Despite a mild deterioration in technical results among Mexico’s insurance companies, AM Best is maintaining its stable market segment outlook based on significantly improved premium growth in line with the country’s economic recovery.

The Best’s Market Segment Report, “Market Segment Outlook: Mexico Insurance,” notes that the insurance industry’s loss ratio rose by 3.4 percentage points to 79.6% in 2023, due mainly to Hurricane Otis-related losses. However, the pressure on technical results stemming from the spike in Otis-related claims was partially mitigated by the industry’s ongoing efforts to contain operating expenses, as well as a marginal improvement in acquisition expenses vs. retained premiums. Both efforts contributed to a 2% downward adjustment in the segment’s combined ratio. In addition, GDP in Mexico was up 3.2% in 2023, surpassing most forecasts, with inflation cooling, and the insurance segment recorded premium growth of 11.2%. The economy is projected to grow by approximately 2.4% in 2024, and AM Best expects insurance premiums to maintain their current momentum, albeit at a slower pace than last year.

Financial products grew around 34.4%, owing to the high interest rate environment, foreign exchange stability and a larger asset base due to the increase in top-line growth, ultimately leading to a 10.2% increase in bottom-line results. The segment’s capacity to shift a portion of the expected increase in reinsurance costs to policyholders will play a key role in premium sufficiency in 2024. Nonetheless, a stronger competitive landscape, in line with a decline in inflation, will prove a challenge to adjust tariffs over the next year.

“Although bottom-line results improved and capitalization levels remain positive, market participants with more developed risk management tools will be in a better position to manage any potential volatility arising from the recent presidential elections,” said Alfonso Novelo, senior director, analytics, AM Best. “The outlook could be revised to negative if macroeconomic conditions deviate considerably from expectations and adversely affect the industry’s operating performance.”

To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=343447.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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