Brazil, Chile, Colombia, Argentina, Puerto Rico and Peru), concentrated 83% of the ceded premiums market, or 8 percentage points less than for written premiums.
The countries with the largest growth in ceded premiums compared to 2019 are Brazil (22%), Colombia (17%) and Chile (15%).
Local carriers have the largest share of written premiums with 45% and the second one for ceded with 35%. On the other hand, global insurers have 39% of written premiums and are the leaders of ceded premiums with 50%. The remaining shares are for regional companies (those owned by Latin Americans with a presence in more than one country).
In 2019, local companies had 50% of written premiums, which means they lost 5 percentage points: two went to globals and three to regionals. Regarding ceded premiums, globals gained one percentage point that came from local companies.
The percentages for ceded over the last two years and those prior show that about 50% is negotiated with reinsurers in the “open market” and 50% placed at worldwide reinsurance programs from global headquarters.
By Country, globals have the majority share for written premiums in Chile and Mexico (55%), followed by Brazil (38%), Ecuador (37%) and Colombia (31%). Locals, however, lead in Paraguay (70%), Uruguay (69%), Costa Rica (68%) and Dominican Republic (59%). Finally, regional companies are the largest in Venezuela (69%), Honduras (62%), Panama (58%), Nicaragua (45%) and Guatemala (41%).
By line or class of business, what we consider as life lines (health, life, pensions and workers comp and personal accidents) account for 64% of written premiums and only 15% of ceded premiums. Ten years ago, they represented 60% of written premiums and 17% of ceded premiums. This is a sign of increased development of the insurance industry in Latin America, where the potential for life is much higher than non-life.
Non-life classes (mandatory motor vehicle accident insurance, motor, P&C and surety and credit) have a minority share of written premiums (36%) and the majority of ceded (85%). This clearly shows that life classes have much higher retention rates than non-life. Equity levels of the insurance carriers limits their retention capabilities for non-life, mainly due to the high catastrophic exposure of most of the region.
The following chart shows the porfolio mix by country for the eight classes of business that we have standardized for Latin America.
Not all countries have the eight classes, since this depends on local insurance legislation.
For 2022, we foresee additional recovery of the market for both written and ceded premiums, as well as for life and non-life classes. However, at the beginning of this year we were more optimistic due to the predicted end of the effect of the pandemic in the economies of the region, and the rebounding signs they were showing. Now we are less optimistic because of the impact of inflation and other factors, such as the Russia–Ukraine conflict, on the region .
However, despite this, the Latin American insurance market will still grow in 2022, and we expect it will surpass the 2019 market value of USD 159 billion; but we will still need a few more years to get back to the 2013 high water mark of USD 178 billion.