New products and technology contribute to growth in Colombia's insurance sector


On the back of strong economic growth and diversified distribution channels, the insurance industry in Colombia – the fifth largest in Latin America – is expected to post steady growth over the coming years. The expansion of the sector, however, is not anticipated to be as strong as previous years’ due after lower-than-expected tax returns following fiscal reform efforts that are under way.

More than most countries, the performance of Colombia’s insurance sector, especially as measured by premium, is strongly correlated with economic growth. Over much of the past decade this correlation functioned positively, with the industry having grown significantly on the back of economic and demographic expansion, a burgeoning middle class with more purchasing power, greater savings and formalisation in several sectors. Despite some challenges, this upward trend is expected to continue in the medium to long term.

Performance & Size

Insurance premium did not keep pace with economic growth in 2018, rising 1.6% compared to GDP growth of 2.7%. Premium growth in 2018 was also below that seen in 2017, at 4.5%. This stems from lower premium volumes in a number of segments, such as health and personal accident insurance. Insurance penetration increased steadily until 2014 and stood at 2.8% as of 2018. The insurance sector accounted for 3% of GDP in June 2018, up from 2.2% in 2008 and above the Latin American average of 2.7%.

While premium and penetration have underperformed, the profitability of insurers has improved, with the sector’s combined ratio, or measure of insurer profitability, falling from 106.2 in 2017 to 104.5 in 2018. Life insurance makes up 51% of total gross written premium in Colombia, and as in other markets where life insurance dominates, the combined ratio is often over 100. With a combined ratio above 100, insurers pay out more for claims than receiving in premium. The life segment’s overall operating ratio was 59% thanks to favourable credit conditions on the ground.

According to the Federation of Colombian Insurers (Federación de Aseguradores Colombianos, Fasecolda), in April 2019 insurance premiums rose 4.7% year-on-year (y-o-y), up from the 2.8% y-o-y increase seen in April 2018. Investment rose by 33% y-o-y in the 12 months leading up to April 2019, while commissions and overall general costs were up 12%. According to Fasecolda total premium rose by 8% for education insurance, by 11% for group life and by 36% for personal accident, while falling 2% for health insurance. The sector posted a return on equity of 17.9% in 2017, the highest since 2010. Return on assets was 3.1% and total net income up 5.9% from the year before, to COP1.8trn ($615.6m).

According to a the OECD’s “Global Insurance Market Trends” report published in 2019, Colombia’s life segment grew by 4.5% in 2017, up from 3.7% in 2016, and the non-life segment expanded by 3.6%, up from 2.3% the previous year. In terms of equity, the life segment expanded 13.2% and the non-life segment by 8.2% in 2017. Equity growth was down from 2016’s figures for life (17.1%) but up from the 5% seen in non-life. In 2017 the country posted a 9.9% increase in gross payments in the life segment, the 10th highest among the 43 countries surveyed. However, during the same period Colombia posted a 9.4% decrease in gross claim payments in non-life, the third lowest among the countries surveyed.

Structure & Oversight

The insurance sector is governed by the Financial Superintendency of Colombia (Superintendencia Financiera de Colombia, SFC), which oversees the establishment and operations of all insurance companies in the country. Setting up an insurance company in Colombia requires prior approval from the SFC. The company must also demonstrate to the regulator that it has the financial capacity and assets to operate and fulfils the minimum capital requirements stipulated by law. After receiving initial approval from the SFC, the potential operator must then be logged into the mercantile registry. Regulations are tight and are set to get stricter with the forthcoming implementation of Solvency II regulations. However, Colombia is taking a more gradual path to the introduction of the standards, in particular when compared to countries such as Mexico, which implemented a regime similar to Solvency II in 2015.

