Take-off for the Colombian insurance sector began in the 1990s, when trade liberalisation and a series of financial reforms fostered competition within the sector. Among important changes brought about by Law 45 of December 1990, known as the financial reform law, were the elimination of uniformity among policies and premiums, the establishment of new solvency and minimum capital requirements, and allowing the entrance of foreign capital to the sector. In 1993 another reform engendered a significant change in pensions, enabling the private sector to participate in the social security system. This period also saw the establishment of some mandatory insurance policies in areas related to health, professional risks and traffic accidents.


Between 1989 and 1997, while the country’s average GDP growth was 4%, the insurance sector expanded at a rate of 8.1%. After overcoming the global crisis of 1998-99, the insurance sector regained growth momentum between 2000 and 2007, again at rates higher than seen in overall GDP, driven by the social security and personal insurance segments.

Financial liberalisation entered a new phase in 2012 with the adoption of a new legal framework that enacted financial reforms approved in 2009. These allow Colombians to seek insurance services abroad, except for those regarding social security.

“Insurance penetration in Colombia has been increasing in recent years, but it is still low when compared to more developed economies,” Santiago Osorio, president at insurer MetLife Colombia, told OBG. “This is certainly an opportunity and there is still a lot of work to be done.” According to several sources in the sector, Colombia has a 2.4% penetration rate, calculated by premiums as a percentage of the GDP.

Compared to other Latin American countries, Colombia has room to grow to meet the 5% penetration level in Chile and the 4% rate in Panama; however, it leads Mexico and Peru, with 2.1% and 1.7%. In terms of premiums per capita, Colombia, at 150, falls behind Chile (591), Panama (300), Uruguay (279) and Mexico (195).

Market Structure

The Colombian Financial Superintendence (Superintendencia Financiera de Colombia, SFC) supervises major segments of the insurance sector: life insurance and general insurance. According to the SFC, the life insurance division comprises 19 companies while the general insurance segment has 26. The market, which includes global industry leaders such as Chubb, Allianz, AIG, MetLife, and Royal & Sun Alliance, is divided almost equally between local underwriters and foreign participants. After the liberalisation of the 1990s international insurers began entering the market, while the ones that were already established in the country started expanding into new segments.

Insurance culture in Colombia is low. The overall penetration rate (2.4%) is even lower for general insurance segments. Certain mandatory insurance policies have aided in developing the market, such as occupational risk policies and the mandatory transit accident insurance (Seguro obligatorio de accidente de tránsito, SOAT). Occupational risk policies, in particular, have shown dynamic growth due to lower unemployment and greater economic growth around the country.

Main Players

Most firms have divisions for general insurance and life policies. Through its subsidiaries Suramericana and Protección, Grupo Suramericana is the leading firm in insurance and the second-largest pension fund administrator (PFA). Suramericana leads in general insurance, particularly in vehicle, fire and earthquake segments, where it commands 25% of the market, and in home insurance, where it controls 31%. The company is also the leader in certain health and individual life segments, with 31% of personal accident policies and 15% of group life policies. With regard to pension funds, Protección administers COP47.7trn ($23.85bn), making it the second largest PFA after Porvenir acquired BBVA’s Horizonte in 2013.

German insurance group Allianz is the second-largest underwriter in Colombia. It has 10.1% of general premiums and 6.4% in life. It is the second-largest provider of auto insurance and loss-of-profit policies, and the leader in machinery assembly and all-risk policies. Allianz is the second-largest health insurer with 21.5%.

Seguros Bolivar, the third-largest underwriter in the sector, was founded in Colombia in 1939 and began its expansion in the financial sector in the 1950s. Today it controls 7.7% and 8.6% of premiums in the general insurance and life segments, respectively. Bolivar is the second-largest insurer in group life policies and thirdlargest in individual life. In general insurance, it comes second in fire and transport, after Suramericana.

