Reaching a plateau: Growth is expected to slow in 2014 as infrastructure projects wrap up

Following high economic growth and the massive volume of investment in infrastructure projects of the past few years, the insurance sector in Panama has enjoyed a prosperous period recently. It is the largest insurance market in Central America and, despite being a small economy, in terms of market penetration and insurance density lags behind only Argentina, Brazil, Chile and Venezuela in Latin America. It is ahead of the Latin American average and of larger economies like Mexico. The economy’s recent positive performance has attracted new insurance companies and reduced the market’s concentration. The market is dominated by Panamanian and Latin American companies, although global firms from the US and Europe are also present.

Basic Services

Auto, health and life services are the dominant segments on the domestic market. Like other small and less developed economies, the country still lacks a more developed financial culture, and insurance is widely seen as an expensive and unnecessary product. Reform initiated in 2012 includes changing this scenario as one of its goals, by developing new distribution channels and reaching the lower-income segment, which still has a low rate of coverage. In addition to the recent law on insurance, new legislation on reinsurance is expected as part of the effort to turn Panama into a Latin American hub for reinsurance. The sector in Panama is composed of 31 companies, of which 10 are domestic, nine are from Venezuela, four from the US, three from Colombia, two from the Dominican Republic and the remaining three are from Spain, Italy and Barbados. With intermediaries, there are 2961 insurance brokers, made up of 2482 individuals, 349 firms and 130 temporary permits, to sell life policies.


There are eight reinsurance companies, eight reinsurance brokers and 33 insurance adjusters and/or inspectors of damages, comprising four individuals and 29 companies. There are also 30 foreign reinsurance firms and brokers registered in the country. The office overseeing the sector is the Superintendency of Insurance and Reinsurance of Panama (Superintendencia de Seguros y Reaseguros de Panama, SSRP), a public entity that in April 2013 gained autonomy and independency from the Ministry of Trade and Industry. SSRP is in charge of regulating the activities of insurance, reinsurance and captive insurance.

It is founding partner of the International Association of Insurance Supervisors, the International Association of Offshore Insurance Regulators, the Association of Insurance Superintendencies of Latin American and the International Association of Insurance Fraud Agencies. The sector has a representative association as well, the Asociación Panameña de Aseguradores (APADEA), with 26 members that were responsible for 97% of the premiums written as of 2013.

The most recent figures available at time of press indicated that sector assets stood at $1.9bn, of which investments were the main component, comprising $1.3bn, or 70%, and concentrated in fixed income ($495m, 37% of total investments), private securities (29%) and public securities (14%). The 10 largest firms had 81% of total assets and the five largest 58%. Mapfre was the biggest, with $271m in assets and a 14.3% market share, and Assa was second with a market share of 13.9%, followed by Compañia Internacional de Seguros (CIS), with 13.8%; HSBC Seguros at 8.2%; and Generali at 8.1%. The other five were Suramericana with a market share of 7.8%, Empresa General de Seguros ( General), at 6.4%; Ancón, with 4.2%; Pan American at 2.3%; and Chartis, now under the brand AIG, with 1.8%.

Liabilities and equity totalled $1.9bn, with liabilities comprising 60% ($1.1bn) and equity 40% ($756m). Liabilities were composed mostly (60%) by reserves. As regards equities, non-distributed profits were $448m, which corresponds to 65% of total equity and 26% of liabilities and equity combined, suggesting insurers have in their profits an important source of financing.

The net profit generated by insurance companies in 2012 was $91.8m. HSBC made the highest profit, reaching $27.8m, 30% of the total profit of the sector. Its profits were 75% higher than Assa’s, the second highest with $16m. According to the latest data available as OBG went to press, market penetration in 2012 was 3.3%. While in 2011 this indicator was behind only Chile in Latin America, in 2012 it was surpassed by Venezuela, Brazil and Argentina. Insurance density (premiums per capita) reached $314 in 2012, above the Latin American average of $282, but still behind the other four countries. Moreover, the elasticity of premiums to GDP (the growth of premiums related to the increase in GDP) in the period 2000-10 was one, less than half of the Latin American average of 2.2.

