Life insurance’s untapped potential in LatAm

Latin America’s insurance market is poised for transformation, offering untapped growth potential in a regional marked by economic challenges and demographic promise. 

This is according to Moody’s latest report, which highlights that although insurance penetration here is among the lowest globally, particularly in life coverage, the opportunity for growth is immense.

Despite modest GDP growth of 2.4 per cent in 2024 and 2.5 per cent forecast in 2025, insurance expansion remains constrained by economic informality and income inequality.

As per Moody’s reports, only 17 million of Mexico’s 61.4 million economically active population have private insurance, reflecting the broader underinsurance issue across the region. 

“The lack of sufficient and steady household income has been one of the main barriers to insurance industry growth,” the report noted.

However, change is on the horizon.

Increasing financial inclusion combined with positive demographic trends is gradually driving higher penetration. 

Countries such as Peru and Mexico – with particularly low life insurance coverage – stand to benefit as insurers develop products tailored to underserved segments. 

Chile’s recovery in life insurance, fuelled by pension annuities, highlights the potential for targeted growth strategies.

Catastrophic events, while challenging, also spotlight the need for robust insurance solutions. 

From historic floods in Brazil to wildfires in Chile, these events have reshaped the risk landscape, pushing local insurers to retain more risk while relying on reinsurance for stability. 

Low penetration may have limited immediate financial impacts but it does highlight the vast underinsurance gap that insurers can address.

To seize this growth opportunity, insurers must overcome trust barriers and innovate. 

Affordable microinsurance products, digital distribution channels and partnerships with local stakeholders can expand reach and relevance. 

The region’s gradual adoption of International Financial Reporting 17 Standards (IFRS 17) by 2025-2026 will further enhance transparency, building investor and consumer confidence.

Latin America’s insurance market may face hurdles, but for forward-thinking insurers, it offers unparalleled opportunities to drive growth and resilience. 

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