Latin American Reinsurers To Sustain Strong Performance through 2025

Latin American reinsurers are expected to maintain strong performance throughout the second half of 2024 and into 2025, driven by disciplined market conditions, according to a new report from Fitch Ratings. Global reinsurance capacity targeting market share and diversification in the region may increase competition for local reinsurers, but favorable underwriting results are anticipated to persist. 

Despite nearing the peak of the reinsurance pricing cycle, hard market conditions could continue if insured losses in the region remain elevated. Fitch's "neutral" outlook for global reinsurance, marked by strong profitability and resilience, applies to Latin America as long as reinsurers maintain robust capitalization and sound financial performance amid ongoing macroeconomic risks. However, Latin American reinsurers remain vulnerable to sovereign risk, with potential adverse effects on ratings if sovereign ratings decline. 

In 2023, Latin America faced substantial catastrophe-related economic losses of approximately $45 billion, the second highest in the past decade. Notable events included Hurricane Otis in Mexico and extreme drought and heat waves across South America, which led to insured losses of $3.4 billion and total economic losses of $33 billion. While insured losses of $6 billion were manageable compared to the record $53 billion in 2017, the significant gap between economic and insured losses highlights the need to address the region's protection gap. 

Ceded premiums in Latin America increased from $19.7 billion in 2019 to $23.6 billion in 2023, reflecting the insurance market's expansion. This growth is expected to continue over the next 12 to 18 months, supported by organic market development, rising natural catastrophe frequency, and inflation-related exposure. Insurers have managed to retain a stable retention rate of 85 percent despite challenges such as limited capacities and rising renewal rates in recent years.