AM Best, a global credit rating agency specialising in the insurance sector, says the Latin American reinsurance market has remained resilient despite weaker economic growth, significant catastrophe exposures and a prolonged soft market.
Its September 2026 Market Segment Report highlights continued premium growth, abundant reinsurance capacity and opportunities created by the region’s substantial insurance protection gap, while also pointing to growing pressure from climate-related risks, economic uncertainty and evolving regulation.
According to AM Best, reinsurance conditions across Latin America remain favourable to cedants, with ample capacity and flexible terms continuing to characterise the market. Facultative business remains highly competitive, with pricing reductions of between 5% and 20% reported in some areas.
AM Best notes that the soft market, which has continued since the second half of 2024 and extended through the June and July 2026 renewals, has allowed insurers to strengthen catastrophe protection while maintaining relatively favourable terms.
The market is nevertheless operating against a more challenging economic backdrop. AM Best cites the Economic Commission for Latin America and the Caribbean’s revised forecast for regional economic growth of 2.2% in 2026, down from its previous 2.3% projection, with economic growth expected to slow in 24 of the region’s 33 countries.
Commercial and geopolitical tensions, alongside volatility in commodity markets and oil prices, have added uncertainty to economic projections and created additional considerations for reinsurers when assessing risk and pricing.
AM Best identifies the region’s substantial insurance protection gap as one of the clearest areas of potential growth. Less than 24% of almost USD 21 billion in economic losses were insured, according to the report, with insurance penetration remaining below 5% of GDP. The scale of uninsured losses associated with hurricanes, droughts, floods and earthquakes illustrates both the financial vulnerability of the region and the potential for insurers and reinsurers to develop products that extend protection to currently underserved markets.
Catastrophe exposure remains a central consideration. AM Best highlights Latin America’s vulnerability to earthquakes, tsunamis, volcanic eruptions and landslides, alongside increasing exposure to climate-related events including extreme heat, drought, flooding and tropical cyclones.
The report notes that catastrophe experience during the second half of 2026 could influence market conditions, particularly following the start of the phenomenon known as “Super El Niño”. AM Best says the phenomenon is showing signs of rapid intensification, with potential consequences including prolonged droughts, torrential rainfall and extreme heat.
Despite these risks, AM Best says international reinsurers continue to show interest in Latin America, supported by the region’s diverse exposures, relatively low insurance penetration and demand for additional capacity. The report also points to growing interest in proportional reinsurance, while casualty and specialty lines are gaining attention in more developed markets such as Chile, Mexico and Brazil. Life and health reinsurance demand is also increasing, with demographic changes, migration and evolving protection requirements contributing to the trend.
Brazil provides a particularly important example of how the regional market is developing. AM Best reports that domestic Brazilian reinsurers remained profitable in 2025, with net premiums increasing by 5.6% and industry surplus growing by 13% in Brazilian reais.
The domestic industry also recorded a positive underwriting result for the first time since 2019. High interest rates, which stood at 15% at year-end 2025, supported investment income and contributed to overall profitability, although AM Best notes that investment income itself declined by 12.7%.
AM Best also highlights a gradual shift in Brazil’s reinsurance structure. While the volume of reinsurance accepted by local reinsurers from domestic insurers has increased, the proportion of ceded premium directed towards local reinsurers has fallen. Local reinsurers accounted for approximately 70% of premium ceded by domestic insurers between 2015 and 2018, compared with 53% at the end of 2025. AM Best says this reflects greater use of offshore reinsurance alongside the maturation of Brazil’s insurance market and the increasing need to diversify risk.
Brazilian reinsurers are also placing greater emphasis on specialty lines, property and other areas where relatively low insurance penetration provides scope for further expansion. AM Best reports that health, property, motor, marine and financial risks were among the main contributors to premium growth in 2025. Agricultural reinsurance also increased by 6.3%, despite weather-related concerns, with AM Best noting the use of developing techniques to monitor climate risks affecting the sector.
At the same time, Brazil faces additional pressure from tax and regulatory changes. AM Best says recent changes affecting foreign exchange transactions have increased costs for offshore participants, while the introduction of the CBS and IBS taxes in April 2026 represents a significant change to the country’s indirect tax framework. The pilot implementation is expected to reveal operational issues during 2026, which AM Best says it will continue to monitor.
Risk management remains a central theme across the report. AM Best says stronger enterprise risk management capabilities and improved risk modelling are increasingly important in determining how reinsurers price business and manage capital.
Parametric covers and captives are becoming more widely considered by rated companies, although issuance remains limited. For reinsurers operating in markets exposed to climate, catastrophe and foreign exchange risks, AM Best emphasises the importance of evolving risk management practices alongside changing exposures.
The report also identifies managing general agents and alternative risk transfer arrangements as factors supporting continued capacity in the region. AM Best says the increasing use of MGAs to provide capacity to Latin American markets, or to transfer regional risks to reinsurers abroad, has contributed to the prolonged soft market. A reduction in global interest rates could further increase the attractiveness of the region and support demand for delegated underwriting authority enterprises focused on Latin America.
Overall, AM Best’s assessment is that the Latin American reinsurance market remains positioned for continued growth, but with profitability increasingly dependent on disciplined underwriting, effective risk management and an understanding of changing catastrophe exposures.
While abundant capacity and competitive pricing continue to favour cedents, AM Best will be monitoring catastrophe experience, climate-related risks, economic conditions and regulatory developments for signs that market conditions could begin to change.