Another foreign company among the market leaders is Spanish insurer Mapfre, which has a diversified portfolio among the different segments. Mapfre is the leader of the social security market with 19.8% of total premiums, while in general insurance and life insurance products it holds 9.3% and 4.3% of premiums, respectively. The firm is a specialist in covering risks for infrastructure and industry sectors. Mapfre is the leading company in loss-of-profit, navigation and aviation policies, while maintaining a significant share of all-risk and machinery assembly policies. In the life segment, Mapfre is the market leader in funeral policies.

Other large players are Colombian insurance company Colpatria, which was recently acquired by France’s AXA, and US-based underwriter Liberty. Swedish financial and insurance services company Skandia is the leading provider in the voluntary pension fund market, controlling more than 60% of the premiums. The sector also comprises 34 intermediaries or brokers as well as 15 reinsurance companies.


In 2013 the total written premiums reached COP18.9trn ($9.45bn), an 18% increase compared to the previous year, which ended with COP16trn ($8bn). Such growth was driven mainly by a transfer of assets and liabilities from the government-controlled Previsora insurance company to the state-owned Positiva. This operation between the two companies generated almost COP1.4trn ($700bn) in premiums. Excluding that effect, the actual growth rate would have been about 9.6%, ending the year with a total of COP17.5trn ($8.75bn) in written premiums, confirming a marked slowdown in the industry’s growth rates, which reached 16% in 2011 and 14% in 2012.

According to the Colombian Insurers Association (Federación de Aseguradores Colombianos, Fasecolda), the life insurance division ended the year with COP6.21trn ($3.11bn) in premiums (excluding social security segments). General insurance finished the year with COP8.2trn ($4.1bn) in premiums. Social security, which encompasses occupational risk, pensions from Law 100 and disability pensions, reached COP4.44trn ($2.22bn) in premiums in 2013.

The industry recorded 11.3% growth in assets to end 2013 with COP42.8trn ($21.4bn), up from COP38.4trn ($19.2bn) in 2012. Investments held by the sector rose from COP27.4trn ($13.7bn) to COP31.4trn ($15.7bn). Nearly two-thirds of assets and three-quarters of investments were held by the life insurance division.

Despite growth in the number of premiums issued, the technical result remains negative, leaving the industry’s profitability dependent on investment returns. Paid-out claims for the industry as a whole reached a total of COP8.4trn ($4.2bn) in 2013, increasing 9.7% from COP7.64trn ($3.82bn) in the previous year. General and administrative (G&A) expenses grew 11.5% from COP3.6trn ($1.8bn) in 2012 to COP4.03trn ($2.02bn) in 2013. Commissions to intermediaries reached COP1.55trn ($775m) in 2013.

Costs Of Coverage

G&A expenses in the general insurance segment represented 38.2% of premium income in 2013, up from 37.1% in the previous year. In the life segment, G&A expenses as a percentage of premiums have been growing over recent years, from 41.8% in 2011 to 46.1% in 2013. For social security policies, G&A expenses have been falling since 2010, when they stood at 21.8%, to 13.1% in 2013.

Underwriters are facing a high number of costs, of which commissions paid to intermediaries represents one of the largest. Commissions to intermediaries as a percentage of premiums remained stable in the life segment at 13.1% in 2012 and 13.6% in 2013. Certain lines such as funeral charges and group life face very high commission rates of 25% for the former and 35% for the latter. In the case of general insurance, commissions continue to grow, passing from 11.7% in 2012 to 12.2% in 2013. In this division, compliance policies face the most expensive commissions, at 23%. On the other hand, in social security segments, commissions fell from 4.9% in 2011 to 3.1% in 2012.

The profitability of the industry decreased from COP1.09trn ($545m) in 2012 to COP583bn ($291.5m) in 2013. This was a result of a combination of lower profitability in investments and increased expenses. Income from investments dropped from COP2.34trn ($1.17bn) in 2012 to COP1.97trn ($985m) in 2013. Expenses other than G&A and commissions increased from COP4.87trn ($2.44bn) to COP5.23trn ($2.62bn).

