Latin American insurance market shrinks 12% in 2020 due to the pandemic
The Latin American insurance market registered an 11.9% decrease in premiums during the year of the pandemic, to 134.36 billion dollars, of which 57% came from non-life insurance and the remaining 43% from life insurance. These figures are shown in the report titled The Latin American Insurance Market in 2020, presented by MAPFRE Economics and edited by Fundación MAPFRE.
The sector’s contraction has been caused mainly by the evolution of the life insurance business, with a strong decline in Brazil, Mexico, Chile and Colombia, as well as by the effect of the depreciation of their currencies. As a consequence, the total global share of the Latin American insurance market fell again in the past year, reaching 2.1%.
Premiums in the life insurance segment fell sharply by 18.7% in dollar terms (compared to +5.1% in 2019), while premiums in the non-life segment dropped by 6.1% (compared to -1.1% in 2019).
These declines affected most of the major markets in Latin America, the Chilean market being the one that fell the most (-15.3%), followed by Ecuador (-5.3%), Mexico (-3.1%), Peru (-2.4%) and Brazil (-2%). However, there were some exceptions, with Puerto Rico (+13.7%) standing out for its growth due to the strong performance of health insurance.
The consolidated net result of the region’s insurance market amounted to 9.32 billion dollars in 2020, representing growth of 30.1% over the previous year.
The report produced annually by MAPFRE Economics also aims to review the main structural trends underlying growth of operations, such as penetration (premiums with respect to GDP), density (premiums per capita, measured in dollars in this case), and insurance depth (the relationship between life insurance premiums with respect to total premiums).
In this regard, from a medium-term perspective (2010-2020), an increase in penetration of 0.7 percentage points (in terms of GDP) has been observed; a significant increase compared to the previous measurement. The sharp decline in GDP in 2020 due to the pandemic and the resistance shown by some lines of the insurance business with great weight in the region, particularly the health sector, undoubtedly contributed to this result.
The report also analyzes the Insurance Protection Gap (IPG), which represents the difference between the insurance coverage that is economically necessary and beneficial to society and the amount of coverage that is actually acquired. The estimated IPG for the Latin American insurance market was 206 billion dollars in 2020, 16.7% lower than in the previous year. What’s more, determining the IPG allows us to measure the region’s potential insurance market, or the size that the market could achieve if this gap disappeared. The potential insurance market in Latin America in 2020 (the sum of the actual insurance market plus the IPG) therefore stood at 340.4 billion dollars, 2.5 times larger than the current regional market.