A political shift in Mexico that has seen López Obrador become the country’s first leftist president-elect in decades could benefit the environment for health and agriculture insurance coverages, as well as the wider insurance market, says A.M. Best.
Director of Analytics, Alfonso Novelo and Eli Sanchez, Senior Financial Analyst, both of A.M. Best, say that a pressing issue in Mexico’s market is the renegotiation of North America Financial Trade Agreement (NAFTA).
“At this time, the market is optimistic, since the peso has gained some ground against the U.S. dollar,” said Novelo.
“I believe that the renegotiation of the NAFTA agreement will have some impact on the movement of the Mexican peso in the coming months.
“However, as of now, the insurance industry is well-prepared to face these challenges that could arise, basically because most of the insurance companies try to avoid mismatches in terms of currency for their assets and liabilities.”
Sanchez focused on the ever-present catastrophe risk in Mexico, especially in light of the earthquakes in 2017.
“At the time of the earthquakes, there was a catastrophe risk culture among insurers, which enabled them to be very well-protected by their insurance programs,” said Sanchez.
“Presently, those programs are well-capitalized and have regulator support. Additionally, in those areas where insurers do not participate, the government has put in place catastrophic bonds.”
