Insurance Industry Is Recovering From the Pandemic: SHCP
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Insurance Industry Is Recovering From the Pandemic: SHCP

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Antonio Gozain By Antonio Gozain | Senior Journalist and Industry Analyst - Wed, 05/25/2022 - 10:41

The insurance industry, which, as most sectors, was hit by the COVID-19 pandemic, does not show signs of system risk and will see recovery soon, said Héctor Santana, Head Insurance, Pensions and Social Security Unit, Ministry of Finance and Public Credit (SHCP).

“Currently, we do not see yellow lights. The insurance sector is a long-term maturity business and that is where we must be evaluating. The National Insurance and Bonds Commission (CNSF) periodically monitors the situation. Although there may be a decrease in profits since insurers have had to assume the accident rate, there is no report of systemic risk in insurers,” said Santana during the 31st Insurers Convention, organized by the Mexican Association of Insurance Institutions (AMIS).

Since the pandemic hit, insurance companies have paid around MX$60 billion (US$3 billion) in medical expenses and COVID-19 deaths, according to Deloitte. This accident rate became the most expensive event for the industry, leading to shrinking profits. In 2021, this came to MX$38 billion (US$1.9 billion), a 28.7-percent drop against 2020. However, in 1Q22, profits increased by 12.5 percent to MX$12 billion (US$600 million), reported El Economista.

While the insurance industry has registered losses in some areas, for example in policies that were affected due to the economic paralysis brought by the pandemic, the sector has successfully faced the most difficult situation in its history, said Santana. “The report made by CNSF proves that the sector shows stability and gradual growth. Recovery has started.

The insurance market in Mexico is the second in Latin America, in terms of assets and premiums, only behind Brazil, according to BBVA Research. However, the penetration of the insurance sector is low compared to other countries with similar economic development, since it is equivalent to 2.4 percent of the GDP, below other Latin American markets, according to CNSF. “There is a cultural issue regarding insurance in Mexico. In other countries, insurance services represent between 7 and 10 percent of GDP,” said to MBN Felipe Sánchez, President, Assurant México.

Despite the low penetration of insurances in Mexico and the challenges that the pandemic brought, insurance companies generate legal certainty and offer guarantees for businesses among diverse economic activities, while also offering asset security, health protection and certainty in retirement for individuals, said Santana.

“Another crucial aspect to highlight is the economic importance of insurers in Mexico. They are the third main institutional investors in the country, representing 5.4 percent of the GDP and a very important instrument that drives and promotes the country’s development.”

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