Increased capital requirements and regulation driving consolidation of Argentine insurance market

Maintaining robust levels of profitability through the use of financial instruments rather than the development of core competencies, Argentina’s insurance industry has remained relatively stable since 2008. Though technical profits remain low, they were compensated by assets held in government bonds or short-term central bank notes known as Lebacs. The introduction of more market-friendly regulations since 2015, coupled with improvements across a number of macroeconomic indicators, is expected to have a positive impact on the insurance industry, enabling it to focus more on developing the market as well as take on a more active role in the overall economy.

Moreover, ongoing policy and regulatory reforms have already started to demonstrate positive results. An increase in capital requirements, stronger regulatory oversight and the easing of restrictions have piqued the interest of international companies to participate in the Argentine economy. Notwithstanding, a number of challenges remain, which is preventing penetration levels from rising and the overall industry from improving. Most noteworthy is the occupational risk segment, in which a substantial number of class action lawsuits have been filed (see analysis).


Argentina’s insurance sector today is characterised by its atomisation and a very large number of actors. Until 2009 the number of players operating in the sector was in decline due to the introduction of measures aimed at increasing competition, transparency and solvency; however, a period of expansion followed from 2010, especially in the property and mixed insurance segments. By the end of 2017 there were 188 insurers and 24 local reinsurers, according to the 2017 “Indicators of the Insurance Market” report by the Superintendency of Insurance of the Nation (Superintendencia de Seguros de la Nación, SNN).

In terms of types of insurers, 117 were general insurance companies – which offer both property damage and personal insurance products; 37 were involved in the life segment and 16 offered retirement plans; 13 operated exclusively with occupational risk; and five insurers specialised in public transport.

While most markets in the region are dominated by a handful of large firms, Argentina’s is quite fragmented, with the largest operator, Federación Patronal, accounting for 7.1% of total premiums, followed by Caja Generales with 5.7%, Prevención ART (5.5%), Provincia ART (5.3%) and Sancor Seguros (4.9%), with no other firm holding a market share greater than 4%.


The Argentine insurance sector, and indeed that of the most economies in the region, is seen as highly profitable. In 2017 profits for the industry rose by 49.7%, after witnessing a 4% decline in 2016. While technical results remain negative, posting losses of AR20.3bn ($1.1bn) in December 2017, they are compensated by strong yields on investments in financial products, which accumulated AR41.7bn ($2.2bn) – a trend also visible in countries such as Chile and Mexico.

Total industry assets for 2017 reached AR452bn ($23.4bn), an increase of 15% on 2016 figures, while liabilities registered AR351bn ($18.2bn), resulting in a net worth of AR101bn ($5.2bn), up 19% on the previous year. Investments accounted for the bulk of assets with 74%, while debt with insured persons represented the largest share of liabilities with 49%. Overall, the insurance industry contributed 3.2% of GDP in 2017.

Argentina’s insurance penetration rate – measured by insurance premiums as a share of GDP – was the fifth-largest in Latin America, at 3.2% at the end of 2016, behind Puerto Rico at 12.7%, Chile at 5%, Brazil at 3.3% and Venezuela at 3.1%, according to “The Latin American Insurance Market in 2016” report, the latest available study by Spanish insurance company MAPFRE.

In 2017 net premiums rose by 12.7% to reach AR290.6bn ($15bn), while spending per capita increased by nearly 12% to exceed AR6597 ($342).


In 2017 the segment with the greatest share of the market was property damage and mixed with 63%, followed by life with 19%, pension (8%), occupational risk (7%) and public transport (3%).

