Latin America 2021 insurance outlook: Growth in a hard market
Premium growth in the region is expected to rebound this year after contracting 3.4% in 2020.
Latin American nations have been some of the hardest hit by the COVID-19 pandemic. But, through this past year’s strifes, the insurance markets across the region have proved their resiliency and growth power.
Real premium (life and non-life) growth in Latin America is expected to rebound 4.4% in 2021 after contracting 3.4% in 2020, according to a new market outlook published by the Swiss Re Institute.
In the property & casualty sector alone, the Institute expects premiums to increase by 6.8%, driven primarily by hardening commercial lines.
“The region has potential for rapid growth in the medium- to long-term. We expect total premiums for the region to grow above GDP annually in the next five years on the back of rising risk awareness, large insurance protection gaps and low insurance penetration, particularly in motor, [which is] the largest P&C line of business,” writes the Swiss Re Institute in its Latin American market report 2021.
However, the market’s growth potential does face a few challenges, such as political risk, social unrest, and other stressors. For example, social discontent recently spurred protests in Colombia, and Peru is currently waiting for the results of its 2021 presidential election, with the two candidates representing polarized ends of the political spectrum.
Similar to other global insurance markets, Latin America is experiencing firming rates but at a slower pace. According to the Institute, composite commercial insurance prices rose by 9% in the region last year. In the first quarter of 2021, prices increased 5%, which is far below the global average of 18% for the same period. Most of the increases have been driven by property, financial and professional liability lines.
In contrast, casualty prices have declined since second-quarter 2020, particularly in auto liability, where exposures and claims have decreased.
“Rising risk awareness, natural catastrophes, potential COVID-19 claims, and a still large profitability gap in P&C should continue to support commercial rates,” said the Institute.
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