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Latam motor insurance: not back to pre-Covid levels

Viaduct in in Sao Paulo downtown

The motor insurance market in 2021 for Latin America is still down by 6% compared to 2019

The motor class of business premiums in Latin America reached $23.449 billion in 2021, a figure that compared to 2020 represented a growth of 9% in current terms, but at the same time still represents a reduction of 6% compared to that of 2019, the pre-pandemic year.

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Latin America motor: written premium & annual growth

One of the main reasons for this result is the lower number of new units sold in 2021 vs 2019, which can be observed in the following graph, for the largest countries. Mexico had the highest reduction with 47%, followed by Brasil with 24% and Argentina 17%.

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Latin America motor: annual sold units (does not include motorcycles)

Doing a country analysis, Brazil comprises 31% of the market, followed by Mexico with 23%, Argentina 22%, Chile 5%, Colombia 4%, Puerto Rico 3%, Peru 2%. These seven countries account for a total of 90% of the premium in the region. It is important to mention that Argentina ranks third due to the mandatory third-party liability motor insurance, which represents two thirds of this line’s premium.

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Latin America motor: written premium market share (total $23.449 billion in 2021)

Between 2020 and 2021, the countries with the highest growth were Chile 25%, Argentina 15%, Colombia 11%, Mexico and Peru 8% each, Brazil 6% and Central America as a whole 5%.

The value of written premiums of this line with respect to GDP was 0.47% (vs. 0.49% in 2020 & 0.49% in 2019). In per capita terms, each Latin American spends only $37 annually (vs. $35 in 2020 and $41 in 2019).

On average in Latin America each insurance company issued premiums of $58 million per year. In Brazil this figure is $224 million, in Mexico $177 million, in Chile $86 million, in Argentina $77 million, and in Peru $63 million.

Global companies (which have operations worldwide) captured 39% of the market, while local companies, those that only have operations in their domestic market, reached 33% of the total written premiums; regional insurers (which operate in more than one Latin American country) have the remaining 28%.

Global companies lead in Chile – 81%, followed by the Brazilian ones – 56%, the subsidiaries in Colombia with 40% and in Ecuador with 40%. Regionals lead in Honduras and Venezuela with 77% each, followed by Panama with 63%, El Salvador with 52% and Uruguay with 40%. Finally, local insurers lead in Costa Rica with 77%, followed by Puerto Rico with 75%, Bolivia with 73%, Paraguay with 70% and Argentina with 52%.

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Latin America motor: written premium breakdown between local, global & regional companies 2021

This class of business does not require much reinsurance, however, $1.2 billion was ceded in 2021. This amount is 34% higher than the 2020 cession and 18% higher than 2019, showing an increase of the average cession.

Brazil was the highest growing country in ceded premiums with 136%, followed by Argentina 24%, Colombia 20% and Chile 17%.

Brazil takes 32% of this market, followed by Mexico with 27%, Argentina 13%, Colombia 8% and Chile with 3%. These 5 countries account for 83% of the total volume.

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Latin America motor: ceded premium market share ($1.238 billion in 2021)

The percentage of ceded vs written premium as an average grew 25% from 4% to 5%. The countries with the highest cession level were Bolivia 31%, Honduras 18%, Guatemala 15%, Nicaragua 13% and Colombia 10%.

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Latin America motor: % ceded premium by country 2021

Regarding the type of companies, globals lead with 64% of the ceded premiums, followed by locals with 23% and regionals with 13%.

In terms of loss ratios, the net earned ended December 2021 with 60%, 10 percentage points higher than the previous period; and the gross also grew by 8 percentage points, from 51% to 59%. Consequently, the technical result ratio (technical revenue minus technical costs excluding administrative expenses) as a percentage of written premiums decreased from 29% in 2020 to 17% in 2021.

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Latin America motor: loss ratio & technical result / written premiums

When we analyze combined ratios, the net reached a value of 95%, 9 percentage points above 2020, very close to the pre-pandemic level of 97%.

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Latin America motor: net combined ratio

The countries with the lowest net combined ratios were: Costa Rica 75%, Guatemala 87%, Peru 88%, Brazil and Mexico 92% each, Panama, Ecuador, Dominican Republic and Bolivia with 93% each.

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Latin America motor: net combined ratio by country 2021

Similarly, gross combined ratio also grew, but not as much (only by 5 percentage points), from 86% in 2020 to 91% in 2021. This value is still 4 percentage points below 2019 (pre-pandemic).

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Latin America motor: gross combined ratio

At the regional level, a total of 300 insurers operated in motor insurance consolidating the global and regional subsidiaries.

The first 20 companies (10 globals, 6 regionals and 4 locals), accounted for 70% of the written premium and registered a growth of 9% compared to 2020.

The remaining 280 companies reached a volume of $6.964 billion and grew 10% compared to the previous year.

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For 2022, written premiums will continue recovering and will most likely have a higher value than that of 2019, driven by the important increase in new cars sold during this year. However, loss ratios and consequently combined ratios will deteriorate, due to higher traffic levels, and higher cost of motor parts.

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