Personal insurance – which includes life, pension and personal accident – grew by 19.2% in terms of premiums in 2017 to reach AR29.2bn ($1.5bn). However, in terms of penetration rate, life insurance remains low at 0.7%, compared to 2.7% in Chile and 2.4% in Brazil. In an effort to increase penetration in the segment and boost savings, Congress passed the comprehensive tax reform bill in December 2017, which includes a new provision enabling contributors to deduct investments in life insurance products. Effective January 1, 2018, the maximum deduction savers can apply for is AR996 ($51.60), though this figure is expected to increase in the year. Local press reported in December 2017 that this would benefit 1.2m employees who have a savings deposit account, bolstering their long-term savings.

Similarly, savings through life and retirement insurance products are poised to benefit from the capital markets reform bill, which was passed by Congress in May 2018 (see Capital Markets chapter). The reform will enable the development of private pension schemes in the country, among other concessions.


By far the largest, the non-life segment grew by 23.8% in 2017 to register total premiums of AR132bn ($6.8bn). The automobile and occupational risks subsegments account for 44.5% and 34.3% of nonlife premium, respectively. While virtually all segments have experienced strong gains in nominal terms, when adjusted for inflation, growth in real terms remained somewhat unchanged through 2017.


According to the “Latin America Insurance Market in 2016” by MAPFRE, the Argentine insurance industry had the strongest return on equity in the region in 2016 with a ratio of 24.1%, ahead of Brazil with 22% and Mexico with 21%, even though it recorded the lowest technical results in the region.

The role of investment on financial products is linked to the large capital buffers held by insurers, which enabled operators to invest in high-yielding, long-maturity products. However, in November 2017 the government barred insurance firms’ from subscribing to new Lebacs – although they may maintain those held until maturity – in an effort to redirect their capital through investment funds. Following this move, concerns have been raised over the availability of assets to replace Lebacs, which account for close to 50% of underwriters’ investment portfolios. Nevertheless, the new regulation still enables insurers to invest in government bonds, Treasury bills and bonds, for up to 92% of their portfolio. It also stipulates the share of investment able to be directed through other instruments, such as bonds from provinces, time deposits from banks and infrastructure projects. According to the Ministry of Finance, the insurance sector held 13% of total available Lebacs as of end-2017. “The logic behind this new policy is sound, but our capital market remains underdeveloped to provide insurance firms with enough security and transparency to cover our long-term liabilities,” Carlos Porzio, sales director at local insurer Experta ART, told OBG. “Authorities must therefore speed up capital market reforms to allow us to redirect our funds through new tools.”

Reforms & Consolidation

One of the first policies carried out by the government was to eliminate Clause K in the General Regulation of Insurance Activity Law in 2016, which had forced insurance companies to invest in “productive assets” – such as debt instruments and deferred cheques – and infrastructure projects since 2012. The elimination of this policy progressively removed investment floors and caps, enabling insurers to freely structure their investment portfolios.

Also in 2016 came the increase in capital requirements, from AR10m ($518,000) to AR30m ($1.6m) for those operating in the non-life segment. While the new capital requirements did not have much effect on the majority of the industry – given that most insurers already met this threshold under the previous policy – the regulator estimated that 35 companies could come under strain. In September 2017 local insurance companies Caledonia Seguros, Horizonte Seguros and ProFru Seguros were restrained from operating for not meeting the capital requirements imposed by the SSN.

Given the sheer number of companies involved in the sector, some industry players believe that a downsizing of the market is very likely. “The excessive amount of local providers and brokers makes it logical for us to think that we will move towards greater consolidation, as the regulating requirements from the SSN become stricter,” Gastón Schisano, CEO of BBVA Seguros, told OBG. This has already been exemplified by the acquisition of the Latin American operations of Australian insurer QBE Insurance by Zurich Insurance Group for $409m in February 2018, a move that effectively made it the leader in the property and casualty, and life segments. However, the elimination of restrictions on capital requirement for foreign insurance firms is poised to attract new international players.


