English Appendix
THE IBERO AMERICAN INSURANCE MARKET; 2007-1st quarter 2008
FUNDACIÓN MAPFRE
RESEARCH CENTRE
MACROECONOMIC CONTEXT1
The economic growth recorded in the
countries of Latin America and the Caribbean
stood at 5.7 percent in 2007.The region’s
economic expansion has taken place over recent
years in a favourable external context, as
revealed by improved terms of trade, high
migrant worker remittances and high
international liquidity. Against this backdrop,
the balance of payments current account
produced a surplus for the fifth consecutive
year, totalling 0.5 percent of the regional GDP
in 2007.
In 2007, domestic demand was up by 7.1 percent, encouraged by increased gross fixed capital formation and consumer spending.The rise in consumer spending remained within the rate of consumer spending. Since 2004, gross fixed capital formation has been the most dynamic component of demand, not only due to the expansion in construction, but also for investments in machinery and equipment, mainly imported.These levels of investment were financed entirely from national savings.
In recent years, employment has grown in both volume and quality due to the increase in formal employment in most countries. Despite labour market improvements, real salaries experienced only a slight increase in 2007.
The notable hike in international oil, food and raw materials prices combined with the pressures of an increased domestic demand contributed to a new inflationary increase.The annual variation in the consumer price index was 6.4 percent, more than two points above figures for 2006. Prices have continued to rise in 2008, leading to an estimated inflation rate of 8.5 percent for the year.
ECLAC estimates that the GDP of Latin- American and Caribbean countries will grow by around 4.6 percent in 2008, one point less than the previous year, though it will be the sixth consecutive year of economic expansion in the region.
With regards the possible repercussions of the current economic crisis on the region, various sources coincide in the belief that Latin America has now reduced its vulnerability to economic fluctuations.There are, however, several factors that could affect these countries in the future: the global slowdown will reduce the volume and price of exports, remittances and direct foreign investment; in addition, these companies will come up against more obstacles for obtaining external financing, and the costs of this will be higher.
INSURANCE MARKET
In 2007, the insurance markets of Ibero America continued the sustained growth begun four years earlier.Thus, with the exception of Bolivia, all of the region’s markets secured increases in premium volume, both in local currency and current prices, which resulted in an average growth rate of 18.5 percent, two decimals above figures for 2006. Real average growth stood at 11.4 percent, with all countries except for Bolivia and Paraguay increasing their revenues. By subregions, South America obtained an average growth of 20.4 percent, in comparison to Central America’s 18.5 percent.
The Mexican insurance sector once again experienced a favourable evolution in 2007, with a nominal increase of 16.3 percent and a real increase of 12.1 percent. However, in contrast to the previous year, the non-life segment recorded the strongest development. Despite the economic contraction affecting the country, Puerto Rico’s insurance industry registered a nominal growth of 11.2 percent, driven mainly by health and life insurance as annuities.Together with vehicle insurance, life insurance was also one of the catalysts for growth in the Dominican Republic insurance sector, which saw a 13.3 percent increase.
Puerto Rico recorded the region’s highest premium per capita, with € 1,733/inhab., followed by Chile (€ 246/inhab.),Venezuela (€ 190/inhab.), Brazil2 (€ 165/inhab.), Panama (€ 132/inhab.) and Argentina and Mexico (€ 119/inhab). Paraguay and Bolivia, with € 12/inhab., are the countries with the lowest premium per capita.
Nominal growth in local currency
| COUNTRY | NON-LIFE | LIFE | TOTAL |
|---|---|---|---|
| General total | 18,2 | 19,3 | 18,5 |
| Argentina | 25,6 | 24,9 | 25,4 |
| Bolivia | -21,5 | 21,5 | -16,0 |
| Brazil | 9,9 | 24,7 | 16,7 |
| Chile | 14,0 | 13,5 | 13,7 |
| Colombia | 14,3 | 6,8 | 12,7 |
| Costa Rica | 23,8 | -7,0 | 22,5 |
| Ecuador | 7,8 | 23,9 | 10,1 |
| El Salvador | 7,2 | 4,4 | 6,3 |
| Guatemala | 16,0 | 20,1 | 16,7 |
| Honduras | 23,0 | 24,3 | 23,3 |
| Mexico | 18,8 | 26,3 | 16,3 |
| Nicaragua | 18,4 | 12,4 | 19,5 |
| Panama | 27,1 | 12,3 | 22,3 |
| Paraguay | 5,0 | 14,6 | 5,7 |
| Peru | 6,7 | 1,8 | 4,7 |
| Puerto Rico | 10,4 | 19,3 | 11,2 |
| Dominican Republic | 12,6 | 20,0 | 13,3 |
| Uruguay | 10,2 | 18,5 | 11,6 |
| Venezuela | 46,5 | 55,6 | 46,7 |
FIGURE 1. VARIATION IN 2007 PREMIUM VOLUME IN IBERO AMERICA.
