LatAm insurance premiums fell 12 percent in 2020 on contraction of life segments

The Latin American insurance market suffered a 12 percent decline in dollar-denominated premiums 2020 as the pandemic brought a "sharp decline" in business in Brazil, Mexico, Chile and Columbia. The decline was made sharper on local currency depreciation during the downturn.

That is according to a report by MAPFRE Economics that shows that premiums in the life insurance segment fell by a sharp 18.7 percent in dollar terms (compared to +5.1 percent in 2019), while premiums in the non-life segment dropped by 6.1 percent (compared to a 1.1 percent decline in 2019), Mapfre said.

Life insurance was hit by the sudden shift to ultra-accommodative monetary policy and the retail rush to cash savings that can clip other kinds of mid to longer-term investments, authors said.

In local currencies and counting both life and non-life, the Chilean market fell most, down 15.3 percent, followed by a 5.3 percent decline in Ecuador, a 3.1 percent decline for Mexico, a 2.4 percent decline for Peru and a 2 percent decline for Brazil.

However, there were exceptions for growth, with Puerto Rico up 13.7 percent thanks to a strong performance of health insurance and Argentina up 10 percent, a result distorted by inflation.

The consolidated net result of the region’s insurance market amounted to $9.32 billion in 2020, representing growth of 30.1 percent over the previous year.  Profits in Chile, Costa Rica, Guatemala, Paraguay, Puerto Rico, and Uruguay were all said to be up year on year.

The region's average penetration rate (premiums/GDP) was 3.1 percent in 2020, higher than the previous year by 0.17 percentage points (pp). This indicator improved in the non-life segment (1.8 percent compared to 1.6 percent the previous year), but worsened in the life segment (1.3 percent compared to 1.4 percent the previous year). The long-term trend in life remains for growth, authors claimed.

The Mapfre calculation of the insurance protection gap, measuring the protection difference between the insurance coverage that is economically necessary and beneficial to society and the amount of coverage that is actually acquired, fell 16.7 percent to $206 billion in 2020, authors claim. That left a potential insurance market in Latin America in 2020 (the sum of the actual insurance market plus the protection gap) came to $340.4 billion, 2.5 times larger than the current regional market.

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