Best’s News & Research Service - September 24, 2024 11:29 AM (EDT)
Best’s Market Segment Outlook: AM Best Maintains Stable Outlook on Peru’s Insurance Industry
- September 24, 2024 11:29 AM (EDT)
//BestWire// - Despite the growing perception of risk related to political instability in Peru and its potential impact on the economy and financial markets there, AM Best has maintained a stable outlook on the country’s insurance segment.
The Best’s Market Segment Report, “Market Segment Outlook: Peru Insurance,” notes that Peru’s insurance industry has been resilient amid political turmoil with stability among key personnel at insurance and financial regulators. Additionally, significant infrastructure projects are expected to benefit insurance premium growth.
Peru’s macroeconomic stability has been key to insurers’ ability to navigate market cycles since 2000, in comparison with other Latin American countries that have experienced profound political and economic shifts. However, last year the combined effects of political turmoil, climate-related events and a lack of investment impacted economic growth in Peru, leading to a 0.6% contraction in the country’s gross domestic product (GDP). Investments originating from outside are expected to generate key infrastructure projects related to ports, mining and electricity, and increase the demand for insurance.
“We expect that insurers with well-stablished enterprise-risk management capabilities, as well as depth in their reinsurance panels and relationships, will benefit the most,” said Inger Rodriguez, senior financial analyst, AM Best.
As of December 2023, Peru’s insurance market totaled USD 5.6 billion in premiums, making it the seventh-largest market in Latin America. The non-life insurance segment accounted for 48.1% and the life segment, 51.9%.
Peru’s insurance industry is quite concentrated, with four companies accounting for 87% of premiums and the five largest companies accounting for around 87% of the industry’s equity. In 2023, the insurance market grew 11.6% in nominal terms and 13% in real terms. The main growth driver (in nominal terms) has been the life segment, which reflects price adjustments as well as an influx of annuities that have migrated from the insurance plans related to private pension funds.
On the property/casualty side, fire and allied lines reflect different risk pressures, as well as greater awareness of risk by reinsurers and higher appraisals (inflation), which has finally led to an increase in premium. The third main component of growth in Peru’s insurance market has been the accident & health segment, as medical assistance also reflects medical inflation.
To access the full copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=347076 .
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City