Surety insurance bounces back in Latin America
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Surety insurance bounces back in Latin America

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The surety insurance market in Latin America grew 11% between 2020 and 2021, returning to the same size as 2019

The amount of written premiums in the Latin American insurance market in the surety line of business ended 2021 at $2.373 billion, a figure that ,compared to 2020, represented a growth of 11% in current terms. This value is similar to the one reached in 2019, pre-pandemic.

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Latin America surety: written Premium & growth

At the country level, Mexico had 27% of the market, followed by Brazil with 24%, Colombia 15%, Argentina 8%, Panama 5%, Peru 5%, Chile 5%, Ecuador 3%, Puerto Rico 2%, Guatemala 2%. These top ten countries concentrate 95% of the region.

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Latin America surety: written premium market share (total = $2.373 billion in 2021)

Between 2020 and 2021, the countries with the highest growth were Colombia with 46%, Honduras with 45%, Chile with 35%, Uruguay with 26% and Nicaragua with 23%.

The value of written premiums of this line of business with respect to GDP was 0.047% (vs.0.049% in 2020 and 0.046% in 2019); and versus public expenditure it was 0.31% (vs. 0.031% in 2020 and 0.29% 2019).

On average in Latin America, each insurer issued premiums for an amount of $6 million. In Mexico this figure reached $38 million, in Colombia $17 million, in Brazil $16 million, in Peru $11 million and in Panama $7 million.

Local companies, those that only have operations in their domestic market, reached 54% of total written premiums while globals (those with worldwide operations) captured 34%. Regional companies (that operate in more than one Latin American country) accounted for the remaining 12%.

In the largest countries, local companies have the highest share in Mexico with 71%, in Argentina with 65%, in Colombia with 58% and in Brazil with 41%.

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

Regarding ceded premium, the surety line of business ended December 2021 with an amount of $1.4 billion, an increase of 10% compared to 2020 and 1% compared to 2019 (pre-pandemic).

Brazil leads the market with 30%, followed by Mexico with 23%, Colombia 16% and Chile, Argentina and Panama each with 6%. These 6 countries concentrate 87% of the total volume.

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Latin America surety: ceded premium market share (total = $1.4 billion in 2021)

Between 2020 and 2021 the highest growers were Colombia with 58%, Chile with 36% and Mexico with 24%. On the other hand, the countries with the highest reductions were Panama with 16%, followed by Brazil with 8% and Ecuador with 5%.

The percentage cession for this line of business for the region remained at 59% the last three years. The countries with the highest value (more use of reinsurance capacity) were Chile with 81%, Brazil with 75%, Bolivia with 73%, Nicaragua with 70%, Paraguay with 67%, Ecuador with 66%, Colombia with 62% and Panama with 60%.

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Latin America surety: % ceded premium by country 2021

The net earned loss ratio reached 35% in December 2021, 12 percentage points below the previous year. On the other hand, gross loss ratio dropped 7 percentage points, from 34% to 27%, and as a consequence, the technical result ratio (technical income minus technical costs without administrative expenses) as a percentage of written premiums rose from 23% in 2020 to 26% in 2021.

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

The net combined ratio for the region reached a value of 66%, 10 percentage points below 2020, and 9 percentage points less than 2019 (pre-pandemic). This value is one of the five lowest ratios in the last ten years.

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Latin America surety: gross combined ratio

The gross combined ratio behaved similarly but only fell by 7 percentage points, from 66% in 2020 to 59% in 2021. However, this value is 13 percentage points lower than the one in 2019 (pre-pandemic).

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Latin America surety: gross combined ratio

Consolidating the subsidiary companies for globals and regionals, a total of 305 insurers operate in surety. Of these, the top 20 concentrated 66% of GWP and grew at an average of 15% vs 2020. In these largest companies we find 10 globals, 2 regionals and 8 locals.

The remaining 285 companies reached a written premium volume of $817 million and grew 3% compared to the previous year.

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Latin America surety: top 20 companies written premium 2021

From our preliminary analysis of the 2022 surety written premium figures, we estimate the market will reach a record value of $3.5 billion, the highest for the decade. The main reasons behind this growth are the recovery of the main economies, where important government investments in needed infrastructure are being done, and also by more steady exchange rates. We also foresee similar combined ratios in 2022 vs those in the previous year. This will mean higher profits than in 2021.

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