MEXICO CITY--(BUSINESS WIRE)--AM Best is maintaining its stable outlook on Chile’s insurance industry given the resilience of the country’s insurers in the face of global and domestic pressures and strengthening of the market’s regulatory framework.
The Best’s Market Segment Report, “Market Segment Outlook: Chile Insurance,” notes that the country’s insurance penetration rate stood at 4.3%, higher than most Latin American countries, including larger markets such as Brazil, Mexico and Argentina. At the same time, Chilean insurers’ operating performance and financial strength are still vulnerable to volatile financial markets, inflation-related pressures and currency devaluation. Chile’s economic growth likely will slow in 2023 due to a rollback of expansionary fiscal policies adopted to counteract higher inflation, as well as tighter global financial conditions.
Although net income for Chile’s insurance market contracted by 3.2% in 2022, the market still expanded by 15.3%, led by significant premium growth in the annuities and pension insurance segments. This growth trend has extended in 2023, with the annuities segment reporting volume growth of 53.3% year over year at the end of June. Factoring in investment results, AM Best expects the life insurance market to grow by 15.0% in full-year 2023, and the non-life market to grow by 4.4%.
“Risk-adjusted capitalization remains solid, and the industry is well-positioned to face evolving insurance and market risks,” said Inger Rodriguez, financial analyst, AM Best. “However, rising interest rates could push companies to use capital rather than expensive financing alternatives such as debt. The stabilization of rates over the medium term should facilitate adjustments in companies’ asset-liability management.”
The report states that Chile is in the process of strengthening its insurance regulatory framework, underpinned by two main pillars: prudence, focused on solvency and risk-based analysis, and market conduct, focused on transparency of the financial system.
Chile also is in the process of adopting a new constitution, with expectations that the final draft will be more market-friendly than originally proposed. Overall, AM Best expects Chile’s insurance market to withstand current challenges and will continue monitoring developments that could affect the performance of domestic insurance companies.
To access the full copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=337768.
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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