Economic and political uncertainty shapes Colombia’s insurance landscape

A combination of economic challenges and political uncertainties has led AM Best to maintain a negative outlook for Colombia's insurance market, as highlighted in its 2024 Market Segment Outlook report.

Still, Colombia's economy has shown notable growth in recent years, particularly in manufacturing, mining and services. 

Economic expansion, creating a burgeoning middle class, has increased awareness of insurance coverage among individuals and businesses.

However, this progress faces pressures from global economic conditions, elevated interest rates and a deteriorating labour market. 

Presidential change in 2022 added further uncertainty over the government's ability to stabilise fiscal policies.

Even amid these difficulties, the insurance market demonstrated resilience, achieving a 10.4 per cent year-on-year growth as of October 2024. 

Property and casualty sectors led this, followed by social security business lines. Auto insurance contributed significantly due to rising average premium values and an increase in insured vehicles. 

Additionally, life and health premiums saw double-digit growth, despite the ongoing depreciation of the Colombian peso.

Yet, the industry's technical results remained negative by October 2024. 

Inflation and the pandemic's residual effects drove a recovering claims rate, affecting profitability. 

Compounding this, fraudulent activities such as false claims and scams pose ongoing risks. To address these issues, insurers must prioritise robust fraud detection and prevention measures to safeguard operations and maintain consumer trust.

On a brighter note, Colombia benefits from sound regulatory measures and healthy solvency ratios, mitigating the negative outlook. 

Regulations such as minimum rating requirements for issuers and concentration limits for technical reserves protect balance sheets, positioning the industry to weather current challenges.

For reinsurers, Colombia's market dynamics present a mix of hurdles and opportunities. The steady growth trajectory indicates a rising demand for reinsurance solutions, especially in rapidly expanding segments. 

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