By insurance penetration (% of premiums/GDP), Puerto Rico again leads the way, with 15.9 percent, followed by Chile (3.4 percent) and Brazil (3.3 percent),Venezuela (3.1 percent), Panama (3.1 percent) and Argentina (2.5 percent).
If we analyse growth in Euros, in December
2007, the volume of premiums in Ibero America
amounted to € 62.39 billion, representing an
increase of 13.5 percent on figures for 2006.The
countries with the highest volume of premiums
in Euros were:Venezuela (34.4 percent), Brazil
(20.4 percent), Colombia (17.8 percent) and
Argentina (13.3 percent). Once again, the effect
of the revaluation of the euro against the dollar
could be seen in the development of some
countries: Bolivia ( 23.1 percent) and El Salvador
(-2.6 percent). In Bolivia, besides the exchange
rate effect (the state regulatory body publishes its
data in US dollars), the decline in premiums was
also caused by the fact that pension, ordinary risk
and occupational hazard insurance, managed
until recently by insurance companies, has been transferred to pension fund managers after their
bidding contest was abandoned at the end of
2006.
FIGURE 2. IBERO AMERICA. PREMIUM PER CAPITA 2007.
In contrast to what has occurred in previous years, the revaluation of the euro against most local currencies has not encouraged the conversion to Euros of premium revenues from the region.The opposite occurred in Brazil, Colombia and Paraguay, due to the appreciation of their currencies against the euro.
FIGURE 3. IBERO AMERICA. INSURANCE PENETRATION 2007 (PREMIUM/GNP)
Market concentration has increased by six decimals in 2007, with the top seven insurance markets of the region accounting for 93.8 percent of its premiums. Brazil, Mexico and Puerto Rico are still the biggest three markets by premium volume, with Venezuela moving up to fourth place, ahead of Argentina. Chile and Colombia remain in sixth and seventh place, respectively.
For the second consecutive year, life
insurance recorded the highest rate of growth of
all non-life insurances, increasing its market
share by almost one point above the sector total to 36.5 percent. Direct premiums totalled
€22.748 billion, representing an increase of
16.2 percent.The evolution of life insurance
premiums written in Euros was favourable in all
Ibero American countries except for Peru, Costa
Rica and El Salvador.The countries with the
highest market participation were Brazil (28.7
percent),Argentina (12.9 percent) and Chile
(9.3 percent). In Brazil,VGBL (Vida Gerador de
Benefício Livre) insurance was once again the
driving force of the branch. In Argentina, all
types of life insurance recorded significant
premium increases. In Chile, life annuity
premiums, which make up 58.5 percent of the life branch, evolved favourably
mainly as a result of the
increase in pension annuity
sales.
Data in millions of Euros. Nominal growth in Euros
| COUNTRY | NON-LIFE | %Δ | LIFE | %Δ | TOTAL | %Δ |
|---|---|---|---|---|---|---|
| General Total | 39.642 | 12,0 | 22.748 | 16,2 | 62.390 | 13,5 |
| Brazil | 11.291 | 13,4 | 10.818 | 28,7 | 22.109 | 20,4 |
| Mexico | 7.094 | 8,5 | 5.561 | 3,4 | 12.655 | 6,2 |
| Puerto Rico | 6.118 | 1,1 | 676 | 9,2 | 6.794 | 1,8 |
| Venezuela | 5.078 | 34,2 | 130 | 42,5 | 5.207 | 34,4 |
| Argentina | 3.317 | 13,5 | 1.365 | 12,9 | 4.682 | 13,3 |
| Chile | 1.574 | 9,7 | 2.510 | 9,3 | 4.084 | 9,5 |
| Colombia | 2.183 | 20,2 | 812 | 11,6 | 2.994 | 17,8 |
| Perú | 522 | 1,8 | 340 | -2,9 | 862 | -0,1 |
| Ecuador | 415 | -1,3 | 77 | 13,5 | 493 | 0,8 |
| Panamá | 308 | 16,4 | 132 | 2,9 | 441 | 12,0 |
| Dominican Republic | 384 | 3,6 | 45 | 10,4 | 429 | 4,2 |
| Costa Rica | 346 | 12,7 | 12 | -15,4 | 357 | 11,4 |
| El Salvador | 201 | -1,8 | 86 | -4,4 | 286 | -2,6 |
| Guatemala | 231 | 5,0 | 50 | 8,7 | 280 | 5,7 |
| Uruguay | 227 | 4,5 | 53 | 15,3 | 280 | 6,4 |
| Honduras | 135 | 12,3 | 44 | 13,5 | 179 | 12,6 |
| Bolivia | 92 | -28,1 | 21 | 11,3 | 113 | -23,1 |
| Paraguay | 67 | 10,1 | 6 | 20,3 | 72 | 10,9 |
| Nicaragua | 62 | 2,7 | 11 | 9,5 | 72 | 3,6 |
FIGURE 4. IBERO AMERICA. VOLUME OF 2007 PREMIUMS BY COUNTRY.
