MEXICO CITY--(BUSINESS WIRE)--Companies in Mexico’s surety industry have maintained strong capitalization levels and adequate operating performance, supporting AM Best’s stable market segment outlook on the sector.
A new Best’s Market Segment Report, titled, “Market Segment Outlook: Mexico Surety,” states that surety companies are facing a challenging growth environment, given uncertainty about public infrastructure spending. However, in 2018, the surety segment still recorded for MXN 10.7 billion (USD 545 million) of direct premiums, which translates to 8.9% nominal and 4.1% real growth year over year. Given the effect of economic cycles on market behavior, AM Best believes companies may be more challenged to meet 2020 growth targets, but that a more diversified approach to underwriting may foster industry development. Some market participants have shifted their attention to the private sector, looking to diversify their business models.
Surety bonds long have been a key part of Mexico’s insurance industry. The surety insurance market in Mexico is considered mature and one of the larger markets in the world. In 2018, 16 surety companies were operating in Mexico, with the five largest accounting for more than 80% of the total market and administrator surety bonds accounted for nearly two-thirds of total premiums written. The industry’s combined ratio deteriorated to 70% in 2018 from 65% in the previous year, mainly as a result of a rise in acquisition costs, indicating growth in competition.
Overall, companies are characterized by stable operating performance, conservative investment policies and positive bottom-line results. Companies in this segment have proven their ability to remain profitable despite the slowdown in the sector, and AM Best expects to see more companies seek ways to diversify revenue.
To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=291324.
AM Best is a global credit rating agency and information provider with an exclusive focus on the insurance industry. Visit www.ambest.com for more information.
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