In 2H23, the loss ratio of the main business segments (except SOAT) is expected to improve once the effect of a full year of upward adjustments in premium prices is seen, accompanied by more controlled inflation.

Fitch’s report includes an overview of currently rated companies, the macroeconomic outlook for Colombia and an overview of the most important factors in the industry. These include the composition of the Colombian market by company and business line, the development of financial performance after the pandemic affected period and the companies’ current levels of leverage are reviewed in Fitch’s report. In addition, the report analyzes the composition of the investment portfolio of the rated companies.

The full report is available at www.fitchratings.com or by clicking here.

With social distancing and quarantines, drone inspections can contribute to worker safety by reducing face-to-face work at heights. A single flight can cover a large area with buildings and infrastructure, revealing needs for intervention in a timely manner on roofs and rooftop machinery.

“The complementary technology installed in the drones, such as video and photography cameras, 3D reconstruction and thermography equipment, improves loss prevention inspections by providing a detailed view of the condition of roofs and other infrastructure conditions from the air,” said Manuel Obregón, the president of Chubb Seguros Colombia.

The capture of images with a drone, in addition to offering digital and thermal photographs, allows the detection of hot spots, humidity, water or gas leaks and the location of energy losses, among other damages that are not perceived by the human eye.

These inspections can be carried out in hospitals, apartment or house complexes, industrial zones, free zones and industrial plants, among other facilities.

“It is important to note that the Chubb service is conducted under a strict corporate privacy policy. In this policy, we include legal clauses that protect the personal information of citizens during the inspection processes and we keep all the information collected from customers safe,” added Obregón.

Chubb Risk Engineering initially developed this service in North America, then introducing it in Chile during 2018, then rolling it out to several Latin American countries.

The move builds on a major push by Zurich into the market in 2011, when the carrier acquired a 51% stake in the Latin American operations of Santander for “a total consideration of $1.67 billion USD as part of a 25-year strategic distribution agreement,” according to EY.

The agreement, which Zurich said in a statement is subject to regulatory approvals, will give the Swiss company a major presence in Argentina and Ecuador while “adding incremental scale and capabilities” in Colombia, Brazil, and Mexico.

The company added that it expects the transaction to be finalized “by the end of 2018” and funded by internal sources.

In all, the Sydney-based QBE’s Latin American operations accounted for $790 million USD in gross written premiums in 2017, with around half that total ($394 million USD) coming from Argentina.

Colombia is the second largest pickup, with the Swiss firm adding QBE’s $119 million USD of gross written premiums in the Andean nation last year to the $24 million USD of Zurich’s premiums in the country in 2017. In an investor note, however, Zurich stated that it expects to reduce this volume through re-underwriting.

This move will double Zurich’s presence in Argentina to make it the leading insurer in the Southern Cone nation, according to the company. The newly combined 8.4% market share in the property/casualty and life segments will allow Zurich, which had been fourth in the market, to leapfrog Cajas Seguros, Federacian Patronal, and Sancor in Argentina.

The acquired assets in Ecuador will mark Zurich’s entry into that market, where QBE wrote $108 million USD in premiums last year. According the company, this will make it the number three player in the country’s insurance sector.

The remaining gross written premium acquisition in the region’s two largest countries (amounting to $113 million USD in Brazil and $56 million USD in Mexico) will likely be reduced through re-underwriting, stated the firm.

The insurer added that, in the first year after completion, the transaction “is expected to comfortably exceed” its “hurdle rate” of 10% return on investment.

QBE is unloading the assets after underwhelming results in 2017, largely due to a reported $1.25 billion USD loss amid major natural disaster exposure, per the Sydney Morning Herald.

In other actions to deal with the blow, according to the paper’s report, the firm also gutted its final dividend of the year to just 4¢ AUD per share — down from 33¢ AUD per share in the prior quarter — and warned that a previously announced share buyback plan may be extended over a longer timeline than originally expected.

“This transaction positions us as the leading insurer in Argentina, a market that is demonstrating strong growth, a stable economy, and a positive environment for insurance,” said Claudia Dill, Latin American chief executive officer at Zurich. “It deepens our capabilities in the retail and commercial businesses and supports our strategy to become the preferred retail and commercial insurer in the region.”

Photo: Zurich historic headquarters in Switzerland. (Credit: Zurich Insurance Group)

While he is still familiarizing himself with all aspects of the region, Brohm has a lot of experience in Colombia. He was closely involved in the reinsurer’s acquisition of Seguros Confianza in Bogotá, where he now sits on the board of directors.

Photo: Axel Brohm became Swiss Re’s new CEO of Latin America in July and remains optimistic about the Colombia insurance market.