Growth of non-life branches totalled 12 percent. Vehicle insurance is still the undisputed leader, with a 38 percent share of all non-life insurance. Owing to a significant increase in vehicle sales in recent years, this branch has experienced a growth rate of over 20 percent in 2005 and 2006.While vehicle behaviour was also very positive in 2007, there has been a degree of slowdown in this growth, with a 12.6 percent variation rate and revenues of € 15.038 billion.
IN 2007, THE INSURANCE MARKETS OF IBERO AMERICA CONTINUED THE SUSTAINED GROWTH BEGUN FOUR YEARS EARLIER. WITH THE EXCEPTION OF BOLIVIA, ALL OF THE REGION’S MARKETS SECURED INCREASES IN PREMIUM VOLUME
Health also displayed moderate growth this year, with a 10.3 percent increase in premium volume, less than the 21.3 percent recorded in 2006. In Venezuela, the branch continued its favourable evolution, influenced by the health policies taken out by the public sector. In Puerto Rico, healthcare plans for pensioners (Medicare) continued to grow in 2007, due mainly to the increase in the number of people taking out Medicare Advantage plans.
Premiums in millions of Euros.
| BRANCH | 2006 | 2007 | %Δ | % SHARE |
|---|---|---|---|---|
| Total | 54.974 | 62.390 | 13,5 | 100,0 |
| Life | 19.580 | 22.748 | 16,2 | 36,5 |
| Individual and collective life | 16.641 | 19.505 | 17,2 | 31,3 |
| Pensions | 2.939 | 3.243 | 10,4 | 5,2 |
| Non-life | 35.394 | 39.642 | 12,0 | 63,5 |
| Vehicle | 13.351 | 15.038 | 12,6 | 24,1 |
| Health | 8.286 | 9.136 | 10,3 | 14,6 |
| Fire and/or allied lines | 3.441 | 3.846 | 11,8 | 6,2 |
| Other claims | 4.527 | 4.954 | 9,4 | 7,9 |
| Transport | 1.666 | 1.844 | 10,7 | 3,0 |
| Civil liability | 999 | 1.100 | 10,1 | 1,8 |
| Personal accident | 1.443 | 1.719 | 19,1 | 2,8 |
| Credit and/or suretyship | 631 | 760 | 20,5 | 1,2 |
| Occupational hazard | 1.050 | 1.246 | 18,6 | 2,0 |
FIGURE 5. IBERO AMERICA. VOLUME OF 2007 PREMIUMS BY BRANCH
Fire and allied lines insurance, the third leading branch by premium volume, obtained revenues of € 3.846 billion, representing an 11.8 percent increase on the previous year’s figures.
On a different issue, this year saw the
disappearance of two monopolies of the region:
reinsurance in Brazil and the state insurance
monopoly of Costa Rica. In December 2006,
the Brazilian Chamber of Deputies passed a Law
regulating the country’s reinsurance market,
opening it up to the national and international
private sector. Nonetheless, it was not until
December 2007 that the regulatory insurance
body published the rules of the new reinsurance model in Brazil, replacing the monopoly of IRB
Brasil Re with a new, free market model.
