A growing middle class and formalisation drive insurance expansion in Peru


The Peruvian insurance market as a whole returned to profitability in 2018, following losses and anaemic expansion over the course of 2016 and 2017. Underwriters enjoyed the most robust returns in the life segment, particularly in personal income annuities, which have come into high demand among new retirees as reinvestment vehicles for pension withdrawals. Furthermore, overall claims fell significantly against indemnities paid out in 2017, when the El Niño climactic phenomenon precipitated widespread damage to residential and agricultural properties in the north of the country.

Even as the insurance penetration rate remains low vis-à-vis uptake among Peru’s South American neighbours, the sector is expected to drive growth in the wider economy, as coverage for earthquakes, fires and other accident liabilities grows alongside investments in mining and construction. Process digitalisation, product innovation and the acquisition of local underwriters by foreign firms demonstrate responses to the rising demand for asset protection in Peru’s middle class.

While public and private actors must work together to tackle several challenges – principally the low rates of worker contributions to the pension and health care systems – there is reason to believe that the factors that propelled growth in 2018 will remain supportive of premiums and broader market reach in 2019.


The domestic insurance market comprised 20 firms at the end of 2018, according to the Peruvian Association of Insurance Companies ( Asociación Peruana de Empresas de Seguros, APESEG). Eight underwrote general policies; five exclusively sold life insurance; and another seven offered both life and nonlife coverage. The market is relatively concentrated, with firms Rimac Seguros and Pacífico Seguros accounting for 56.8% of net written premiums (NWP). The top-five providers – the pair above, Mapfre Perú, La Positiva and Interseguro – constituted 89.4% of the market.

Foreign providers sold policies worth a little more than one-fifth (22.6%) of total NWP for the year, led by the domestic branches of Mapfre Perú. That share is poised to grow markedly in 2019, following the acquisition of a controlling stake in La Positiva by Portugal’s largest underwriter, Fidelidade.

General policies made up 37% of the market by premium value in 2018, followed by life products (33.5%); those associated with the Private Pension System ( Sistema Privado de Pensiones, SPP) (15.3%); and coverage for accidents and illness (14.2%). The insurance penetration rate – or the total value of written premiums as a share of GDP – stood at 1.7% in 2018. While that marked a 0.1% increase from the year prior, it remained well below those registered by neighbours Chile (4.6%) and Brazil (3.2%) in 2017, the last year for which OECD data is available for country-by-country comparison. The penetration rate also fell short of the level seen in 2015, when NWP was valued at 1.9% of GDP. Although the rate of insurance uptake remains low, factors like GDP growth, employment formalisation and a swelling middle class are driving demand for coverage, and recent forecasts have expressed optimism that the market will continue to widen in the near term.

Recent Performance

Sector-wide NWP was valued at PEN12.9bn ($3.9bn) at the end of 2018, up 13.6% from 2017, according to APESEG. The increase marked substantial improvement from the performance registered in the two years prior: premium value contracted by 4.2% in 2016, before recovering marginally to a growth of 0.6% in 2017. Moreover, the sector’s growth in 2018 well exceeded that of the broader economy, in which GDP rose by 4% on the back of strong performances in several key sectors in the fourth quarter. “Peru’s insurance sector saw dynamic growth in 2018,” Eduardo Morón, president of APESEG, told OBG. “It was a good year despite a few elements that could have impeded the sector, such as the modification of taxes on new cars, which caused sales to drop by 15-20% that year.”

The sector’s development was balanced in 2018 and led by a strong performance in the life segment, where NWP expanded by 26.5% to PEN4.3bn ($1.3bn). Relief insurance, which covers debts outstanding after a policyholder’s death, remained the most popular type of life policy, increasing by 13.5% to PEN1.4bn ($423.8m). However, segment growth was driven primarily by longterm individual life policies, which increased by 30.1% to PEN1bn ($302.7m), and personal income annuities, which expanded by 87.1% to PEN896m ($271.2m) after growing by more than 30 times in value in 2017. Since its introduction to the market in 2016, the latter product has rapidly become a popular securities option among those seeking to re-invest retirement savings withdrawn in bulk, following changes to the law regarding pension disbursement in April 2016.

Total NWP in the general risk branch was up by 24.6% for the year to PEN4.8bn ($1.5bn). Vehicle coverage was valued at PEN1.4bn ($423.8m) and remained the largest segment, although it grew by just 0.4% in 2018. Earthquake insurance grew by 8.3% to PEN908m ($274.9m), while fire and associated lines increased by 21.7% to PEN541m ($163.8m). The APESEG attributes the latter’s growth to accelerating investments in the local construction industry. Lastly, insurance against robbery and assault rose by 31.1% to PEN250m ($75.7m).

