SANTIAGO, Chile & NEW YORK--(BUSINESS WIRE)--Fitch Ratings has published its 2015 outlook report for the Chilean insurance industry.
The stable sector outlook for the Chilean insurance industry reflects the high probability that Fitch will affirm its current ratings assigned to the local companies. This scenario responds to Fitch's view about the sector, which is considered to be mature, in a regional context, with adequate operational flexibility, which would allow Fitch to keep its metrics stable despite the less dynamism in the local economy.
Fitch foresees 2014 growth in the range of 6.0% (nominal) and near to 7.0% for 2015. The lower growth compared to previous years was in part determined by economic variables which had affected both the life and non-life insurance segment, and thus the aggregate. Due to the slowdown in the annuities activity, the agency projects year-end growth near to 6.0% for the life segment, and in the range of 7.0% for 2015, buoyed by the savings lines' growth. For the non-life segment, Fitch foresees a year-end growth of 4.5% and 5.9% for 2015, affected by the less dynamism in the auto segment (especially due to the slowdown in new car sales) and the soft cycle of reinsurance tariffs.
The Chilean insurance industry is highly competitive; however, it remains attractive for new business generation, leading to a broader overall market As of September 2014, the industry was composed of 62 insurance companies; 33 related to the life segment and 29 to non-life lines. Fitch does not foresee changes in the gross written premiums breakdown: 66.8% for the life lines and 33.2% for non-life lines; this composition has not changed over the last few years.
Results for the industry remain volatile driven mainly by volatility of life insurance results. Although the life segment has historically been the segment mainly responsible for the industry's volatility, during the 2014 determination of the mark-to-market valuation (applied since 2012), the fall in interest rates had an effect on non-life segment volatility and thus on the aggregate.
During the last years, the Chilean insurance industry has been exposed to catastrophic events, which, due to the solid reinsurance protection maintained for these companies, have not had a significant impact on the solvency of the companies rated by Fitch. In Fitch's opinion these events have only had an impact on the companies' net results; nevertheless, an increase in their frequency could affect the available reinsurance capacity, which could lead to higher levels of retention and risk exposure.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research: 2015 Outlook: Chilean Insurance Industry (Growth in a Slowing Environment)