In July 2008, Costa Rica published its Regulatory Insurance Market Law, which did away with the state monopoly on insurance –managed by the INS (National Insurance Institute) for 84 years– and set down the rules for opening up the sector.The passing of this Law creates the possibility for national or foreign insurance companies to sell their products in Costa Rica and for the INS to operate abroad. It also introduces the Superintendencia de Seguros, regulatory authority for insurance.
In the first semester of 2008, the insurance markets of Ibero America continued to show signs of strength, with real and nominal increases –in local currency– in the issue of premiums in all countries except for Puerto Rico (-0.3 percent), which has generated an average nominal increase of 17 percent and an average real increase of 11.7 percent. By subregions, Central America has recorded the highest nominal increase, with 21.5 percent, followed by South America with 21.1 percent. However, Central America had higher inflation rates, so South America actually had the highest real growth (15 percent compared to 14.7 percent). The Mexican insurance sector recorded a nominal variation rate of 10 percent (7.8 percent real) and the Dominican Republic of 12 percent (7.8 percent real).
IN THE FIRST SEMESTER OF 2008, THE INSURANCE MARKETS OF IBERO AMERICA CONTINUED TO SHOW SIGNS OF STRENGTH, WITH REAL AND NOMINAL INCREASES IN THE ISSUE OF PREMIUMS IN ALL COUNTRIES EXCEPT FOR PUERTO RICO
The highest increase took place in life insurance, with 20.6 percent, boosted by increased savings and the development of payment protection insurance.Tough price competition and poor economic expansion were reflected in the moderate growth of the non-life segment, which stood at 15.2 percent. Declining vehicle sales in the more developed economies were not reflected in the evolution of the vehicle insurance branch of the region, which recorded positive data in virtually all markets that published statistical information by branches.
The depreciation of local currencies against the euro meant that the growth of the region’s premiums written in Euros in this period fell to 10.4 percent, recording premium volumes of € 33.5 billion.
Data in millions of euros. Nominal in Euros
| COUNTRY | NON-LIFE | %Δ | LIFE | %Δ | TOTAL | %Δ |
|---|---|---|---|---|---|---|
| General Total | 21.104 | 6,6 | 12.396 | 17,52 | 33.500 | 10,4 |
| Brazil | 6.463 | 17,1 | 6.137 | 30,0 | 12.600 | 23,1 |
| Mexico | 3.573 | 5,3 | 2.881 | 3,7 | 6.454 | -1,5 |
| Puerto Rico | 2.904 | 19,1 | 77 | 29,8 | 2.981 | 19,3 |
| Venezuela | 2.620 | -14,6 | 302 | -6,4 | 2.922 | -13,8 |
| Argentina* | 1.942 | 12,1 | 608 | -13,2 | 2.551 | 4,9 |
| Chile | 885 | 19,3 | 1.473 | 26,7 | 2.358 | 23,8 |
| Colombia | 1.134 | 8,1 | 462 | 20,6 | 1.595 | 11,5 |
| Perú | 291 | 6,4 | 177 | 10,1 | 469 | 7,8 |
| Ecuador | 255 | 15,9 | 40 | 5,4 | 295 | 14,3 |
| Panamá | 166 | 15,6 | 67 | 10,3 | 233 | 14,0 |
| Dominican Republic | 181 | -7,5 | 23 | 5,6 | 204 | -6,2 |
| Costa Rica | 181 | 10,6 | 6 | 10,6 | 188 | 10,6 |
| El Salvador | 113 | 19,7 | 29 | 18,6 | 143 | 19,5 |
| Guatemala | 113 | -4,2 | 24 | 1,5 | 137 | -3,3 |
| Uruguay | 92 | -4,5 | 42 | -1,3 | 134 | -3,5 |
| Honduras | 73 | 10,5 | 25 | 18,1 | 98 | 12,3 |
| Bolivia | 46 | -4,6 | 12 | 15,8 | 58 | -1,0 |
| Paraguay* | 43 | 27,8 | 4 | 46,8 | 47 | 29,3 |
| Nicaragua | 29 | -9,0 | 5 | 10,3 | 34 | -6,4 |
FIGURE 6. IBERO AMERICA. VOLUME OF PREMIUMS 1ST SEMESTER OF 2008, BY COUNTRY.
(*) Estimated.
1Observations based on the «Estudio económico de América Latina y el Caribe 2007-2008» (Financial study of Latin America and the Caribbean 2007 2008), publication of the Economic Commission for Latin America and the Caribbean (ECLAC).