MEXICO CITY--(BUSINESS WIRE)--AM Best has assigned a negative market segment outlook to Chile’s insurance industry, citing contractions of premium volume, limited financial flexibility and regulatory changes that have diminished the attractiveness and profitability of the health and annuity segments, all of which are being exacerbated by the COVID-19 pandemic.
The Best’s Market Segment Report, titled, “Market Segment Outlook: Chile Insurance,” states that the country’s economic growth was struggling ahead of the pandemic. This was due to social unrest, lower copper prices and slowing growth in the economies of Chile’s main trading partners, which limited real GDP growth to 1.1% from an expected 2% and affected services, commerce and the balance of payments. For the first quarter of 2020, with the COVID-19 lockdown, GDP growth stood at 0.4% despite the economy reacting positively during the first months of the year to announce government measures. Overall, the insurance industry contracted in real terms by approximately 10% as of March 2020 (vs March 2019), following a contraction of 1.8% last year.
AM Best recognizes the solvency of the industry, however, notes that the impact on financial markets has limited financial flexibility to insurers that leverage its surplus. In addition, major insurance segments were already struggling prior to COVID-19, with private health insurers facing rising medical costs in 2019 and annuities losing premiums in favor of pension funds. Regulatory authorities are addressing these market distortions.
The negative outlook recognizes that for the insurance business to generate business, profitability and financial flexibility, many factors need to stabilize, including domestic social unrests. AM Best expects the effects of current market developments to be felt through 2021, with a gradual recovery of the industry as the Chile’s economy and global economies rebound. AM Best will continue to monitor developments in the insurance market in Chile, and its exposures to financial and natural risks.
To access the full copy of the Chile market segment report in English and Spanish, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=532765.
To view current Best’s Market Segment Outlooks, please visit http://www.ambest.com/ratings/RatingOutlook.asp.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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