Global rating agency AM Best has revised its market segment outlook on the Panama insurance industry to stable from negative.
Best cited that this was due to the segment’s consistent technical results and improving macroeconomic environment.
The report, titled, “Market Segment Outlook: Panama Insurance,” noted that Panama’s GDP expanded by 15% in 2021, following on from a 17.9% contraction in 2020.
Additionally, the country also reduced its debt burden, largely due to its debt-to-GDP ratio falling to 58.4% in 2021 from 65.6% in 2020.
Best stated that public finances remain pressured by the government’s dependence on the Panama Canal´s revenues and the deteriorated fiscal regime, in conjunction with its material spending due partially to its health crisis program, pensions and social security.
However, Best also warned that further disruptions in global commercial trade, as well as a slowdown in global economic activity and potential external shocks still represent a risk for the region´s most relevant shipping and logistics hub.
Meanwhile, Panama’s insurance industry grew by 5.9% by GWP in 2021.
Non-life business, which accounts for almost 75% of the market, remains heavily driven by health and auto.
Best noted that Health remains the spearhead of the domestic industry, as this line grew 19% in 2021. This was driven partially by the population’s growing awareness of the need for health coverage, the postponement of non-COVID related treatments and ongoing medical inflation.
Furthermore, the report states that Panama’s insurance industry remains concentrated, with five companies accounting for almost 75% of GWP market share.
Along with this, underwriting continues to remain healthy, reflecting a combined ratio of 91%, consistent with the segment’s historically sound performance.
Moreover, given the current high inflationary environment, as well as historically high volatility in the equity capital markets, Best concluded that the overall industry is positioned to take advantage of the attractive interest rate environment.
