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Fitch: Removal of Mexican officials' insurance policies to have $2.5B impact

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Fitch: Removal of Mexican officials' insurance policies to have $2.5B impact

Fitch Ratings expects that the elimination of life and medical expense policies for high-ranking Mexican government officials would lead to an impact equivalent to $2.5 billion in reserves for the insurance sector, El Financiero reported.

The cancellation of such policies is part of a cost reduction plan under the incoming administration of President-elect Andrés Manuel López Obrador.

Speaking at a press event, Eugenia Martínez, Fitch's director and head of Mexican insurance, said the removal of the policies could account for 2% of the total premiums of the insurance sector. However, it also entails weeding out additional benefits such as the individualized separation insurance, or SSI.

The official noted that despite the challenge posed by the planned measure, Fitch's outlook for the insurance companies is positive in the next government, with insurers having the resources to face the measure.

"The insurance sector shows resilience to these challenges, given the moderate expected growth and the sufficiency of both capital and reserves, so we do not foresee a reduction in its credit rating, due to a limited impact for insurers that have contracts with the government," Martínez said.

The Mexican insurance sector could expand by about 10% by 2019, following a 7.6% growth in the first half of 2018, according to Eduardo Recinos, Fitch's senior director and head of insurance for Latin America.

Reforma previously reported that MetLife México SA could lose a 2.71 billion-peso contract due to the removal of coverage for state workers' major medical expenses.