Protecting Property in Latin America

Underinsurance of property risk continues to be a global challenge. The latest Swiss Re Economic Research & Consulting expertise paper focuses on the property protection gap – the difference between total and insured economic losses – in Latin America.

The paper, titled "The property protection gap in Latin America", estimates natural catastrophe property losses from historical and modelled perspectives and assesses what can be done to close the gap.

Fueled by economic development and rapid urbanisation, the value of property at risk has outpaced the purchase of insurance in many countries, including in those prone to natural catastrophes. From a historical perspective, the protection gap has steadily grown over the last four decades in Latin America. From a modeled perspective, using Swiss Re's loss distribution models for seismic risk for a sample of seven countries in the region, we estimate total economic losses of USD 6.9 billion annually, 88% of which are expected to go uninsured.

Can insurance markets catch up to close the gap? Our analysis shows the property insurance market in Latin America is growing rapidly. Despite being a small market by global standards, its share of the global market rose from 2.4% in 2005 to 4.4% in 2014. Brazil and Chile have the highest premium volume in the region, USD 6.5 billion and USD 3.4 billion respectively, with the highest property penetration rates in Chile (0.53%) and the Dominican Republic (0.42%).

Still, the region has a long way to go to reduce the impact of the gap on its economy.

The paper also analyses the role of the public and private sectors and how these can help change buying behaviours and market structures. New distribution technologies and purposefully designed products can also help increase insurance penetration and reach a key underserved market.  


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