Fiscal Reform Implications

In May 2019 credit ratings agency Moody’s downgraded its outlook on Colombia’s insurance industry to negative due to weaker-than-expected economic growth, which is anticipated to have a ripple effect on premium. In addition, the tax reform enacted in December 2018 generated less tax revenue than forecast, which in turn resulted in decreased public investment and spending as the government cut back to meet a 2.4% of GDP fiscal deficit target. Moody’s expects the lower investment to slow GDP growth and weaken demand for insurance products.

In addition to revenue pressures, a growing number of new insurers in different segments in recent years has made the market more competitive. This has driven a fall in premium and increased pressure on profits and affected companies’ ability to expand, particularly in the surety, pension and mandatory auto insurance segments.

The ratings agency also noted that profitability, while dented by low interest rates and volatile equity investment returns, remained healthy. These returns should be strong enough to provide the financial muscle to spur expansion in the medium term. “Insurers’ profitability will support growth but remains under pressure,” Moody’s said. “Overall, companies have been profitable and have had adequate capital, suggesting good capacity for further business expansion. However, industry profitability has been highly dependent on investment returns because of poor underwriting results.” It also noted that any downgrade of the sovereign credit rating could have a negative impact on its assessment of the Colombian insurance sector.

Foreign Participation

Colombia’s insurance sector is open to foreign players, and practically all of the world’s largest insurers and reinsurers are present in the market. The country is also becoming a regional hub for the largest reinsurers and brokers. Legislation passed in 2013 made several changes that opened the market, including allowing residents to be able to purchase insurance policies from abroad, except for products such as social security and compulsory lines.

Foreign firms can operate in Colombia through branches but are not allowed to advertise their products, with the exception of those involved in international trade and transport. “The Colombian economy has been open to international investors in a wide variety of sectors, but in particular within the insurance industry,” Moody’s wrote in its 2019 outlook on the sector, noting the presence of large international firms such as Swiss Re, MAPFRE, Allianz, Chubb, MetLife, Liberty and AXA. “We consider this a positive credit development for the industry because it will improve the industry’s practice in terms of underwriting discipline, pricing, reserving, corporate governance and risk management.”

Market Players

Each segment is dominated by several large companies. Seguros Generales Sura is the largest firm in the property and casualty segment, with COP2.4trn ($820.8m) in gross written premium, COP4.3trn ($1.5bn) in total assets and an 18% market share as of December 2018. Seguros del Estados came in second, with COP1.4trn ($478.8m) in gross written premium, COP2.1trn ($718.2m) in total assets and a market share of 11%. The third and fourth largest were MAPFRE and Allianz, which had respective gross written premium of COP897.9bn ($307.1m) and COP864.7bn ($295.7m), and market shares of 7% and 6%. Colombian companies similarly dominate the life insurance segment, with Seguros de Vida Alfa, Seguros de Vida Sura and Seguros Bolívar hold market shares of 38%, 16% and 1, respectively. In December 2018 gross written premium for Alfa were COP3.4trn ($1.2bn), for Bolívar COP2.5trn ($855m) and for Sura COP1.5trn ($513m).

Mergers & Acquisitions

Around the world the insurance sector has experienced a period of consolidation – a shift that has been reflected in Colombia. In February 2018 three major acquisitions and agreements occurred that had a significant impact on the insurance sector. That month, UK firm BUPA entered the market through a partnership with Seguros Bolívar, Santalucia Seguros entered into an agreement with Fundación Social to offer funeral insurance and Swiss giant Zurich acquired the Latin American assets of Australian firm QBE. This trend continued into 2019, with Seguros Bolívar announcing it would purchase Liberty Seguros’ labour risk and life portfolios in May. Additionally, HDI Seguros and Fincomercio entered into an agreement to boost financial inclusion between the finance and insurance sectors in June of that year.

