Overview of the Insurance Industry in Latin America

Español

Before we start the conversation about the digital disruption and the Insurtech landscape in Latin America, it is important to understand the characteristics of insurance industry in the region. I used the research from Mapfre Foundation in 2017 to get the following numbers that will help us understand the size and features of the market:

Annual premiums in 2017: $158.5 US billion (54% corresponds to Non-Life businesses, and 46% corresponds to Life businesses)

Annual growth rate: 9.3% in the last year, (This number is partly influenced by the appreciation of some currencies against the dollar in 2017, mainly the Brazilian real)

Penetration Index: The penetration Index is on average 2.17%[1]. This index is well below developed countries that usually have indexes above 5%.

Deepening Index: The deepening index is 20.1%[2], also below the average of developed countries that is above 40%.

Main Players in the region:

It is important to mention that the insurance industry in Latin America is not considered a highly concentrated industry, the 25 most important companies barely concentrate 64.1% of the total premiums. If we analyze the market by Life and Non-Life premiums, the same trend continues. However, the Life market has a level of concentration higher than the Non-Life. In the Life market, the top 25 companies represent 82.9% of the total market, while in Non-Life, the participation of the top 25 companies is 60%.

The main companies in the industry by market share are BRADESCO from Brazil with 8.2% of the market, BRASILPREV from Brazil with 7.6%, MAPFRE from Spain with 5.8%, ITAU from Brazil 4. 8% and ZURICH from Switzerland with 4.3 %. (table 1)

For Non-Life market, the top 5 companies per market share are the following: MAPFRE from Spain with 7.8 %, Porto Seguro from Brazil with 4.2 %, Suramericana from Colombia with 3.8%, ZURICH from Switzerland with 3.8 and Triple-S from Puerto Rico with 3.6 %. (table 2)

For Life Market, the top 5 companies by market share are the following BRASILPREV from Brazil with 16.6%, BRADESCO from Brazil with 15%, ITAU from Brazil with 9.7 %, CNP Assurances from France with 6.1%, and MetLife from USA with 5.5%. (table 3)

Challenges and opportunities of the Latin American insurance market

• Low penetration compared to other regions makes the growth of the insurance market in Latin America slow, and product innovation is expensive.The main factors that have made penetration low are the low income of the population and the lack of confidence in the financial system. However, this low penetration means that the opportunities for growth in the sector are large since the average income of the region has been growing steadily in recent years and there is an unattended market.
• Other factors that affect the growth of the industry have to do with the political and economic instability of some countries in the region. In recent years, we have seen oil prices fluctuate and some cases of corruption that have affected the economy and stability of countries such as Argentina, Venezuela and mainly Brazil.
• Investments in technology development to improve the efficiency of processes and develop new distribution channels will impact the insurance industry in the following years, which will contribute to deepen the consumption of insurance and attract new users.The penetration of internet and smartphones in the region is much higher than that of the financial sector, and through these digital media there is an important growth opportunity for the insurance sector. There are also several infrastructure development projects that will help with the growth of premiums of the commercial insurance policies.
• Regarding regulation, the region is very diverse and is at different levels.However, all countries are on the same track looking to achieve good international practices, following the guidelines of the framework created by Solvency II. The region is also concerned about creating regulation for cybersecurity and new players like Insurtechs. An example is Mexico with the law for financial technology institutions.

[1] The Association of Insurance Supervisors in Latin America (ASSAL) for 2015, from a sample of 19 Latin American countries.

[2] IBID