Latin America is expected to remain one of the fastest growing insurance markets worldwide, despite potential headwinds facing the industry, according to Alan Murray, SVP at Moody.
The region has been the world’s fastest growing insurance market during the last decade, outpacing other emerging markets, such as Asia, as well as developed markets.
Average annual growth for the region’s insurance sector reached almost 15% in the last ten years, with particularly strong growth in markets including Brazil, Argentina and Colombia.
Much of this growth has been driven by a rapid expansion of Latin America’s middle class, as earnings, savings and consumption grew rapidly, Moody’s said in a report.
Slowing economic growth in Latin America is giving rise to the possibility of stagnating income growth among the region’s middle class, and this could have a dampening effect on the insurance sector, the report added.
With a slower pace of growth, the positive gap in insurance growth relative to other markets is unlikely to be sustained at current levels, according to Murray.
The strong middle class expansion in the region, however, has been accompanied by capital market development, improved corporate governance and insurance market regulation.
As a developing market, Latin America is expected to grow at higher rates than mature economies, but whether it continues to exceed Asia “remains to be seen,” according to the analyst.
The Brazilian insurance sector, which accounts for around half of overall premiums in the region, has continued to grow faster than GDP despite the “ups and downs” of the local economy, Moody’s VP and senior analyst Diego Kashiwakura said.
The still relatively low level of insurance penetration in Latin America also means that there is still potential to grow, he added.