Premium Shares

The volume of premiums written in 2013 was $1.25bn. Assa had the biggest share (17%), followed by CIS (16%), Mapfre (13%), Generali (9%) and Pan American Life (7%). Combined they hold a 62% market share. The segment with the highest share of total premiums was auto (17%) reaching $213m, followed by health (16%), collective life (12%,), individual insurance (11%) and surety (9%). These five segments combined were responsible for 65% of the written premiums. Total claims in the period were at $543.4m. Health had the highest volume, reaching $129.4m (24% of the total), followed by auto (23%), fire (22%), collective life (9%) and individual insurance (5%). Combined they were responsible for 83% of total claims in the period. The total claims-to-premiums ratio was 44% in December 2013. Fire was the only segment in which claims were above premiums, with a ratio of 103%. Fires in the Colón Free Trade Zone resulted in the high value of claims. Health and auto, with 64% and 58%, respectively, had high ratios as well. No other segments had claims-to-premiums ratios above 50%. Hull, with 7%, theft (11%) and surety (12%) were the segments with the lowest ratios. The largest segments, health and auto, combined with fire had the highest claims-to-premiums ratio in 2013 and 2012. However, these are segments with higher penetration and may be used as entrance doors for other kinds of insurance.

Firm Forecast

Preliminary data from APADEA indicates that 2013 will have been the third year in a row that the fire and auto segments will have losses on their technical results (the results related only to insurance operations, excluding financial revenue from investments). In 2013, the technical results of companies affiliated with APADEA was $13.5m, or 1.96% of written premiums, 26% below the $18.3m of 2012.

Assa is the leader in premiums in two of these five segments. In collective life its market share is 17% and in fire 25%. Mapfre has the lead in the auto segment (15% market share) and in individual insurance (18%). In December 2012 CIS was the leader in the health segment with a market share of 18%. One year later it lost the leadership of the segment to Pan American, which bought Alico and now has a 23% market share. In the same period, the other four largest segments did not see any changes in the leading positions.

Although it is the fifth-largest firm in terms of premiums written, Pan American’s leadership in the second most important segment may be explained by the high concentration (55%) of its premiums in the health segment. The segment with the highest concentration is hull. Assa is the leader with 38%, followed by CIS with 25%. No company reaches more than 30% of the market in any other segment. Besides, the market share of the five largest companies is the highest of any segment: 88%. By contrast, the auto segment had the highest competition. The segment’s leader (Mapfre) has 15%, the lowest of all segment leaders and so too is the share of the five biggest combined (61.5%).


Analysing the evolution of the market structure from 2008 to 2013, there were two important operations among companies. The first was in 2009, when the current leader in assets, Mapfre, was not even operating in Panama and bought 65% of the insurance operations of Aseguradora Mundial , then the largest insurance company in Panama with 16% of total assets. The second was in 2012, with the merger of Compañia Istmeña de Seguros (seventh in assets in 2008) and Empresa General de Seguros (11th) under the name of Empresa General de Seguros. Currently, Empresa General de Seguros occupies seventh position. Another important change has been the reduction in the degree of concentration since 2008. Taking the assets held by the 10 largest firms, they represented 88% of the market in 2008 and 81% in 2012. Gabriel de Obarrio, CEO and general manager of Generali’s Panama branch, told OBG, “25 years ago there was a similar number of companies, 32, but through mergers and acquisitions (M&A) this was reduced to 17. With the recent boom of the economy, the number has increased again, but it is expected a new movement of consolidation will restore the total to fewer than 20.” Of this trend, Salvador Morales, assistant vice-president for finance and planning at Generali, said that among the largest firms, it would be difficult to increase ranking through natural growth; M&A would be the only way to do it.

Premium Growth

From December 2012 to December 2013, written premiums grew 9.3%. The segment with highest growth was theft, up 29%, followed by technical segments, up 17.5%, and fire, up 16%. Even the largest segments grew above the average. Of the six largest segments, auto was the only one with below-average growth, at 7%. Cargo and others saw a drop in premiums of 2.3% and 0.6%, respectively. In nominal terms, health had the highest growth at $19m, over fire ($15.4m) and surety ($14.6m). Expansions in these segments corresponded to 54% of premiums’ total growth.

The increase in claims (by value) between December 2012 and December 2013 was 4.29%, below the growth in written premiums. Among the five segments with the highest volume of claims, health (8.4%), fire (41.6%), auto (10.7%) and life (6.5%) grew above the average. Collective life, in contrast, decreased at a rate of 1.4%. The segment with highest growth was personal accidents (116%), followed by liability (98%) and surety (74%). Technical segments, hull and theft saw the values of claims reduced by 79%, 75% and 49%, respectively. Theft had the highest growth in premiums (29%) and the second-highest decline in claims (49%). The total difference between premiums and claims in 2012 was $618m, a 46% ratio, which rose to $701m in 2013, a 44% ratio. Aliado had the highest growth in written premiums from 2012 to 2013, 217%, followed by La Floresta de Seguros Vida. However, these are small companies with less than 1% of market share and such good performances did not have significant impact on the market. Meanwhile, 74% growth at Pan American took it from seventh position, with a market share of 4.2%, to fifth position, with a 6.7% market share. That was due mainly to the purchase of American Life Insurance (Alico), which was the eighth-biggest in 2012. With a modest growth of 1%, CIS lost market share, down 17.6% in 2012 and 16.3% in 2013, and Assa took the lead, expanding 16.7%, after a 12% rise in written premiums. Among the reasons for these recent positive performances in the sector, according to Cesar Chang Osorio, general manager of Tecnica Seguros, is the link to the high growth of past years. Regarding specific features, Chang Osorio mentioned the stronger enforcement of the law on obligatory auto insurance that helped boost the segment and the law from 2008 that turned mandatory life and health insurance for foreign employees working on infrastructure projects.

