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.


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.


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.


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.

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

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