MEXICO CITY--(BUSINESS WIRE)--AM Best is maintaining a stable market segment outlook on Mexico’s insurance market, based on the strong balance sheets of the insurance companies operating in the country, backed by robust reinsurance programs, according to a new AM Best report.
A new Best’s Market Segment Report, titled, “Market Segment Report: Mexico Insurance,” states that the growth and performance of Mexico’s insurance and surety market in 2018 and 2019 was positive, despite the gradual deceleration of the economy. In terms of solvency, the segment’s performance remains adequate, owing to good underwriting metrics and the ability to generate capital. Dividend payments and capital management will remain key factors as the country’s economy develops.
In 2018, the insurance segment generated premium growth of 5.7%, taking into account the premium accrual of PEMEX (Petróleos Mexicanos), the largest policy in the market. In the life insurance segment, which encompasses 41% of the market, individual life had the most dynamic performance, while on the non-life side, accident and health had the highest growth rate. The automotive, catastrophic and diverse risks segments continue to contribute positively, despite contractions in fire, liabilities and marine and cargo segments.
The economic slowdown has affected the non-life market directly, mainly surety and liabilities. Growth in the automobile segment also has been slowing gradually, down by 7% in 2018 and 5.7% from June 2018 to June 2019, in line with the contraction in new automobile sales and annual production.
The industry’s earnings before taxes contracted by 4.2% in real terms in 2018, owing to a decline in investment income; return on earned premium was of 17.5%, compared with 19.6% in 2017. The combined ratio improved year over year to 97.0% from 100.5% as the loss ratio associated with the automobile industry, along with benefits paid on retained premiums in the life segment.
Decisions by Mexico’s fiscal and monetary authorities will continue to influence industry growth. AM Best will continue to monitor the appetite of the large domestic and foreign insurance groups operating in Mexico, as they may direct capital capacity to other countries should uncertainty about Mexico’s economy grow in an effort to diversify business profiles over the medium term. Insurers’ appropriate enterprise risk management and asset-liability matching policies also are supporting the stable outlook; however, AM Best will monitor capital flows between parents and insurance companies as well, as this is a key factor in the segment’s financial strength.
To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=291230.
AM Best is a global credit rating agency and information provider with an exclusive focus on the insurance industry. Visit www.ambest.com for more information.
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