Penetration Rates

A 2018 study on the Colombian insurance industry by government-run Banca de las Oportunidades, Faseconda and the SFC found that among all segments individuals were most aware about life insurance, with 59.4% of Colombians knowing about the product, although only 19.2% of households were covered. Colombians prefer to pay for their insurance in cash; 52.4% pay cash for life insurance and 67.5% for auto insurance. The study noted this trend is unlikely to change until structural and cultural shifts occur in the way in which Colombians manage their finances.

Various insurance products were popular in both urban and rural areas, highlighting the opportunity for insurance companies to target new segments for expansion in the coming years. Across the country, 90.3% of households had some type of protection or risk insurance scheme, a figure that was slightly higher in cities (90.7%) than in rural areas (88%). However, coverage was highest in dispersed rural zones (95.6%). Rates were also higher among the more wealthy socio-economic classes (94.6%) than the less wealthy classes (88.8%).

By segment, 76.6% of households had social security, 42.4% had obligatory insurance, 30.3% had voluntary insurance and 47.5% had funeral insurance. Overall, 19.2% of Colombian households had life insurance, with penetration rates of 14.9% in lesswealthy socio-economic classes and 42.6% among the more wealthy. Approximately a quarter (25.4%) of Colombian households had some form of labour insurance, with penetration rates of 20.3% in low-income households and 51.4% for high-income households. Around 15% had personal accident insurance, with penetration rates higher in the western (34%) and Pacific (22.8%) regions than in Bogotá (9.5%) or Antioquia, which is home to Medellín (9.4%). Fewer than 4% of households purchased fire, earthquake, home, agricultural, education, unemployment or liability insurance. Of those surveyed, 8.9%, or around 1m, had never purchased insurance. Of these, 41.2% cited costs, 13.6% cited lack of trust and 11.3% cited lack of valuable possessions as deterrents.


Colombia’s reinsurance segment has seen growth in recent years due to an uptick in large projects and infrastructure development, both of which require insurance and reinsurance. One project of particular interest for reinsurers is the Fourth Generation road infrastructure programme, one of the largest of its kind in the region. The risks associated with a project of its size make it of particular interest to insurers and reinsurers. Other reinsurance growth areas include cybersecurity, as many companies, particularly small and medium-sized enterprises (SMEs), are considered vulnerable to attacks (see ICT chapter). According to José Miguel González, president of JLT Re Colombia, reinsurance premium are on track to increase. “The cause of the increase is more global than local, because various losses have occurred in a number of countries,” he told local press in April 2018. “This has led to reinsurers being more cautious about taking on risk and putting pressure on premium.”

Automotive Insurance 

More vehicles on more roads throughout the country has resulted in continued growth in the automotive segment in recent years. The segment also benefitted from an increase in the minimum wage in 2018, price adjustments favourable to consumers and a rise in new car sales. Obligatory personal accident insurance (seguro obligatorio de accidentes de tránsito, SOAT) is mandatory for all vehicles and ensures all personal accidents costs are covered in the event of an accident, including death, surgery, permanent paralysis, funeral costs, medical costs and transport to the hospital. According to the 2018 study by Banca de las Oportunidades, Fasecolda and the SFC, 39% of those surveyed had an automobile or motorcycle, and of those, 81% had SOAT. The number of both automobiles and motorcycles on the roads has increased, by 58% and 77%, respectively, between 2013 and 2019. The increase in the number of motorcycles in particular has led to an uptick in payouts for insurers, making some reluctant to participate in the SOAT programme.

Health Coverage

Over 97% of Colombians are covered under the General System of Social Security in Health (Sistema General de Seguridad Social en Salud, SGSSS) administered by the Ministry of Health and Social Protection. Health service providers ( entidades promotoras de salud, EPSs) play a similar role to insurance companies in the US, affiliating patients, arranging for treatment and collecting payment for their services. Several international EPSs have recently entered the market, including UnitedHealth and CHRISTUS Health in 2018, and the authorities hope the participation of more global companies will raise standards across the board. While the SGSSS is public, a growing middle class with greater spending power is expected to contribute to a shift towards the private health care industry in the coming years. Financing difficulties experienced by public health care operators are also expected to lead private insurers and providers to play a more substantial role in the future.

