The Latin American insurance market grew by 1.6 percent in 2019 and faces a complex 2020

In 2019, premiums in the Latin American insurance market rose by 1.6 percent to total 153.05 billion dollars, of which 54 percent came from Non-Life insurance and the remaining 46 percent from Life insurance. These figures are shown in the report titled The Latin American insurance market in 2019, prepared by MAPFRE Economics and published by Fundación MAPFRE. The Non-Life business’s negative contribution to growth in 2019, which was undoubtedly influenced by the economic slowdown experienced that year, was offset by the positive performance of the Life business, which enjoyed a favorable interest rate environment for savings and annuities products, which also offset the negative effect of the economic slowdown on this business segment. As such, when measuring insurance activity growth in local currency for each of the region’s markets, many recorded positive premium growth both in local currency and in real terms.

Despite the relative economic stagnation experienced by Latin America in 2019, it should be noted that, with the exception of the Argentinian and Chilean insurance markets, the region’s major insurance markets performed well. This is particularly true for Mexico and Peru, which experienced exceptional real growth in both local currency (7.2 percent and 7.4 percent respectively) and dollars (11 percent and 8 percent respectively), with this increase split equally between the Life and Non-Life segments. The Brazilian and Colombian markets also showed considerable real growth in their respective currencies (7.4 percent and 6.6 percent respectively), although these figures were significantly lower when measured in dollars (3.1 percent and -0.6 percent respectively), due to the depreciation of their respective currencies. It is worth noting that the good performance of the Brazilian insurance market was the result of the positive performance of the Life business, given that the Non-Life business experienced a slight decline in real terms.

The outlook for 2020 could change drastically. The crisis began at the start of the fiscal year as a result of the lockdown and social distancing measures implemented to tackle the COVID-19 pandemic. This was accompanied by the fall in the price of oil, other raw materials and commodities, meaning that the region’s economic outlook for 2020 is extremely complex. MAPFRE Economics therefore predicts a 9.4 percent fall in the region’s GDP.

Broken down by line of business, Life insurance premiums grew by 5.1 percent measured in dollars (compared to a -7.2 percent drop in 2018), as a result of less currency depreciation in 2019, while Non-Life insurance premiums fell by -1.1 percent (compared to -4 percent in 2018). In the former segment, both individual and group Life insurance premiums increased, whereas Pension insurance premiums fell, unlike during the previous year. As such, individual and group Life insurance, which represent 40.2 percent of total premiums, grew by 6.9 percent, which can largely be explained by the positive performance of this line of business in Brazil and Mexico. For the region’s Non-Life segment, most of the business sectors that comprise this line of business reported negative growth. The Automobile line, which represents 16.9 percent of total premiums, contracted by -8.5 percent.

The outlook for 2020 could change drastically. The crisis began at the start of the fiscal year as a result of the lockdown and social distancing measures implemented to tackle the COVID-19 pandemic. This was accompanied by the fall in the price of oil, other raw materials and commodities, meaning that the region’s economic outlook for 2020 is extremely complex. MAPFRE Economics therefore predicts a 9.4 percent fall in the region’s GDP.

Broken down by line of business, Life insurance premiums grew by 5.1 percent measured in dollars (compared to a -7.2 percent drop in 2018), as a result of less currency depreciation in 2019, while Non-Life insurance premiums fell by -1.1 percent (compared to -4 percent in 2018). In the former segment, both individual and group Life insurance premiums increased, whereas Pension insurance premiums fell, unlike during the previous year. As such, individual and group Life insurance, which represent 40.2 percent of total premiums, grew by 6.9 percent, which can largely be explained by the positive performance of this line of business in Brazil and Mexico. For the region’s Non-Life segment, most of the business sectors that comprise this line of business reported negative growth. The Automobile line, which represents 16.9 percent of total premiums, contracted by -8.5 percent.

In 2019, the aggregate net result of the Latin American insurance market stood at 13.46 billion dollars, representing growth of 13.5 percent compared to the aggregate result of the previous year. Profits were down year on year in the insurance markets of Argentina (-6.5 percent), Chile (-28.1 percent), Costa Rica (-22.6 percent), El Salvador (-2 percent), Nicaragua (-13.4 percent) and Paraguay (-0.2 percent), while all the other countries in the region reported growth. In terms of return on equity (ROE), Argentina (27.8 percent), the Dominican Republic (26.4 percent), Mexico (24.7 percent), Brazil (24.6 percent), Guatemala (23.5 percent), Honduras (20.7 percent), Nicaragua (18.4 percent) and Paraguay (17 percent) are noteworthy.

The annual report prepared by MAPFRE Economics also aims to review the main structural trends underlying the medium-term growth of insurance activity, such as penetration (premiums relative to GDP), density (premiums per capita) and insurance depth (Life insurance premiums relative to total premiums).

The region’s average penetration was 2.9 percent in 2019, up by 0.08 percentage points from the previous year. This indicator improved in the Life segment (1.4 percent, compared to 1.3 percent in the previous year) and remained unchanged in the Non-Life segment (1.6 percent). In terms of density, each inhabitant of the region spent an average of 248.3 dollars, 0.7 percent above the level reported for the previous year. The majority of insurance spending per person remains focused on the Non-Life segment (133.9 dollars), which was down by -2.0 percent compared to the previous year. Puerto Rico continues to report the highest penetration and density indices in the region, reaching 14.8 percent and 5,050 dollars respectively in 2019. This is because Puerto Rican premium volume includes Health insurance for the poorest populations, which are managed by the private insurance industry but covered by the government’s budget. After Puerto Rico, Chile (4.3 percent), Brazil (3.2 percent) and Colombia (2.8 percent) were the countries that reported the highest penetration indices in 2019.

Lastly, the depth index also saw an upward trend, which reflects the growing maturity of the region’s insurance market. This stood at 46.1 percent in 2019, 1.5 percentage points above the value recorded for 2018, and was strongly influenced by the positive performance of the Life segment in the region’s major markets.

The report also analyzed the Insurance Protection Gap (IPG), which represents the difference between the insurance coverage that is economically necessary and beneficial to society and the amount of coverage that is actually acquired. The estimated IPG for the Latin American insurance market in 2019 was 246.8 billion dollars, 3 percent down on the previous year’s estimate, which further confirms the positive development of insurance activity in Latin America. What’s more, determining the IPG allows us to measure the region’s potential insurance market, or the size that the market could achieve if this gap disappeared. The potential insurance market in Latin America in 2019 (the sum of the actual insurance market plus the IPG) therefore stood at 399.8 billion dollars, 2.6 times larger than the current regional market.

Click here to read the full report (in Spanish).