Panama: Expanding insurance uptake

Panama: Expanding insurance uptake

Latin America | 17 May 2013

Home to 3.5m people, Panama has one of the largest and most competitive insurance markets in Central America, with 30 companies vying for annual insurance premiums of around $1bn. Moreover, the sector continues to expand alongside broader economic growth.

According to the Insurance and Reinsurance Superintendent of Panama (SSRP), insurance premiums rose by 8.2% in 2012. Drivers of growth included the automotive segment, which expanded by 8.4% to $199.2m, giving it a 17.5% market share. Health coverage, which increased 14.9%, had the second-highest market share of 15.9% ($181.3m). It was followed by collective life insurance ($135.3m, 11.9% market share) and individual life insurance ($119.8m, 10.5% market share), which grew by 5.6% and 12.4%, respectively. Meanwhile, home fire insurance experienced one of the larger percentage increases, at 19.1% growth ($96.9m, 8.5% market share).

Despite market expansion in recent years, insurance coverage is still considered expensive and unnecessary by many people. While further educating uninsured segments of the population on the benefits of insurance coverage could stimulate growth in some middle- and lower-income communities in the short term, market penetration is expected to continue to rise alongside growth in per capita income and consumer purchasing power.

Nevertheless, even today, Panama is doing well compared to its neighbours, ranking third in Latin America in terms of insurance spending per capita. According to the Association of Insurance Supervisors of Latin America, in 2011 its per capita spending on premiums of $290.61 was topped only by Chile ($524.34) and Brazil ($329.29).

Panama has also attracted some of the biggest global names in insurance, including Mapfre, HSBC Insurance, ACE Group and Generali. The market is highly competitive, with no one firm holding a share greater than 20%, and only three accounting for more than 10% of premiums.

According to the SSRP, in 2012 the five largest providers in terms of revenue were Compañia Internacional de Seguros (17.6%, $200.4m), ASSA Compañia de Seguros (16.3%, $185.9m), Mapfre Panama (13.2%, $150.1m), Assicurazione Generali (8.3%, $94.2m) and Asegudora Ancon (6%, $68.7m).

In April 2012 insurance reform was passed through the approval of Law No 12 of 2012. The legislation addresses multiple aspects of the insurance sector, starting from the top, with a strengthening of the regulator. The SSRP was formerly an extension of the Ministry of Commerce and Industry but is now a fully autonomous agency with the ability to enforce regulations regarding financial viability as well as consumer protection.

Under the new framework, capital requirements for insurance companies have increased to $2.5m. This may make it more difficult for new firms to enter the market, although it will help ensure that investments will come from providers with a long-term commitment to the country, according to the Panama Insurance Association. The new law also provides for consumer protection in the insurance segment for the first time, allowing the SSRP to investigate customer complaints.

With a strengthened, modern regulatory framework, the SSRP is now trying to take the sector beyond Panama’s borders. Indeed, transforming the country into a centre for insurance and reinsurance companies in Central America has now become one of the main objectives of the SSRP. It may have already had some success, with Mapfre reportedly considering a consolidation of its Central American reinsurance operations to Panama.

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