Stable market segment outlook on Guatemala’s insurance industry

By Mayora IP

AM Best has maintained its stable market segment outlook on Guatemala’s insurance industry, citing the country’s quick reaction to the COVID-19 outbreak and insurers’ limited exposure to foreign exchange and capital markets.

In a Best’s Market Segment Report, the U.S.-based credit rating agency states that its stable outlook also is supported by limited concerns about higher claims costs and reserve requirements, owing to a stable foreign exchange rate, the low interest rate environment and controlled inflation.

Guatemala is currently the third largest insurance market in Central America. The country’s recently elected president, Alejandro Giammattei, promptly implemented mobility restrictions in response to the COVID-19 outbreak, and worked with the legislature to develop an economic stimulus package. 

During the last five years, the Guatemalan insurance industry’s combined ratio has reflected the capacity of the market to manage claims while maintaining an efficient cost structure. The short-term effect of the COVID-19 restrictions could benefit claims costs due to lower frequency, but once activities are resumed collection efforts and customer service will be key to adequate performance as frequency normalizes.