Insurance in Central America: 2015 Outlook

Fitch Ratings expects moderate growth in premiums in Costa Rica, increased interest in personal insurance in Guatemala, and stable performance in Nicaragua and Honduras.

Monday, January 5, 2015

From the report "Outlook 2015: Central American Insurance Sector":

Costa Rica:

Moderate growth in premiums

Since the Costa Rican insurance industry opened up to private competition in 2008, the market has experienced rapid and consistent growth in premiums. At the end of 2014, Fitch expects the insurance market to reach a nominal growth appropriate for the local currency (+ 15%), driven by positive economic growth. For 2015, Fitch would expect the production of premiums to fall slightly, due to the need to correct certain macroeconomic indicators that may drive certain policies that could have an impact on economic growth and, therefore, the insurance market. Given the above, the agency projects a lower nominal growth rate in local currency for the insurance industry (+ 12%) in 2015. However, product innovation, marketing channels and specialization will remain essential for the consolidation of some insurers in the market.

Guatemala:

Slight reduction in premiums

Fitch believes that the Guatemalan insurance market is still experiencing great potential for creating products and generating business. Competition in personal lines is not aggressive, as it has been in the business of general damages. Therefore, there is a significant opportunity for growth and development. During the third quarter of 2014, the insurance sector recorded a moderate growth rate (sep14: + 7%). However, for the closing of 2014, the agency estimates a nominal growth rate of 10%, driven by health premiums continue to rise. However, aggressive competition in these lines of business may cause insufficient rates for these businesses. Given the stable economic conditions, Fitch projects a similar growth rate in local currency (+ 9.5%) by 2015.

Honduras:

Good Dynamics of Growth

Fitch believes that a more favorable economic growth in 2014 compared to 2013, and a high dynamism in the subscription during the fourth quarter, influence nominal growth sector near 8%. However, this would be less in dollars (5%),
due to continued pressure from inflation and depreciation in the local currency. But for 2015, the agency estimates that the nominal growth of the sector will be at 9% (6% in dollars), benefit from greater dynamics in the country's infrastructure and the development of some major projects. It will also help the favorable influence of recent agreements between the country and the International Monetary Fund to support the economic program of three years from the authorities.

Nicaragua:

Growth will remain robust

Fitch estimates that growth in premiums Nicaragua will keep rising, helped by robust economic growth in the next two years. It will also be influenced by a strong and stable increase in premiums auto and personal lines. The agency believes that the sector will close 2014 with nominal growth in premiums close to 21% in local currency. In 2015, the nominal growth of the sector will be around 23%, based on the positive outlook for the business lines non-life and bonds. Particularly, the latter considered the strong government support various investment projects of significant scale in various fields, projected for next year. These include the development of an ambitious canal, multiple diversification projects matrix generation and industrial complex oil treatment.

More on this topic

Expectations for the Insurance Market in 2017

December 2016

According to Fitch Ratings growth in the insurance sector in Central America in 2017 will be driven by the markets of Costa Rica and Nicaragua.

From the report "Outlook 2017: Insurance in Central America"  by Fitch Ratings:

Rating Outlook Stable: Fitch Ratings´outlook for insurance ratings in Central America is stable. The agency believes that there is a limited probability of rating adjustments in the next 12 to 18 months, which could lead to significant changes in the risk profile or the weighted support in some cases.   

Prospects for Insurance Sector in Central America

January 2016

Fitch forecasts growth of 3.5% in the region in 2016, due to increased competition and currency devaluations in some markets.

From a statement issued by Fitch Ratings:

Fitch Ratings - San Salvador - (January 21, 2016): The Outlook for the Insurance Sector in Central America and the Dominican Republic is stable, according to a report by Fitch Ratings.

Central American Banks: Outlook 2015

January 2015

Slow growth is projected in El Salvador, very good performance in Nicaragua, stability in Panama, more competition in Guatemala and moderate growth in Costa Rica.

From a report by Fitch Ratings entitled "2015 Perspectives: Central American Banks":

Costa Rica:
Fitch Ratings has revised the outlook for the sector from positive to stable, because the agency does not anticipate substantial improvements in respect to the previous year. The system's profitability will remain low, with less than 1.0% ROAA. The results are limited because of the high dependence on net interest margin (NIM) and additional expenses in provisions for loan losses, due to regulatory changes that established gradual constitutions of general provisions for the best qualified loans. In addition, Fitch does not anticipate improvements in revenue diversification and also foresees a significant revenue exchange rate differential. This last factor has a significant influence on the results of the banks in Costa Rica.

Insurance in Central America: 2014 Perspectives

January 2014

Fitch Ratings predicts good performance for the sector, but warns of risks such as intense competition in rates, exposure due to natural disasters, and inflation.  

Fitch Ratings believes that the insurance industry will perform well in 2014, however, it does not rule the possibility that some factors such as strong competition in rates, exposure to natural disasters, inflation and devaluation of currencies in some countries will continue to exert pressures.

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