MEXICO CITY--(BUSINESS WIRE)--Insurance companies in Colombia have maintained strong capital positions, and the market as a whole shows room for growth in a favorable economic climate backed by adequate regulation, and these factors are supporting AM Best’s stable market segment outlook on the industry.
A new Best’s Market Segment Report, titled, “Market Segment Outlook: Colombia Insurance,” states that Colombia’s insurance market has demonstrated solid operating performance with diversified distribution channels amid economic conditions that have improved. However, these factors have not resulted in larger insurance penetration. The country’s insurance penetration rate had been growing since 2014, but it declined to 2.8% year over year in 2018. In addition, the insurance market has not been able to follow economic trends consistently. Premium growth expanded 1.6% in real terms, significantly lower than the 4.5% seen in 2017, mainly due to lower premium volumes of provisional, health and personal accident insurance coverages.
However, the industry’s combined ratio improved in 2018, to 104.5 from 106.2 in 2017. The life insurance segment accounts for 51% of total gross premiums written, and in most markets with a heavy component of life insurance, the combined ratio tends to be above 100. In Colombia, the life segment’s operating ratio is 59%, taking into account the results generated by investment income. This result is driven by lower benefits-paid and investment income ratios compared with 2017. Growth in the life segment also has resulted from better credit conditions, as many of these policies are related to mortgage loans and consumer loans originated within the financial sector.
Profitability was strong in 2018, and insurers generated a return on equity of 13.2%. For non-life insurers, compulsory automobile insurance benefited from the increase in minimum wage, as well as from adjustments to its price and the increase of new car sales during 2018.
Overall, with economic growth predicted for 2019, along with better trade terms and a reduced commercial deficit, AM Best expects the Colombia’s insurance market to build a larger business base while improving technical results and maintaining strong risk-adjusted capitalization.
To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=285284.
AM Best will be hosting a networking event with a brief Latin America market overview to mark the five-year anniversary of its Mexico-based subsidiary at Habita Hotel in Mexico City, on Thursday, May 9, 2019, beginning at 6 p.m. CDT. There is no charge for this event. To attend or for more information, please visit the event registration page or email email@example.com.
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