AM Best has revised its market segment outlook on Chile’s insurance industry to stable from negative, owing to market dynamics, effective regulatory measures and economic recovery.
In its Best Market Segment Report, – “Market Segment Outlook: Chile Insurance,” the ratings agency noted that Chile’s USD 10.4 billion insurance market as the fifth-largest in Latin America and one of the most developed in terms of penetration, financial flexibility and depth.
However, the industry’s operating performance and financial strength are being affected by volatile financial markets, inflationary pressures, and a changing regulatory framework. Other challenges include the effects of COVID-19, global inflation, the devaluation of the currency, and, to a lesser degree, domestic social and political events, but AM Best expects the industry to grow in an improving economy.
In 2021, Chile’s economy grew by 11.7%, following a contraction of 6.6% in 2020, led by an increase in domestic goods consumption and a recovery in retail trade. Employment, however, has not yet returned to pre-pandemic levels, and key industries face complicated global challenges.
AM Best expects Chile’s insurance industry to continue to grow.
Property and Casualty (P&C) insurance premiums expanded by 9.6%, while the life segment was flat owing to regulatory and market developments. Overall, the market grew 2.9%, with net income rising 58.3% due to the life companies’ exceptional investment results.
The non-life segment’s net results were positive but flat compared to the previous year. However, AM Best expects further growth in this segment as public expenditures and global economic conditions improve.
According to the report, the health segment also was profitable in 2021, even though health premiums dropped by 2.5%, the number of insurance policies increased 105.1% due to compulsory COVID-19 coverage, which private-sector employers had to acquire for their employees.
AM Best noted that the loss ratio increased from 2020, when usage was limited, but 2021 levels remain below pre-pandemic levels.
Eli Sanchez, associate director, AM Best, said: “Challenges still remain for Chile’s insurers, including the effects of COVID-19, global inflation, the devaluation of the currency, and to a lesser degree, domestic social and political events. However, risk-adjusted capital levels among domestic insurers remain solid and resilient against evolving market risks.”
AM Best has observed fewer factors limiting the overall performance of Chile’s insurance companies as the country’s economy has benefited from prompt action by monetary and fiscal authorities.
Recent global and domestic market developments can be expected to felt throughout 2022, but more mildly than in 2021. AM Best will continue to monitor developments in Chile’s insurance market, as well as its exposures to domestic and global natural risks and financial volatility.
