Rating agency Moody's warns that inflation and rising claims are pressuring margins for insurance companies in Mexico. These factors, alongside economic weakness, offset a low technical margin through reserve financial income. Climate change worsens the issue by increasing reinsurance costs.
Moody's rating agency has examined the landscape for insurers in Latin America, noting how inflation raises claims costs and complicates passing them to premiums, thereby squeezing technical margins. In Mexico, this combines with rising claims and weak economic activity to impact overall sector profitability.
While the country's technical margin remains low, it is partially offset by financial income from reserves. Moody's indicates expected growth in property insurance, particularly auto lines, which lead this category in the region, including Mexico alongside Argentina and Brazil.
Climate change is a major factor, with events like hurricanes, floods, and fires boosting claims and reinsurance coverage use. This has prompted reinsurers to become more selective and hike rates, driven by regional inflation and catastrophic risks. Insurers are integrating these into their risk management models.
On the regulatory front, Latin America is moving toward international standards such as IFRS 17 and Solvency II, through reforms aimed at enhancing policyholder protection and transparency. In Central America, mass-channel life, health, and accident products present chances to diversify risks and grow the insured base.