AM Best: Market Segment Outlook – Colombia Insurance
OLDWICK, N.J. //BestWire// - The outlook for Colombia's insurance industry remains negative as the country addresses economic pressures caused by challenging global conditions, finds research outlined by AM Best Associate Director Olga Rubo.
Olga RuboFollowing is an edited transcript of the interview.
View the video version of this interview here.
Q: What are the main factors contributing to the negative outlook for Colombia's insurance industry in 2026?
A: The industry is facing a tough combination of challenges. First, the global economic environment isn't helping as there's a lot of pressure from rising inflation and higher interest rates. On top of that, Colombia is heading into a presidential election and the uncertainty around who will win and what policies they'll introduce is making investors and companies nervous.
Even though the country's economy grew by 2.8% in 2025 and is expected to keep growing moderately, there are warning signs. Inflation could spike again due to things like a recent minimum wage hike and rising gas prices.
For insurance companies, this means their investment income might go up because of possible interest rate increases, but the value of their current investments could drop in the short term. All these factors together are why the outlook is negative, even though the insurers are trying to manage risk better and expand into new opportunities to cushion the blow.
Q: How did Colombia's insurance market perform in 2025, and which segments experienced the most significant changes?
A: In 2025, the market grew by 8.8%, reaching 61 billion Colombian pesos in premiums. Looking closer, not all parts of the market are doing equally well. Property and casualty insurance, which makes up about a third of the market had the slowest growth. The auto insurance segment actually shrank a bit with average premiums dropping by almost 6%. The engineering insurance segment had the biggest contraction down over 4%.
On the flip side, unemployment insurance premiums grew a lot, which probably reflects the economic uncertainty that people are feeling. Life and health insurance also saw meaningful increases, mainly because companies raised premium rates and there's steady demand for health plans.
Social security insurance is another big chunk of the market, and the mandatory traffic accident insurance makes up about 7%. While the overall numbers look good, there are some weak spots, especially in areas hit by economic and climate-related challenges.
Q: What are the main challenges and risks facing Colombia's insurance industry beyond economic factors?
A: There's a lot more going on than just economic pressures. For starters, the regulatory environment is a source of uncertainty. For example, in late 2025, the government tried to increase income taxes for insurance and reinsurance companies, but the move was quickly suspended after being declared unconstitutional. Still, the fact that such changes are even being considered makes the market nervous about what might happen next.
The market is also pretty concentrated, with the top five companies holding almost half of all the premiums. The pricing rules, especially in personal lines, like auto insurance, make it hard for companies to compete or adjust prices based on risk. Digital platforms have made it easier for customers to buy insurance, but they haven't really changed how prices are set.
The climate risks are also another major headache. Frequent floods, the landslides and events such as El Niño have led to more claims, especially in property and agricultural insurance. Many policies don't fully cover these disasters, leaving businesses and homeowners underinsured.
On top of that, it's tough to introduce new products because of regulatory delays, and many small businesses and lower income households aren't buying extra coverage. The limited reinsurance options and reliance on traditional underwriting methods also make it harder for the industry to adapt quickly.
All these factors combine to create a challenging environment for insurers, and with the upcoming elections, there's a lot of uncertainty about what the future holds.
You can find the full report online at ambest.com.
View this and other interviews at http://www.ambest.tv
(By John Weber, senior associate editor, AM Best TV: John.Weber@ambest.com)