Key Concerns

Luis Alberto della Togna, superintendent of insurance and reinsurance at the SSRP, told OBG that large projects do not affect the insurance sector directly. “The majority of large projects, especially the biggest ones like the canal expansion or the metro, contracted their insurances with firms in foreign countries. This was because they needed specific insurance products during the construction of this kind of infrastructure and Panamanian companies were not able to provide them with these products,” he said. Katherine Arjona, deputy director of the SSRP, spoke on the expansion of the canal. She told OBG that although the canal expansion may increase the demand for products like life insurance for workers, there are specific products needed by the users of the canal that are not sold by firms in Panama, like oil leak insurance.

Morales mentioned as an important obstacle for continued growth: the low level of unemployment, which is making qualified labour scarcer and more expensive. There is also an institutional or cultural problem: insurance is considered expensive and unnecessary by many people. The SSRP recognises these obstacles and Arjona highlighted the role of the SSRP in providing financial education. Another strategy she mentioned was focusing on microinsurance. “Only 5% of the population has private insurance and in order to increase penetration rates, microinsurance is a key element,” Arjona told OBG. “To reach segments of that population that have no tradition of having insurance and with lower per capita income, you need new products with lower premiums and policies. For that it is necessary to have more accessible channels of distributions, one of the focuses of the new law.”

On microinsurance, Chang Osorio thinks although it is a necessary instrument to reach lower-income segments, it has been going at a slow pace. The main challenge to develop microinsurance is to find an efficient payment mechanism. “For distant places and low premiums, traditional ways of payments are too expensive,” he told OBG. “It is necessary to come up with solutions like payment by cell phone, which is expected to be implemented in Panama in one or two years.”

Pension Funds

There are two companies managing private pension funds in Panama: ProFuturo and Progreso. After buying Assa’s (the insurance company) 21% share in 2013, Banco General became ProFuturo’s only shareholder. Progreso has Banco Panameño de la Vivienda as the only shareholder. According to data from the Superintendency of Securities of Panama the number of affiliates in the private pension system was 61,422 in the first quarter of 2014. Progreso had 29,306 (48% of total); and ProFuturo, 32,116 (52%). From 2012 to 2013, Progreso had higher growth in affiliate numbers (6.8%), against 0.6% of Profuturo. However, since 2009 Progreso has registered smaller growth in the number of affiliates, 41% compared to ProFuturo, which has been the leader since 2009 and saw 48% growth.

Regarding the volume of funds in the private pension funds, in February 2014, Progreso had $132.6m (40%); and ProFuturo, $200.9m, or 60% of the total ($333.5m). From 2008 to 2012, ProFuturo increased its private pension funds by 129%, while Progreso’s funds increased by 78%. Despite the good performance of both companies, like insurance products, private pension is still not popular among investors, especially small ones. Panamanian savers still prefer more traditional products and the existence of a public pension fund, the Public Servants’ System of Savings and Capitalisation of Pensions (SIACAP) only reinforces that. Because it is a compulsory mechanism, whereas private pension is voluntary, SIACAP dwarfs the private system in its number of affiliates and investments. “There really is not room in the voluntary pension funds market, and there will not be unless the government opens the compulsory system to private players,” Juan Pastor, the general manager of Progreso AFP, told OBG.


While strong economic growth in the past few years was a central feature for the sector’s performance, there are unique challenges in 2014: the end of infrastructure projects and the uncertainties related to the canal’s expansion. Strong competition, higher-than-average inflation and lower returns on investments are putting downward pressure on insurance companies’ profits. Despite the improvements in the sector’s claims-to-premiums ratios during 2012-13, profitability has not followed in such key segments as health, auto and fire. However, opportunities exist in the mining sector, where large investments are expected, and while low penetration rates are not a sign of future potential, the appetite for coverage is growing.

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The Report: Panama 2014

Insurance chapter from The Report: Panama 2014

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