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Moody's: Mexican insurers boost capital, profit with new CAT reserve rules

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Moody's: Mexican insurers boost capital, profit with new CAT reserve rules

A new reserving calculation in Mexico helped insurers achieve higher profits and capital levels in the fourth quarter of 2017, Moody's said in a June 12 report.

Due to the new rules, Mexican insurers were able to set aside lower amounts of money to cover catastrophe claims. This led to catastrophe reserves declining 2.4 billion Mexican pesos in the fourth quarter of 2017 compared to the linked quarter.

"Before, probable maximum losses (PML) of prior years had more weight on CAT reserves requirement," Moody's said. "Now, the new CAT reserve rules focus more on PMLs corresponding to the most recent year, thereby capturing latest underwriting trends."

Insurers that have accumulated large catastrophe reserves over the years and with recent reductions in net exposures benefitted the most, Moody's said.

The rating agency noted that the insurers' profit and capital gains due to the new calculation was only a one-off event and will not be repeated.

As of June 11, US$1 was equivalent to 20.50 Mexican pesos.