NWP from accident and illness coverage increased by 12.3% in 2018 to reach PEN1.8bn ($554.9m). Medical assistance policies made up the lion’s share of this category, growing by 13.9% to PEN1.1bn ($333m), while the value of personal accident insurance cover increased by 17.7% to PEN296m ($89.6m).

Lastly, underwriters of insurance affiliated with the SPP reported premiums of PEN2bn ($605.4m), marking growth of 0.7% over 2017 after two years of losses. However, the topline figure obscures diverging trends: the value of policies covering the pensions of the disabled and the pensions of survivors increased by 17% and 11.9%, respectively, while the value of retirement income insurance declined by 68.9%.


On the other side of the ledger, yearly claims were valued at PEN6.9bn ($2.1bn), a 15.4% decrease from the record PEN8.1bn ($2.5bn) worth of indemnities paid out in 2017, when flooding and landslides caused by the El Niño weather patterns inflicted widespread damage to crops and housing stock in several northern coastal regions. However, this drop was not consistent across the sector: the entirety of the reduction in obligations occurred in general insurance, where claims fell by 47.4% to PEN2.2bn ($66.9m). The broader rate of contraction was exceeded in several of the market’s largest policy lines by value, including fire coverage, which was down by 76.4% to PEN485m ($146.8m); contractors’ insurance, down by 69.8% to PEN46.6m ($14.1m); and contract guarantees, which declined by 78.7% to PEN115m ($34.8m). Conversely, the value of claims increased significantly across the other three lines: accident and illness compensation grew by 15.6% to PEN1.1bn ($333m); claims related to the SPP increased by 22.2% to PEN2.6bn ($787m); and benefits from life policies rose by 19.1% to PEN3.6bn ($1.1bn).

Foreign Investment

The sector’s strong performance in 2018 underscores the growing potential for foreign underwriters to enter the Peruvian market. Acquisitions and branch openings brought several regional and global firms into the fold between 2013 and 2017, and in 2018 two more companies reached deals to begin operations in Peru. In March 2018 Fidelidade, Portugal’s largest underwriter by market share, agreed to pay €90m for a 51% stake in La Positiva, Peru’s fourth-largest provider by premium value. Several months later, in November 2018, the Mexican auto insurer Qualitas announced that it would acquire HDI Seguros from the German insurance group Talanx pending licence approval, though no transaction price had been publicly disclosed as of April 2019. Meanwhile, Peru’s Interseguro became one of the country’s largest underwriters in terms of asset reserves when it finalised a $268m acquisition of the local branch of the Colombian firm Sura in the spring of 2018.

Near-Term Forecast

APESEG forecasts overall growth of 8-10% for the insurance market in 2019, on the assumption that continuing political and economic stability will encourage new investments and lift middle-class demand for asset protection. Life insurance is projected to spearhead premium growth due to burgeoning interest among new pensioners in long-term annuities. In addition, Morón expects that the continued diversification of medical insurance packages will help reach new consumer segments and drive the uptake of contracted health policies.

The market-wide penetration rate is also expected to deepen slightly, as gains in net premium value outpace the rate of overall economic expansion. BBVA Research projected GDP growth to reach 4.6% in the fourth quarter of 2018, driven primarily by activities in fishing, construction and primary manufacturing. The firm anticipates that GDP growth will moderate to 3.9% in 2019 and 3.7% the following year as global commerce slows, although renewals of private investment in Peruvian mineral extraction and public spending on transit and logistics infrastructure are expected to sustain domestic economic gains.


Automotive insurance was borne out of the General Law of Transport and Land Transit published in 1999, under which all vehicle owners are required to subscribe to a third-party traffic accident policy known as Obligatory Traffic Accident Insurance (Seguro Obligatorio de Accidentes de Tránsito, SOAT). The policy came onto the market in 2002 and is written to cover the disability, medical and burial expenses of traffic accident victims, irrespective of a given victim’s role in the accident. Eight firms offered SOAT in 2018, led by La Positiva with 52% of the segment’s NWP.

Automotive coverage has high penetration potential, as only two in five vehicles were insured as of mid-2017, according to APESEG. Morón attributes the low uptake to legislative fragmentation and uneven resource distribution across Peru’s 25 regions, which causes irregular enforcement of the policy mandate. Morón says the government is working to level the regulatory playing field in order to narrow coverage disparities.

SOAT providers sold 2.87m policies in 2018, up 8% on 2017, although premium values grew by a less robust 5.8% to PEN425m ($128.6m). Encouragingly, more than one-third of all SOAT sales in January 2019 were made electronically, a share that APESEG predicts will rise to 40% by the end of the year. The lower price associated with electronic sales should incentivise higher policy subscription in the near term, while stricter legal enforcement and growth trends in middle-class incomes and automobile acquisition should expand the pool of potential SOAT policyholders in the longer term.

