MEXICO CITY--(BUSINESS WIRE)--As COVID-19 pandemic concerns remain, AM Best is holding its negative market segment outlook on Mexico’s insurance industry.
The new Best’s Market Segment Report, titled, “Market Segment Outlook: Mexico Insurance,” highlights how aggravating factors from the pandemic are affecting macro and microeconomic fundamentals. In 2020, Mexico’s insurers were able to generate minimal business, reflecting the limited economic response to the pandemic on a local level, as well as the global slowdown that affected its main underlying industries. Additionally, claims were muted by restrictions in mobility of the population. In 2021, premiums are expected to recover slowly amid limited expansionary policies and slow vaccination efforts. A resumption in claims could pressure the net results of companies.
Mexico’s USD 29.8 billion market contracted in real terms by 2.6% in 2020 (-1% when adjusting for the state-run oil company PEMEX policy), and in the first quarter of 2021, compared with the same prior-year period, contracted by 2.1% in real terms. The most affected property/casualty (P/C) segments were auto and surety. Overall, the P/C segment, excluding auto, contracted 2.2% in real terms in the first quarter of 2021. Underlying industries for insurance consumption, such as auto and tourism, are starting to gain momentum in 2021, but this has not yet been reflected in premium growth. The life segments in 2020, including accident and health, remained afloat given a greater awareness of insurance protection due to the pandemic, with major medical expenses driving the growth of the market.
Downside risks for Mexico in 2021 include a challenging security environment and the government’s contingent liability exposure to PEMEX. If the government decides to provide support to PEMEX, it could weaken Mexico’s sovereign rating. However, faster-than-expected economic growth in the United States, Mexico’s largest trading partner, has improved the outlook for remittances, exports and foreign investment, providing a backdrop for a improved Mexico economy in 2021. While the recent surge in COVID-19 cases in the first quarter of 2021 limited growth in the services sector, which accounts for two-thirds of the economy, it is expected to regain traction as the number of COVID-19 cases and deaths fall.
To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=310626.
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 London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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