Latin America

Mexican storm losses

The Association of Mexican Insurers (AMIS) is predicting a growth rate for the local insurance market of only 4%, representing a 1% to 2% fall in real terms. According to AMIS chief executive Recaredo Arias, this is due to the fact that the extraordinary (non- recurring) items which boosted the market’s income last year won’t be there this year. Mr Arias referred to the government imposed increase in pension payments and the P2.5bn multi-year premium payments by the state-run oil company, Pemex and the state electricity company CFE. Insurance premium income in Mexico fell by 4.6% to P101bn (US$9.5bn) for the first nine months of 2005. However, a substantial increase (55%) in investment income meant that companies’ pre-tax profits increased by 4% to P7.8bn. Mexican insurers face P22.9bn in hurricane losses, nearly seven times the losses they suffered in 2002, up to now the worst hurricane loss year for the domestic industry in recent history. AMIS calculates that Mexican insurers will pay 25% of these claims, with the local and international reinsurance markets absorbing the rest. This will make it possible for the market to post a pre-tax profit of around P3.4bn despite the heavy storm losses, according to AMIS. The Association predicts a bright outlook for 2006, with continued growth in health and life insurance premium income. Non-life insurance (with the exception of motor) premium income, which fell by 7.9% during the first nine months of 2005, is set to recover particularly with higher rates for property catastrophe lines.