Latam P&C: on the road to recovery
The 2021 Latin American P&C insurance market grew 16% vs 2020, reaching a higher value than in 2019, and has been profitable for cedants and reinsurers for the last 10 years
P&C business in the Latin American insurance market had a major recovery in 2021, reaching $27.1 billion, corresponding to a 16% increase vs 2020 in constant values.
Compared to 2019 (pre-pandemic), the market grew 11%, reaching a very similar value than the one registered in 2013 ($27.3 billion), which was the highest for the last 10 years.
Brazil leads with 27% of the market, followed by Mexico with 22%, Chile 11%, Argentina 10%, Colombia 7%, Puerto Rico 6%, Peru 4%. These seven countries account for 87% of the region’s premium.
Between 2020 and 2021, the countries with the highest growth were: Mexico 25%, mainly driven by Pemex's biannual policy, Brazil 20%, Chile 18%, Argentina 17%, Colombia 15%, and Peru 7%.
The value of written premiums in this line of business with respect to GDP (penetration) was 0.54%, the same value reached in 2020 but a little more than the 0.48% in 2019. In terms of premiums per capita (density index) each Latin American spent $43 in P&C, a higher value than the $38 spent in 2020 and the $40 spent in 2019.
On average, each Latin American insurer issued premiums for an amount of $46 million. However, Mexican companies averaged $162 million, Brazilians $148 million, Chileans $127 million, Peruvians $100 million and Colombians $80 million.
Global companies (which have operations worldwide) account for 53% of the market, while local companies (those with operations in their domestic market), reached 32% and the regional ones (owned by Latin Americans which operate in more than one Latin American country) have the remaining 15%.
The countries where global companies have a majority stake are: Chile 70%, Brazil 69%, Mexico 57% and Colombia 51%. Local companies are the leaders in Dominican Republic, with 71%, Ecuador 66%, Paraguay 65%, and Costa Rica 61%. Finally, regional companies are very important in Honduras with 82%, Venezuela 76% and Nicaragua 54%.
The average P&C portfolio sub-line distribution as of December 2021 was the following: Fire & Earthquake 49%, Casualty 12%, Engineering and Cargo 8% each, Agro 6%, Hull (Marine & Aviation) 4% and other P&C lines 13%.
Comparing 2020 with 2021, Fire and Earthquake grew 13%, Casualty 21%, Cargo 19%, Engineering 17%, Hull 38%, Agro 29%, Other P&C 10%.
Regarding Ceded Premium, the December 2021 amount was $15.468 million, which meant an increase of 19% compared to 2020 and 20% compared to 2019 (pre-pandemic).
Mexico accounted for 29%, followed by Brazil with 20%, Chile 15%, Colombia 8%, Argentina 8%, Peru 5%. These six countries together account for 85% of the market.
Between 2020 and 2021, Mexico and Brazil registered growth of 25% in ceded premiums each, Chile, Colombia and Argentina 20% each, Peru 10% and the seven Central American countries (Dominican Republic included) 9%.
The percentage of ceded premium of this class of business in the region rose from 56% in 2020 to 57% in 2021. The countries with the highest level of ceded premium were: Dominican Republic 85%, Chile 80%, Ecuador 79%, Mexico 75%, Nicaragua & Honduras 74% each, Panama 73% and Guatemala 71%.
As of December 2021, global companies captured 53% of the ceded premium market, while locals had 34% and regionals the remaining 13%.
Regarding net earned loss ratio, the Latam figure was 34%, or 6 percentage points less than the beginning of the last decade but, 2 percentage points more than the previous period. On the contrary, the gross loss ratio fell 1 percentage point to 39% compared to 2020 and 8 percentage points vs. 2012. Finally, the technical result ratio (technical income minus technical expenses without administrative costs) as a percentage of written premiums fell from 18% in 2020 to 16% in 2021.
When we analyze net combined ratio (without reinsurance), the 2021 value of 80% was 2 percentage points lower than 2020, continuing the ten-year reduction tendency, that started at 86% (exception made in 2015).
The countries that registered the lowest net combined ratio values in 2021 were Costa Rica 39%, Bolivia 69%, Panama 71%, Paraguay, Brazil and Peru 74% and Ecuador 79%.
Similarly. the gross combined ratio fell from 67% in 2020 to 64% in 2021 and has been falling since 2012, when it had a value of 74%. 2017 was an exception with 120%, due to the trio of hurricanes Harvey, Irma and María in the Caribbean plus the impact of a severe Mexican earthquake.
The net and gross combined ratios show a profitable business for cedants and reinsurers during the ten year period of analysis, despite the natural catastrophe related losses.
Finally, a total of 420 insurers operated in this class of business in 2021 (this number is obtained by consolidating all subsidiaries of globals and regionals as one).
The top 20 companies (13 globals, 2 regionals and 5 locals), account for 61% of the written premium and grew 19% compared to 2020.
The remaining 410 companies reached a volume of $10.488 billion and grew 12% compared to the previous year.