Latin American Insurers Complain of Regulation Uncertainty
Regulatory uncertainty is among the main challenges facing the insurance industry in Mexico, Colombia and Venezuela, according to the
‘Latin America Insurance Market Report 2014’
issued by Marsh.
The global insurance broking and risk advisory group reports that Colombia’s insurance sector is dynamic, with the entrance of a number of large global players – such as French group AXA, which acquired 51% of local company Seguros Colpatria. A government-backed infrastructure drive supported by strong economic growth of around 4%, is set to maintain that dynamism.
However, two new regulations are likely to increase costs for Colombia’s insurers. The first is the ‘premiums sufficiency’ regulation, which will require insurers with negative technical results (loss ratios) to boost capital to cover potential future losses.
Secondly, insurers will be required to contribute 2% of fire coverage premiums to a fireman’s fund.
In Mexico, the insurance market is expected to ‘remain favourable’, said Marsh. However, the country’s new tax law could pressure earnings.
Meanwhile, Venezuela remains the region’s most challenging environment. According to the report: “actions taken by the Venezuela government could result in higher rates, changes in policy terms and conditions, and a reduction in the number of insureds”.
“In the most extreme cases, it [regulatory uncertainty] has resulted in a withdrawal of capacity. Yet most governments in the region have taken a more restrained approach, opting for incremental legislative changes,” said Marsh.