Global Vision for the Insurance Industry in Chile

The insurance industry has been in Chile since 1853, allowing Chilean to manage their risks and reduce the uncertainty inherent in all human activities. It is known for being highly competitive, forcing his players to maintain high standards of efficiency.

Chile was the ­first Latin America country to open its market to foreign insurance. Most of the leading insurance companies in the Chilean market are part of multinational groups. Chile’s top five insurance companies by market share are Royal & SunAlliance (18.5%), Penta (11.6%), Mapfre (10.7%), Chartis (9.6%), and Liberty (8.5%), which are all local units of foreign companies except Penta.

There are around 54 insurance companies in the country divided into general and life insurance. Chile’s insurance sector is usually divided into life insurance and general insurance. Life insurance is by far the largest of the two accounting for about two-thirds of the total insurance market, and it’s growing fast. Between 2001 and 2010, life insurance premiums tripled from about $2 billion to nearly $6 billion, growing at an average annual rate of 13%.

The first half of 2013, the insurance market as a whole reported total sales reaching US$5,597 million, which represents a real increase of 5.1% over the same period in the previous year. Between January and June 2013, the market for life insurance showed an increase in real terms of 6.6% in sales compared to the same period of the same period in the previous year, reaching US$ 3,801 million while the general insurance market expanded 2.0% in the same period, reaching US$ 1,795 million. In the first half of 2013, the life insurance market generated profits reaching US$ 221.6 million, while the market of general insurance made profits of US$ 82.2 million.

The third quarter of 2013, the insurance market as a whole recorded total sales reaching US$ 8,483 million, representing a real increase of 3.9% over the same
period last year and total profits of US$ 377 million. In the third quarter of 2013, the general insurance market obtained profits of US$ 105.2 million, representing an increase of 22.5% over the same period last year. Life insurance generated profits of U.S. $ 271.4 million. The best results in general insurance are the result of an increase in investment income and lower expenses in technical reserves.

The figures are clear and the outlook for the insurance sector in Chile is auspicious, since the country has sound macroeconomic projections.

The Chilean insurance sector is stable, indicating the high probability of reaffirming
the ratings assigned to the Chilean insurance market during 2014 revisions. The Chilean insurance industry reflects maturity levels in the regional context. The overall industry would close 2013 with an increase of around 5% in real terms set to continue during 2014, with growth expected at around 5.0% and 5.5%.
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The insurance industry in Chile remains a highly competitive business on a structured and mature environment. The industry should continue keeping proportions having life insurance 2/3 of the share of the market and 1/3 of general insurance.

The insurance protection against natural disasters is solid, including risks earthquake and tsunami, and does not compromise the solvency of companies. While earthquakes represent the greatest exposure to catastrophes for insurers in Chile, the 27F disaster of 2010 was a strong stress test that successfully beat the market.

Source:

Superintendency of Securities and Insurance / Superintendencia de Valores y Seguros

Fitch ratings