Public Health

In 2018 some 11.6m Peruvians had medical coverage via public networks run by the Ministry of Labour. These workers are enrolled in the state’s Social Health Insurance scheme (Seguro Social de Salud, EsSalud), and their employers make contributions equal to 9% of company payroll to health insurance management funds (instituciones administradoras de fondos de aseguramiento en salud, IAFAS). These funds support the provision of health care services to enrollees via a network of state-run clinics (instituciones prestadoras de servicios de salud, IPRESS).

Since 2001 those not covered by EsSalud have been able to enrol in the Integral Health Insurance system (Seguro Integral de Salud, SIS) administered by the Ministry of Health. SIS is financed by a mixture of government subsidies and beneficiary contributions, and is designed to provide coverage to the large share of Peruvians who work in the informal economy – 68.6% of all workers in 2017, according to the National Institute of Statistics and Information (Instituto Nacional de Estadística e Informática, INEI). The scope of SIS has grown remarkably since its founding, insuring some 17.8m people as of March 2018.

EsSalud announced a series of reforms to IPRESS in March 2019 to improve its medical infrastructure, train more staff, and increase the clinics’ procedural and data transparency. Fiorella Molinelli, the president of EsSalud, also announced a proposal to reorganise the programme by separating the administration of IAFAS and IPRESS to shore up its financial sustainability. The proposals stem from the findings of a government commission run in collaboration with the International Labour Organisation and the Pan American Health Organisation to improve EsSalud’s services.

While it has been mandatory for all citizens to maintain health coverage since 2009, a national household survey conducted by the INEI indicated that just over three-quarters (76.4%) of Peruvians were insured in 2017. That figure represents a marginal gain over 2016, when 75.8% had coverage, and a huge improvement since 2007, when less than half (42.1%) of Peruvians were insured. The government has announced that it aims to achieve full coverage by 2021 by inaugurating a system that will use company records to automatically enrol new policyholders (see Health chapter).

Per the most recent year for which World Bank data is available for comparison purposes, Peru’s health care expenditure equalled 5.3% of GDP in 2015. Although this represented more than the 4.6% allocated in 2005, it was the third-lowest amount in South America – only Guyana and Venezuela set aside less. While the government has pledged to increase medical spending, the National Superintendency of Customs and Tax Administration said that insuree contributions to EsSalud, for their part, grew by 6.5% in 2018 to PEN10.6bn ($3.2bn).

Private Health

Peru’s four licensed health care providers (empresas prestadoras de salud, EPS) have increased their footprints in the medical insurance market by responding to growing awareness and demand among middle-class workers for greater comfort, flexibility and personal attention in service provision. Employers can opt to contract with one of these firms on behalf of their workers, choosing between the country’s three largest underwriters by market share – Rimac, Mapfre Perú and Pacífico – and Sanitas, a relative newcomer. In this case, one-quarter of the company’s EsSalud contribution (equal to 2.25% of total payroll) is allocated instead to the EPS to provide alternative or supplementary medical services.

The number of people affiliated with an EPS grew by 27.3% between January 2013 and January 2019, from 639,000 to 814,000, and industry players are taking notice. “The Peruvian market has fundamentally changed in recent years, as private insurance has become more important, including for auto, health and life,” Renzo Calda, CEO of Mapfre Perú, told OBG.

System-wide health contributions grew by 73.6% over the same period to PEN159.4m ($48.3m), while benefit claims rose by 66.4% to PEN129.7m ($39.3m).


In addition to the high uninsured rate in the informal economy, as many as 50% of Peruvian workers are not affiliated with a pension scheme, according to the Institute of Economics and Business Development at the Lima Chamber of Commerce. This means that some 8.5m people are not presently scheduled to receive any benefits when they retire, despite a mandate that all public and private sector employees participate in a pension plan.

Of the 8.6m people affiliated with a pay-as-you-go scheme in 2017, 7.1m kept accounts with one of the SPP’s four pension fund managers (administradoras de fondos de pensiones, AFPs). Together, these bodies oversaw PEN140bn ($42.4bn) worth of assets, equal to one-fifth of national GDP. The rest of the total were members of the state-run National Pension System. However, the Superintendency of Banking, Insurance and Pensions (Superintendencia de Banca, Seguros y Administradoras de Fondos de Pensiones, SBS) found that only 18.1% of the country’s economically active population – roughly 17.5m people over the age of 14 who are employed, underemployed or unemployed but seeking work – made regular pension contributions in 2018, depressing average retirement benefits.

