AM Best has revised its market segment outlook to negative from stable on Colombia’s insurance industry due to the COVID-19 pandemic.
The rating agency argued that the resulting economic damage from the pandemic will put considerable strain on the country’s insurers.
While economic conditions in Colombia have improved over the past few years, the development is now set to be limited by uncertainty arising from the spread of the virus, which has forced the country to impose a mandatory quarantine and travel restrictions.
Additionally, Colombia relies on the hydrocarbon and mining sectors, which makes it vulnerable to shifts in global commodity prices and demands.
AM Best further noted that Colombia’s central bank has cut the policy rate by 100 basis points since the outbreak, positioning it below inflation, to mitigate the economic and social effects of the pandemic and boost the country’s economy.
At the same time, the main stock market index (COLCAP) has registered a sharp decline, reversing the growth of the last year.
As of November 2019, Colombia was the sixth-largest insurance market in Latin America, with US $7.8 billion in premiums and an insurance penetration rate of approximately 2.6%.
Despite an economic contraction of 2.4%, AM Best expects Colombia’s insurance market to withstand the challenges of the current situation.