In the months and years to come, Brohm will lead the company’s expansion throughout the region. He recently took some time out of leading corporate development in Latin America to discuss the Colombian insurance market with Finance Colombia.

Finance Colombia: How would you summarize the state of the Colombian insurance market now?

Axel Brohm: The Colombian insurance market is currently going through a soft patch as a consequence of the country’s economic slowdown. It is a region-wide trend and reflects a combination of sluggish global economic growth, low commodity prices, and fewer inflows of capital.

The Colombian government has had to respond with tighter fiscal and monetary policies, which has further dampened economic activity. This, in turn, has had adverse knock-on effects on insurance demand, as is apparent in the downtrend in new and in-force policies over the past year.

Finance Colombia: How are the business segment and professional lines in Colombia growing in comparison to other emerging markets? How about personal lines?

Axel Brohm: Premium growth slowed sharply in the first half of 2016, with intense rate competition adding to downward pressure on insurers’ top line. Commercial insurance has been hardest hit by the downturn in the energy sector, notably specialty lines of business such as credit, surety, and engineering.

Personal lines have held up comparatively well. Property and casualty posted lower, but still robust, growth rates of around 10% in nominal terms. Similar growth patterns can be observed in other Latin American markets, where reduced trade and investment flows have negatively impacted demand for related insurance covers.

Indeed, compared to the larger and more advanced insurance markets of Brazil and Chile, Colombia has weathered the current region-wide downturn fairly well, the oil shock and peso slide notwithstanding. This outperformance is largely thanks to the country’s strong underlying macroeconomic fundamentals, sound policies, inclusive growth agenda, and productivity-enhancing institutional reforms. These factors should continue to deliver dividends going forward.

Finance Colombia: What are Swiss Re’s main goals and strategies to find opportunities in Colombia? What type of growth do you see over the next few years?

Axel Brohm: Colombia is a focus market for both its reinsurance and commercial insurance units. The local reinsurance operation of Swiss Re is engaging with local insurers to be a strategic partner of choice supporting continued economic growth.

Swiss Re Corporate Solutions, the commercial insurance division of Swiss Re Group, joined forces with Seguros Confianza in 2014, acquiring a 51% stake of the company. Established in 1979 and based in Bogotá, Confianza is a firm with an excellent reputation and understanding of the local market, offering surety insurance products, third-party liability, and all-risk construction insurance solutions. Since the acquisition, we’ve worked together to broaden the company’s range of products with the introduction of property insurance and more products in the pipeline for its target clients and brokers, making Confianza’s global capabilities accessible for local companies.

While we’re optimistic about the fundamentals, we believe that this year will remain challenging for the economy as external headwinds remain intense and domestic policy levers are tightened in response. Our short-run economic forecasts put real GDP growth at between 2.5% and 3.0% for 2016 and 2017 — broadly in line with consensus — while headline premium growth is projected to slow to around 6% in real terms this year. This is down from 8% in 2015 and a 9% average over the past 10 years, but still among the fastest growth rates in the region.

Over the medium term, growth is expected to accelerate on the back of resilient infrastructure spending, supported by the construction phase of the 4G infrastructure agenda, and an orderly rebalancing of the current account, which will be aided by a weaker peso. This should take the insurance market size to around $10 billion US by 2020, from $8 billion US currently, or roughly 3% of GDP.

Certainly, the low-for-long oil price scenario is a downside risk for the economy and it will curtail growth in related insurance lines of business. However, the non-oil sector continues to develop impressively and should sustain relatively high growth rates in related commercial and personal lines.

Finance Colombia: A few years ago, many people were starting to see Bogotá, and Colombia as a whole, as an emerging hub for financial services. With improved security, it seemed to be gaining some appeal, especially for North American companies that could place a regional headquarters in a dynamic, big city that was a lot closer to home than São Paulo, Santiago, or even Buenos Aires.

Many were even optimistic about the domestic growth opportunities given the relatively large population and expanding middle class that still has a low penetration rate when it comes to banking, let alone higher-level financial services. Is excitement over Colombia still a common sentiment? Has the thinking changed about Colombia’s turnaround? Is it still drawing more interest than ever before from foreign financial services firms? Or are people now in more of a wait-and-see mode?

Axel Brohm: As stated before, Swiss Re — and also I personally — believe in the fundamentals of the country, which are being supported by the policy to have a relatively open economy, and the will to bring peace to the country. Our local organizations, on both the reinsurance and commercial insurance side, are independently increasing the local footprint. And we continue to see an influx of competitors, which is a sign of the Colombia’s enduring appeal and of confidence in the country’s institutions.

Obviously, the financial industry as a whole can’t isolate itself from the broader economic context on a local, regional or global level. A slowdown may occur, but outright stagnation is unlikely. Thus, ups and downs will occur, yet the fundamental trend is intact and positive.