Fitch Ratings forecasts that the insurance sector in Central America will close 2018 with a year-on-year increase of almost 6% and expects that in 2019 the business will reach a very similar growth rate.
The projected increase for 2018 and 2019 would be based on the behavior of the Panama, Costa Rica and Guatemala markets, however, the increases of 5.8% and 6.1% forecast for 2018 and 2019, respectively, would represent a slowdown regarding the 8.2% growth registered in 2017.
Between the first semester of last year and the same period in 2018 the value of premiums written in El Salvador saw almost no change, following the line of the weak growth of 1% reported between 2016 and 2017.
According to the Salvadoran Association of Insurance Companies (ASES), insurers reported premiums of $306.5 million in June of this year, which is equivalent to an increase of just 0.11% compared to the $306.2 million recorded up to the same month in 2017.
According to the union of insurers in El Salvador, between January and March net premiums totalled $149 million, 2% less than the $152 million reported in the same period in 2017.
After registering a modest 2% growth between 2016 and 2017, representatives of the Salvadoran Insurance Association (ASES) reported that during the first quarter of the year a 2% drop in contracted premiums was reported, compared to the months from January to March 2017.
With the aim of boosting the insurance market in El Salvador, business leaders in the sector are proposing changes to the legislation that would allow for expanding marketing channels for policies.
After the Salvadoran insurance market recorded growth of 1% in 2017, bills have been prepared that have been submitted to the Presidential House, which seek to reactivate the sector, through the commercialization of microinsurance focused on people with low incomes.
As of December 31, 2017, insurance companies counted $616 million in premiums and generated $38 million in profits.
As of December 31, 2017, Insurance Companies' net premiumsamounted to US $616,142,801.55 and profits were US $38,401,974.41, the latter generated a Return on Equity (ROE) at the system level of 9.88%.
The Superintendence of Competition has authorized the purchase of Davivienda Vida Seguros by the Honduran company Inversiones Atlántida.
A statement issued by the Superintendence of Competition (SC) indicates that the purchase of the insurer Davivienda Vida Seguros, S.A., Seguros de Personas (Davivienda Vida), was made through the Salvadoran subsidiary of Grupo Atlántida,Inversiones Financieras Atlántida, S.A.
Representatives from the sector stated that in 2017 premiums totalled $627 million, which meant an increase of just 1% with respect to the figures reported in 2016.
According to the Salvadoran Association of Insurance Companies (Ases) last year's performance was associated with lower demand in some sectors, greater competition and a volume of risks that has not increased substantially.
Explained by the behavior of the Costa Rican market, in 2017 Central American insurers received $5.02 billion in premiums, 7% more than in 2016.
According to a report drawn up by Revista Desempeño Asegurador, in 2017 "... insurance sales in the region expressed an absolute increase of US $334.7 million, an amount that represented a rise of 7.1% compared to sales in 2016."
Projections are that this year growth of the Central American insurance sector will be driven by activities in the markets of Costa Rica and Guatemala.
From the report "Prospects 2018: Insurance Sector in Central America" by Fitch Ratings:
Stable Rating Perspective:The rating outlook for the Central Americaninsurancesectoris stable for 2018, given that most of the rated companies maintain a stable outlook on an individual basis.Fitch Ratings believes that the sector shows stable fundamentals, as a result of good profitability levels and high liquidity and capitalization indicators in all countries, which it expects to continue to be reflected in solid balance sheets in companies.
In the first half of the year, net premiums totaled $306 million, and the insurance guild plans to close the year with a total growth of 5% compared to 2016.
Figures from the Salvadoran Association of Companies (ASES) show that 2016 closed with a total of $621 million in registered net premiums, and for this year the projection is to increase them by approximately $30 million.
The Executive Committee of the Lempa River Hydroelectric Station is putting out to tender all risks insurance to cover machinery breakdown and consequential loss, for a term of one year.
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.
Panama stands out as the country with the highest penetration rate in the region, and at the other end is Honduras, with the lowest rate, and below the average in Latin America.
From a report by MAPFRE: "Trends of growth in insurance markets in Latin America":
The Superintendence of Competition has authorized the Honduran company Imperia Intercontinental and Inversiones El Salvador to buy Banco Citibank, five of its subsidiaries, Seguros e Inversiones, and Cititarjetas.
From a statement issued by the Superintendency of Competition in El Salvador:
The Board of Directors of the Superintendency of Competition has approved this day, the authorization request for a merger consisting of the purchase of Banco Citibank de El Salvador, S.A. and five of its subsidiaries, Seguros e Inversiones S.A. (SISA) and its subsidiary and Cititarjetas, by Imperia Imperia Intercontinental Inc. and Inversiones El Salvador S.A. de C.V. The deal involves a non-horizontal economic concentration of a conglomerate for most of its operations and a vertical relationship for the provision of financial services through ATMs at gas stations.
According to Fitch Ratings, pension insurance has become a problem in terms of technical profitability for the companies that sell them.
From a statement issued by Fitch Ratings:
Fitch Ratings - San Salvador - (April 28, 2016):
Pension insurance has become a challenge in terms of technical profitability for sellers, says Fitch Ratings. One of the benefits of the current pension system is protection against disability and pension insurance, contracted by the Pension Fund Administrators (AFP) for its members. This coverage is provided by insurers and covers the insured against accidents or diseases that would make it impossible for them to work. In addition it also covers beneficiaries when the insured person dies, providing the required additional capital to finance pensions.
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