The former administration effectively barred international reinsurance companies from operating directly with insurance providers in 2011 by requiring them to cede their risks to local reinsurance companies, thus stunting the development of the industry. However, 2017 saw the passing of a number of reforms aimed at lifting barriers for international reinsurance firms and strengthening the role of the segment. Under Resolution No. 40.422, issued by the SNN in June 2017, local reinsurers are able to cede a portion of their risks abroad starting with a maximum of 10% of premium and extending to 80% by 2024. Capital requirements for companies operating in the industry was raised from AR300m ($15.5m) to AR350m ($18.1m) – to be proven by December 31, 2019 – and firms are now required to submit proof of credit rating. Moreover, international companies registered with the SSN will be able to reinsure 100% of the risks of projects worth over $35m and 50% of those worth under $35m, encouraging them to further participate in the market.

The new retrocession policy coupled with the increase in capital requirements will inevitably put strains on some of the smaller local reinsurance companies, while opening the doors to international players, engendering a slight consolidation of the market. By the end of 2017 the reinsurance industry comprised 24 companies – down from 28 in 2015 – of which 17 were local and seven foreign owned.

Claims & Ratings

In 2017 insurance claims across the sector as a share of total premiums reached 71.4%, up from 68.6% the previous year, according to the SSN. Net total claims rose across almost all major insurance lines, with life insurance claims growing at the fastest rate with 31%, followed by mixed and property insurance claims with 29%. Total claims for 2017 increased by 27% on the previous year.

In 2016 ratings agency Moody’s upgraded Argentina’s insurance outlook from negative to stable on the back of improvements in the regulatory environment and sovereign credit rating. Then at the end of 2017 the agency further upgraded the ratings of Argentine insurers and guarantors so that all 19 entities are now classified as stable. Recent policy changes across the financial sector, coupled with a positive outlook on the country’s sovereign debt, is expected to continue improving insurers’ portfolios given their large holding of government debt and bank deposits.


One of the more unpopular reforms that passed was the changes to the pension scheme in late 2017, which increased the age of retirement from 65 years to 70 for men and from 60 to 63 for women. However, the part of the reform that faced the most opposition from the population and lawmakers has been the amendment to the way pensions are calculated. Under the new guidelines, payments will be adjusted per trimester in accordance to the level of inflation and the average salary of those registered under the scheme. In this context, the increase in pension payout for March 2018 dropped from 12% to 5.7%. The authorities claimed that the regulatory change was necessary due to irregularities in the way pensions were calculated, and that contributors will see payments return to previous levels as macroeconomic indicators improve and inflation continues its downward trend.


The Argentine insurance industry is also characterised by limited investment in technology. However, as the government seeks to boost digitalisation and foment deregulation across industries, insurers are also bound to benefit from these efforts, with a number of local operators already beginning to introduce digital services. In 2011 research firm CESVI established a platform called Orión, which enables users to calculate quotes for vehicle damage claims, while in 2015 life insurer Prevención Salud launched a digital platform providing clients with online health consultation services. In 2017 insurers Asociart and Integrity Seguros both launched new mobile apps in an effort to improve service quality for their clients, with Provincia Seguros following suit in April 2018. “Whoever joins the digital revolution will be in a much better position to grow in the future,” Juan Carlos Lucio Godoy, president of Rio Uruguay Seguros, told OBG.

Technology could also be used to enhance transparency in the sector, the importance of which has been highlighted by several players. In fact, Alberto Grimaldi, CEO of La Segunda, said in a conversation with OBG that it was the most important aspect to improve. Roy Humphreys, CEO of Experta ART, agrees that greater digitalisation will be beneficial for the sector. “Higher digitalisation allows for a larger degree of transparency in transactions, which increases customer trust and confidence levels,” he told OBG.


After a year of recession, the implementation of market-friendly measures is poised to improve the Argentine economy, including the insurance sector. Regulatory reforms are expected to lead to market consolidation as the government seeks to strengthen the industry and attract international players. While penetration rates remain low, the active role of the government in the development of the sector is an encouraging sign for both local and international insurers.

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The Report: Argentina 2018

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