AM Best outlook on Peru’s insurance market remains stable

Credit rating agency AM Best has maintained a stable outlook on Peru’s insurance industry despite the growing perception of risk related to political instability in the country.

According to the Best’s Market Segment Report titled “Market Segment Outlook: Peru Insurance,” Peru’s insurance industry has been resilient in the face of political challenges with stability among key leadership positions within insurance and financial regulators.

Additionally, significant infrastructure projects are expected to benefit insurance premium growth, the agency also noted.

Compared to other Latin American nations grappling with political and economic instability, Peru’s macroeconomic stability since 2000 has provided a crucial foundation for insurers to manage market fluctuations.

However, recent challenges like political unrest, climate events, and investment shortages contributed to a 0.6% GDP contraction last year.

Yet, analysts expect that anticipated foreign investments in infrastructure projects (related to ports, mining, electricity) will boost insurance demand and support economic recovery.

“We expect that insurers with well-established enterprise-risk management capabilities, as well as depth in their reinsurance panels and relationships, will benefit the most,” said Inger Rodriguez, financial analyst, AM Best.

As of December 2023, Peru’s insurance market totaled USD 5.6 billion in premiums, making it the seventh-largest market in Latin America. The non-life insurance segment accounted for 48.1% and the life segment, 51.9%.

Peru’s insurance market is dominated by a handful of major players, with just four companies controlling 87% of all premiums. This concentration is mirrored in the industry’s equity, where the top five companies hold around 87% of the total.

Despite this concentration, the insurance market experienced significant growth in 2023, with nominal growth reaching 11.6% in nominal terms and 13% in real terms.

This growth was primarily fueled by the life insurance segment, which reflects price adjustments as well as an influx of annuities that have migrated from the insurance plans related to private pension funds.

In the property/casualty sector, fire and allied lines are facing various risk pressures, including heightened awareness of risk by reinsurers and higher appraisals (inflation). These factors have ultimately contributed to premium increases.

Additionally, according to the report, the accident & health segment is the third main component of growth in Peru’s insurance market as medical assistance also reflects medical inflation.

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