A special report from A.M. Best – “Regulation Tightens as Colombia’s Insurance Market Grows and Matures -“notes that “insurance companies operating in Colombia are benefiting from a vibrant, growing economy, the country’s commitment to building infrastructure and helping its industry access global markets, and regulation that is improving and is aimed at responsible growth of this important Latin American market.”
According to the report’s findings the “Colombian insurance industry’s gross premium increased by 15 percent to COP 14.2 trillion ($7.83 billion) in 2011, according to BestLink data.” Best projects that total premium will reach COP 20.3 trillion [$11.126 billion] in 2016.
In addition the report notes that the “level of insurance penetration in Colombia has held steady at 2.3 percent in each of the past three years,” but Best said it “expects this to increase if overall economic growth keeps unemployment stable, consumer spending power subsequently elevates and more individuals join the formal economy as banking customers.
“In turn, regulatory efforts by the Superintendencia Financiera de Colombia (SFC) have resulted in enhanced risk-based capital requirements to align its approach with international standards. In addition to underwriting risks, insurers’ capital models will address asset exposure in the coming year, while non-life writers also must factor in market risks. This ongoing regulatory push coincides with next year’s opening of Colombia’s insurance market to non-admitted writers.”
Best listed other highlights from the report as follows:
— Colombia’s emerging-market status is fueled by natural resource exports and a government-driven push to strengthen the nation’s existing transportation infrastructure. Public spending will be a catalyst for growth in two already important insurance segments in Colombia: the construction sector and the surety line of business.
— Another significant regulatory change involves the implementation a 1,500-year return period that will be used to model probable maximum loss from earthquakes, which Colombia is susceptible to given its coastal position on the Pacific “Ring of Fire.” While a precise model for this standard still is being developed, these calculations will be done by line, a shift away from the prior standard.
— Colombia’s non-life premium increased 15 percent to COP 7.5 trillion [$4.11 billion] in 2011, and the combined ratio for non-life was 106, down from 109 in 2010, according to BestLink. Nearly half of the non-life market’s premium is concentrated among the top five writers. In addition, the top five market players in Colombia’s life segment accounting for 61.2 percent of 2011 life premium.
Source A.M. Best