AM Best is maintaining its stable market segment outlook on Colombia’s insurance industry, citing Colombia’s favorable economy, strong capital positions among carriers and adequate regulation.
The new Best’s Market Segment Report, titled, “Market Segment Outlook: Colombia Insurance,” states that the insurance market has responded positively to economic trends. Premiums totaled $7.8 billion USD as of November 2019, a year-over-year increase of 7.2%, maintaining its position as the sixth-largest insurance market in Latin America. The country’s insurance penetration rate has grown since 2014, and as of November 2019, was approximately 2.6%. Economic growth is likely to continue through 2020, as Colombia’s macroeconomic indicators improve, fostering investment in key segments, including construction and infrastructure.
Profitability remained strong in 2019, generating a return on equity of 14.4% as of November 2019, up from 12.1% during the same period in 2018. Net income grew following the segment’s expanded growth, coupled with a stable combined ratio and enhanced investment results. The latter have improved due to a rise in valuations in fixed income securities, in addition to the improved performance of Colombia’s main stock market index.
AM Best expects Colombia’s insurance market to build a larger business base while improving technical results and maintaining strong risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). The solid grounding provided by risk-adjusted capitalization, as well as sound macroeconomic variables, could make way for continued expansion in Colombia’s insurance market if the risk appetite is present.
AM Best will host a market briefing on the state of Latin America’s insurance industries on Thursday, March 12, 2020, at the JW Marriott Miami Turnberry Resort and Spa in Miami, FL, featuring leading Latin America-based insurance industry executives and AM Best analysts. To register for the event, or for more information, please visit www.ambest.com/events/imblatam2020 (or www.ambest.com/events/Cumbre2020 in Spanish). For a related Best’s Special Report, titled, “Latin America: Economic and Political Risks May Subside in 2020,” please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=293607. A video interview with that report’s author is also available.