The national pension regime permits workers to apply for their retirement savings when they reach the age of 65, provided they have made contributions to the accounts for at least 20 years. Some special regimes permit withdrawal at younger ages and allow shorter periods of contribution for certain classes of workers, such as housewives, miners and maritime workers.

Retirement Reform

An additional schedule known as the Special Regime for Early Retirement (Régimen Especial de Jubilación Anticipada, REJA) was amended by Congress in April 2019 and permanently extended, following its initial expiration in December 2018. REJA permits women over the age of 50 and men over 55 who contribute to AFPs to retire early if they can prove that they have been laid off for at least 12 months. Moreover, legislation passed by Congress in April 2016 – in override of a presidential veto – increased the number of disbursement options available to contributors, who are permitted to withdraw up to 95.5% of their savings at once, with the remaining allocated to a common fund under EsSalud. Taken together, these two incentives have led up to 65% of workers to retire early, according to 2018 data from AFP Integra, a local subsidiary of Sura, that manages some 2m Peruvian pension funds.

Early appraisals of the impact of the April 2016 reform have generally not been positive. According to a July 2018 assessment by the IMF, 92% of pension contributors had withdrawn the maximum benefit allowed, fuelling a steep rise in consumption and a sharp decline in annuity premiums. This trend away from long-term, stable and low-risk investments could potentially destabilise the country’s asset market and undermine the government’s social protection goals. The IMF advises that the law be replaced with measures that more evenly distribute the delivery of assets to new pensioners, such as incentives to purchase fixedterm annuities, a mandate for employers to make AFP contributions and a law prohibiting the premature withdrawal of employer contributions.

Investing Abroad

Ageing populations across Latin America are likely to strain public pension systems over the coming decade, according to a February 2019 report by credit ratings agency Moody’s. As the regional labour force shrinks, contributions to social security will drop as drawdowns go up, causing defined-benefit schemes such as those used in Peru to increase expenditure and exacerbate public deficits. In response to this pressure, the Central Reserve Bank of Peru (Banco Central de Reserva del Perú, BCRP) issued a decision in July 2018 to raise the operational limit on the share of AFPs that can be invested abroad. A BCRP statement asserted that the increase from 49% to 50% between July and September 2018 would allow AFPs to invest an additional $480m in international asset markets. Gonzalo Llosa, head of investment strategy at Prima AFP, expects the decision will stabilise the funds in the long term, as it grants them greater flexibility in diversifying the sources of their returns and risk profiles.

Despite the move, this upper limit remains below the average 60% threshold of the Pacific Alliance, the integration agreement created in 2011 between Chile, Colombia, Peru and Mexico. Moreover, the BCRP cannot raise the operational ceiling again without first gaining approval from Congress, which sets the legal limitation on the AFPs’ foreign investments.


Transferring portions of risk portfolios to other underwriters can reduce the likelihood that primary insurers are liable to pay out large indemnities, and this practice played an important role in mitigating the payment of claims of primary policy providers in the wake of El Niño in 2017. Of the $660m in insured losses incurred during the flooding, 89% was reabsorbed by international reinsurance markets, according to the SBS. As of July 2018 over 15,000 claims worth $428m – or nearly three-quarters (72.9%) of the reinsured sum – had been paid back to Peruvian insurers, with the compensation shortfall reflecting the complexity of evaluating large claims. Rimac remained the country’s largest reinsurer by NWP in February 2019, as it captured 36.3% and 24% of premium in the life and non-life segments, respectively.

In December 2017 the SBS issued new guidelines regarding risk cession, accreditations and coinsurance to facilitate partnerships between local cedants and reputable, foreign reinsurers. According to Kennedys, a global commercial law firm headquartered in London, the move comes in response to foreign firms’ growing interest in Peru’s underwriting opportunities, due to the country’s business-friendly environment and the simplicity of domestic regulation regarding non-domiciled international reinsurers. The SBS has also announced that it will continue to work to deepen the penetration of insurance as part of an effort to guard against natural disasters. Peru is particularly susceptible to earthquakes and the cycles of El Niño, and greater securities coverage is likely to help accelerate economic recovery in the aftermath of such disasters.


Insurance providers are poised to build on the gains they made in 2018 with headway in public outreach and awareness. Meanwhile, stable macroeconomic fundamentals and predicated steady spending on minerals, fisheries and infrastructure should support local underwriters in the midst of an expected slowdown in global commerce. Legal mandates regarding health and automotive coverage should lift demand for EPS products and SOAT, and the restructuring of pension disbursement should see demand grow for products like personal income annuities and personal life insurance. Still, population ageing and persistently high labour informality are forces changing the ratio of contributors to beneficiaries in the country’s social insurance programmes, leading to strained budgets.

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The Report: Peru 2019

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