Contraction in gross written premiums (GWP) in 2020 and moderate growth in 2021, whilst also expecting net profits to reach the 2019 levels only in 2022. However, the insurers’ overall adequate underwriting, conservative investment policies, and sound capital and liquidity offer a cushion against the tough conditions. Due to COVID-19 and the shock in oil prices exacerbating pre-existing economic weaknesses. Before the region’s exposure to the COVID-19 pandemic, economic growth had already slowed due to the underwhelming levels of investment, resulting from political uncertainties and rising social protests. This happened to spill into the insurance sector.
Coronavirus pandemic and the collapse in oil prices prompted S&P to take 11 negative rating actions on global scale on the sector, representing around 24% of the total rating actions on the global insurance sector. The industry has remained relatively resistant to the twin shocks compared to other sectors, given that rating actions occurred among 9% of rated insurers compared with around 40% across all sectors. However, the number of such actions among Latin America rated insurers was the highest. Given that more than 90% of FSRs in the region are either at or above the level of credit ratings on the respective sovereigns, the recent rating actions reflect the weakening economic conditions and increasing challenges ahead for these countries. The pandemic will have the deepest impact on Argentina and Mexico given the likely contractions of 5.6% and 5.5%, respectively, for both years.