Energy Coverage

New products have been introduced in the insurance sector, contributing to overall growth. These include energy-saving insurance (ESI) policies. Introduced by Colombian development bank Bancóldex in cooperation with the Inter-American Development Bank (IADB) in February 2019, the energy insurance programme covers SMEs that invest in energy efficiency and power generation in the event they do not reach the estimated energy savings.

Colombia is the first country in the Latin America and Caribbean region to offer ESI, although the IADB said it was working to expand the product across the region to Brazil, Chile, El Salvador, Nicaragua and Peru. ESI mitigates risks, increases the number of companies that are willing to invest in efficient technologies, and improves environmental conservation efforts. The plan, covered by Seguros SURA, began with five SMEs including hotels and solar facilities across the country that invested in energy-saving projects for their businesses.

Agricultural Insurance

Agricultural insurance penetration remains low but is expected to become increasingly popular given the importance of agriculture to the economy. The country is disproportionately affected by climate change, with a majority of its population living in elevated areas, where water shortages are a problem, and along the coast, which is vulnerable to flooding.

Colombia also grapples with El Niño, a weather pattern that results in heavy rainfall in countries along the Pacific coast of Latin America. Without a significant reduction in global greenhouse gases, Colombia could lose up to 60% of its land used for rice production by the 2050s, food security-focused organisation CGIAR found in May 2019. The importance of insurance in mitigating risks from weather events is therefore paramount. In December 2018 Andrés Valencia Pinzón, the minister of agriculture and rural development, announced COP80.8bn ($27.6m) would be made available in 2019 for agriculture insurance under the framework of the National Agricultural Credit Commission. According to Pinzón, the funding would be allocated to encourage a “culture of insurance and protection against climate variability events”.

New Technology

As with most industries, technology is changing the way consumers buy products and how companies operate. Customers are now able to report accidents, pay and get quotes on policies, and ask for technical assistance through applications. The 11 largest insurance companies in Colombia invest an average of COP12bn ($4.1m) a year in technology upgrades, with SURA investing the most at COP75bn ($25.6m), followed by Positiva with COP15bn ($5.1m). Room for improvement remains, however. A survey from the third quarter of 2018 showed that 58% companies regard their innovation processes “in development” and 22% say such processes are “advanced”.

The investments made so far are paying off, with SURA reported an increase of 84.7% in customers purchasing policies via a digital platform in 2018, 39% of which came from clients looking for non-obligatory insurance plans. Insurance technology, or insurtech, similar to financial technology (fintech), was recently introduced to Colombia, and start-ups are creating new technologies in order to boost growth, increase penetration rates and provide access to segments of the population that had not previously purchased insurance before.

In terms of growth, entrepreneurs in the segment see it following a similar path to fintech. “Insurtech is in the same place as fintechs were five years ago,” Andrés Fontao, co-founder of Finnovista, a fintech consultancy firm, told Banca de las Oportunidades in September 2017. “We believe these firms are going to follow a similar growth trajectory, with their maturity taking less time given that there is already experience from various actors in the ecosystem.”


With GDP forecast to grow faster than in recent years, at 3.5% in 2019 compared to 2.7% in 2018 and 1.4% in 2017, and a population increasingly willing to purchase new insurance products, the insurance sector in Colombia looks set to maintain its positive trajectory over the medium term. The growth of insurtech will likely be a decisive shift for both customers and providers, giving customers a better experience and broader choice of products, and firms the ability to tap into artificial intelligence and data analytics to boost sales. Much of the growth, however, will be dependent upon the government’s ability to generate revenue from its fiscal reform efforts and push ahead with public investment, which will stimulate the economy and feed into higher demand for insurance products.

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The Report: Colombia 2019

Financial Services chapter from The Report: Colombia 2019

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