Domestic firms dominate in Bolivia

With a lack of global players, the Bolivian insurance market differs greatly from that of Brazil, where local reinsurers must compete against each other and large companies with a wide array of offerings. AM Best speaks to FIDES Today.

Few global players

Bolivia’s insurance market remains dominated by domestic institutions, with the presence of global players very limited, according to Alfonso Novelo, senior director of analytics at AM Best.

“If we were to consolidate premiums from insurance groups carrying out life and non-life business in different vehicles because of local regulation, the level of concentration is significant, with insurance premiums from the top five market players amounting 78 percent of the market,” he adds.

Bolivia’s insurance market ranks approximately 16th in terms of premiums generated within Latin America, with the market split almost equally between life and non-life insurers.

However, the participation of personal lines premiums still lags behind more developed markets, representing approximately 30 percent of the industry’s total premiums. Novelo explains that, in more developed insurance markets, this proportion is closer to 40 percent.

He says: “The industry’s growth has been limited over the past five years, but the expectation of economic growth for the country at around 4 percent could boost the insurance market dynamics.”

Brazil

In Brazil, the recent merger of local reinsurers Terra Brasis Re and Austral Re proves that the country’s reinsurance market remains highly competitive, with companies looking to obtain scale and a broader product offering.

“Brazilian startups such as Terra Brasis and Austral Re not only must compete with IRB Brasil Re, which maintains a dominant market position, they must also compete against companies such as Munich Re, Swiss Re, and Zurich, which can provide a wide array of products and services,” says Guilherme Monteiro Simoes, senior financial analyst at the rating agency.

As the market matures, companies can choose to build out their books business organically or choose to grow through mergers and acquisitions, both of which come with different risks and benefits.

“Additionally, given Brazil’s current macroeconomic environment, attracting sufficient capital to support growth and organically build out operations can be a particular challenge. However, just like in other markets, reinsurers in Brazil are always trying to maintain and grow their relevance with their clients,” adds Simoes.