Latin America & Caribbean - Slow recovery ahead
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- A jump in life premium growth in 2019 was mostly due to robust performances in Brazil (+12%) and Mexico (+8.6%), which together account for about 75% of premiums in the region.
- In Brazil, we estimate that life premium growth rebounded from –9.8% in 2018. Traditional life premium growth accelerated further to 12%, based on robust performance in credit and individual life. After two years of declines, savings products had a strong year, with premiums up 13%. Interest in life and savings products has increased with the introduction of the pension reform bill in Brazil. However, the pace of growth is likely to slow in the near term due to the expected economic recession.
- In Mexico, both mortality- and pension-related business grew robustly in 2019. The loss ratio for life insurance worsened in 2019, but robust investment results helped increase profits from the year-before level.
- Argentina (–14%) was the worst performer in the region last year, as stubbornly high levels of inflation continued to erode the value of the currency, making life products less attractive.
- The COVID-19-induced economic recession will have a negative impact on life insurance premiums, as demand tends to mirror the shape of the economy. Also, the current low interest rate environment will impact profitability via lower investment results.
- Solid gains in the non-life sector in countries like Mexico, Colombia, Chile and Peru were partially offset by weak growth in Brazil, and premium contraction in Argentina.
- In Brazil, the weak performance came from casualty business (–7%). Mandatory motor (bodily injury) insurance premiums decreased due to cuts in regulated rates last year (–56% to –79%, depending on the category of the vehicle). Health and property business developed more favourably.
- In Argentina, the contraction was broad-based, with high inflation playing a part.
- The Mexican economy was expected to rebound in 2020 but things have gone awry. Ratification of the US-Mexico-Canada (USMCA) trade deal raised hopes late last year, but this year's deep recession in the US will instead push down external demand for Mexican goods. This will hit marine and credit insurance premium growth.