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Mexico Insurance Report Q1 2011
Business Monitor International, Nov 2010, Pages: 78
Mexico Insurance Report provides industry professionals and strategists, corporate analysts, insurance associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Mexico's insurance industry.
Key Insights on Mexico’s Insurance Sector
Premiums have increased much more slowly in Mexico than in other Latin American markets in 2010. Writing in November 2010, the authors have access to the initial figures published by Mexico’s insurance regulator, Comisión Nacional de Seguros y Fianzas (CNSF) for the first six months of the year. Compared to H109, total premiums increased by just 0.3% to MXN121,067mn. Non-life premiums fell by 0.4% to MXN73,125mn, while life premiums grew by 1.3% to MXN47,942mn. This caused us to revise our estimates for the year as a whole.
As the data in this report show, the US economic downturn has had an adverse impact on demand for insurance in Mexico. After almost doubling to around 2.00% of GDP in the five years to the end of 2009, non-life penetration has fallen sharply – although it is still higher than it was in 2008. Life density has fallen by about a tenth to the levels that were prevailing before the global financial crisis reached its climax in September 2008. Our medium-term growth projections are based on the assumptions that by 2015 non-life penetration and life density will return to the levels of 2009.
The authors estimate total premiums in 2010 of MXN351,178. This includes non-life premiums of MXN208,425mn and life premiums of MXN142,754mn. In 2015, the corresponding figures a forecast to be MXN435,424mn, MXN300,833mn and MXN134,591mn. The modest increases in non-life penetration and life density are forecast to be 1.85% of GDP to 2.00%, and from US$105 per capita to US$115 per capita respectively. BMI’s Insurance Business Environment Rating for Mexico, which is boosted by the manifest openness of the market to foreign insurers, is 66.4.
This quarter, BMI include a discussion of developments within regional markets, on the basis of results published by major cross-border companies in relation to Q210 and the latest information provided by regulators and/or trade associations.
Mexico’s Insurance Sector
Mexico’s insurance sector appears underdeveloped by many metrics. In 2010, for instance, estimated total premiums are less than one third of the size of those in Brazil, even though Mexico’s economy is only about a third smaller and the population is only 45% smaller. This appears unlikely to change anytime soon. Many Mexicans who can afford to use financial services, provided by banks or insurance companies, are willing and able to work with providers in the US.
Partly because of the reconstruction of the banking industry following the financial crisis in the mid- 1990s, the life sector is dominated by major foreign groups, but is sufficiently fragmented to allow substantial competition. According to CNSF, the five largest players in the life segment accounted for 70% of premiums written in H110. US insurance company MetLife was the largest, with a market share of 33%. It was followed by Grupo Nacional Provincial (GNP, 10%), BBVA/Bancomer (9%), Monterrey New York Life (9%) and Citi/Banamex (7%).
The non-life segment is more fragmented than it was a year ago. According to the CNSF, the five largest players accounted for 47% of premiums. AXA’s operations in Mexico, enlarged by the purchase of ING Seguros in early 2008, were the largest foreign non-life insurer, with a market share of 14%. Spain’s MAPFRE, with a market share of 6%, was the only other foreign group in the top five. Other leaders included the Mexican groups Quálitas (7%), GNP (14%) and Inbursa (6%).
In other words, premium growth has almost certainly been constrained by competition. Compared to their peers in other major Latin American countries such as Brazil or Chile, Mexican insurers have – at least potentially – been more directly exposed to the problems of the US economy in the wake of the global financial crisis.
Issues to Watch
Growth Of Life Segment
Life insurance premiums are growing significantly more slowly than they were in 2006-2007. Given the competitive pressures in the segment, and the economic challenges still facing Mexico, the authors expect the segment to stagnate from 2011.
Fire Insurance and Other Non-Life Insurance Lines
CNSF’s H109 figures highlighted that the non-life sector has been boosted by particular lines. The authors anticipate that the surge in fire insurance and other lines would not be sustained and he CNSF’s figures for H110 indicate that there has been no growth in either segment. However, BMI’s forecasts for the Mexican economy, and non-life penetration, are consistent with a return to double-digit growth from 2011.
Mexican Fixed Income Markets
At a time when premiums generally are slowing, the continued favourable performance of the local bond markets will be crucial.
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