During late 2009 and early 2010, and despite the complex global environment, the Mexican insurance and surety sector remained stable and continued to be Latin America’s second-largest market (6.3 percent real market growth during 2009).
Sustained profitability, strong assets, and solid capitalization levels, which are constantly monitored by the Mexican authorities, have resulted in a local industry strong enough to face the impact of the world’s economic situation. However, 2010 is expected to be especially challenging for the industry in Mexico, given high unemployment rates, a general increase in taxes, and a continued bad economic situation (no gross domestic product growth expected). This has pushed the industry to seek new alternatives and focus on different potential market niches such as micro-insurance and affinity lines.
The market is largely driven by subsidiaries of foreign companies and companies that belong to large multinational financial groups. This has resulted in more sophisticated insurance programs and services designed for large corporations as underwriters seek to introduce local versions of global products for more developed risk management interests. However, the placement of large and more complex risks is still pursued at international reinsurance markets—London and U.S. mainly—to support the local market capacities.
Beachfront risks are still a major concern for insurance companies; yet, more local underwriters have developed an interest in them recently, providing very competitive alternatives. Cargo insurance is still a major admitted exposure across the country as well as Earthquake and Volcanic Eruption. Being a nonlitigious country, when compared to other developed nations, in México Motor is usually considered a property exposure rather than a casualty one. Yet, increased limits are often required and available in the local market.
In general, insurance culture in the country is still far from that of developed nations (only 1.7 percent of gross national product). However, the consistent market growth and low penetration show very large potential and opportunities, which a financially stable and experienced industry can very well provide for.
2009 Market Share per Line (Total Direct Premiums $18 billion USCy)
Source: The Mexican Association of Insurance Institutions (AMIS- Asociacion Mexicana de Instituciones de Seguros)
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market update.
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