Fitch Ratings said its outlook on the Central American insurance sector remains stable for 2017, reflecting the rating agency's expectations for higher growth in the Costa Rican and Nicaraguan sectors, improvements in underwriting conditions for major insurance lines, and sufficient reinsurance protection supported by soft pricing conditions.
However, any downturn in commerce or remittances could pose problems for the region's economies and insurance industries, Fitch said in a Dec. 8 report.
Economic uncertainty in Central America has risen as a result of the recent U.S. election, Fitch noted, adding that some of the region's economies rely heavily on annual remittances from the U.S.
In U.S. dollar terms, the agency estimates that the Central American insurance industry will record premium growth of 5% at year-end 2016 and 7.5% at the close of 2017. This is due to an accounting adjustment in the financial statements of Instituto Nacional de Seguros de Costa Rica, which underwrites 79% of the market and 29% of the total premiums within the region, Fitch noted.
The Central American insurance sector had a combined ratio of 99% as of the third quarter, compared to 101% a year earlier. The sector's liquid assets-to-liabilities ratio of 110% also compares favorably with other markets in Latin America, Fitch said.
"Fitch expects capitalization levels to remain strong during 2017, which will result in stable and adequate leverage ratios that could sustain growth in the region's markets," the rating agency said.