According to S&P Global Ratings’ latest analysis of the Latin American (LatAm) insurance landscape, the forecast for 2024 suggests a challenging economic outlook due to an anticipated slowdown in global economic growth.
S&P predicts slower growth in the U.S., a significant concern given its strong economic ties with LatAm countries, particularly in trade, investment, and remittances. This slowdown could have significant repercussions for LatAm.
Countries like Mexico, which rely on the U.S. for over 80% of their exports, would be particularly affected.
Economic troubles in the eurozone and China further contribute to the challenging outlook.
While S&P predicts a decrease in inflation in Latin America, allowing for some policy rate cuts, persistently high interest rates may continue to limit investment opportunities and weaken domestic demand.
As a result, most Latin American countries are projected to experience slower growth in 2024, mainly due to slowdowns in Brazil and Mexico, the region’s two largest economies.
Moreover, there is a risk that global conflicts may exacerbate the situation, potentially leading to higher food and energy prices, posing significant risks to the region’s growth outlook.
The report also identifies structural weaknesses within the region, such as poor infrastructure, a large informal labour market, lack of investments, insecurity, and political uncertainty, which contribute to the overall economic challenges.
“In our opinion, LatAm’s sluggish economy in 2024 could weigh on insurers’ growth prospects. However, opportunities could cushion the impact and allow insurers to keep achieving profitable growth,” says S&P.
These potential mitigating factors include Mexico’s strategic location and ties with the US could attract companies worldwide, potentially increasing demand for insurance products. Additionally, the benefits of nearshoring could extend to other countries in the region.
Extreme weather events in Brazil, Mexico, and South America could also raise awareness of the need for insurance coverage.
Despite these challenges, moderate growth is expected in LatAm insurers’ Gross Written Premiums (GPW).