Life Insurance

The life division consists of policies such as group life, health, education, voluntary pensions and funerals, among others. Premiums in this division reached COP6.2trn ($3.1bn) in 2013, growing COP1.9trn ($950m) during the year, or a rise of some 30%. Growth figures were distorted by the absorption of state-owned pensions by PFA Positiva, which represented almost COP1.4trn ($700m). In this division, segments with the highest growth rates (excluding voluntary pensions) are top-end health insurance and voluntary annuities, which grew 36.8% and 24.1%, respectively.

Before the operation between Previsora and Positiva, the segment with the largest share in the life insurance division was group life policies, with 48%, principally since it is an insurance that is required to access consumer credit within the financial system. Health insurance retained another 20%, followed by accidents and individual life with 12% each.

Health insurance demand is still low in Colombia due to how extensive the mandatory health plan is. It was reformed in 1993 and has achieved significant advances since then. In 2002 the national health system covered an estimated 66% of the total population. In recent years coverage is believed to have grown to reach 96% of population. According to the Ministry of Health and Social Protection, at the end of 2012, this scheme covered around 22.5m Colombians, or 50.37% of the population, while 44% participated in the contributory scheme and 5% in special regimes.

Social security policies are sometimes considered part of the life insurance segment. On their own, they reached COP4.44trn ($2.22bn) in premiums in 2013, representing a 13.6% growth rate for the year. More than half of these premiums are generated by the occupational risk policies (51.4%), followed by disability and survival coverage at 30%.

General Insurance

The general insurance segment, which includes automotive, civil responsibility, fire, earthquake, transport and business interruption, among others, saw 5.7% growth in 2013. General or non-life, insurance, is led by auto insurance, with 26.7%, and followed by the mandatory SOAT, with 18.4%. Liabilities and professional indemnity insurance policies each have close to a 9% share in the segment, while fire and earthquake policies have nearly 7% share each.

At just 2%, auto insurance experienced slow growth in 2013, mainly due to the decline in new car sales and lower premiums due to increasing competition. The most dynamic segment during the year was agriculture, though its relevance among general insurance is very low (0.32%). Other segments with growth rates above 20% were policies related to machinery, mining, unemployment, loss of profit and all-risk for contractors.

In terms of market participation, five of the 26 companies in general insurance account for more than half of the premiums. Grupo Sura leads the division with 17.5% market share in premiums. The remaining companies belonging to the top five underwriters in the general insurance sector are Allianz (10.1%), Mapfre (9.2%), Colpatria (8.4%) and Bolivar (7.7%).

Mandatory Pensions

“Colombia has two mandatory pension systems that work in parallel,” Luis Felipe Jiménez, former director of economic studies for Asofondos, told OBG. “One is a pay-as-you-go system administered by Colpensiones, which is public, and the other is a capitalisation system similar to the Chilean model, in which resources are managed by private PFAs.”

More than 6m affiliates with an average age of 50 hold public pensions in the country’s defined-benefit pay-as-you-go system. Just over 2m of these affiliates remain economically active, which generates problems for funding the programme. Under this system, retired affiliates are entitled to between 65% and 80% of their average income of their last 10 working years.

Private pensions are offered in a defined-contribution, fully funded system that began operating in 1996 and has over 12m affiliates. Similar to the public system, only one-third of members contribute regularly. The pension paid out is determined as a function of the accumulated capital during their working life.

In 2011 the private pension system adopted a multi-fund approach similar to the Chilean model, managing three types of portfolios: conservative, moderate and aggressive. As affiliates approach retirement age, their savings are transferred gradually to the conservative fund and then to a programmed retirement fund. The moderate risk portfolio holds 85% of the affiliates, as it is the default portfolio to which affiliates are assigned. Customers rarely move towards the aggressive portfolio, which has only 1% of the total affiliates.


The number of PFAs in the market shrunk to four in December 2013 with the merger of Porvenir (owned by Grupo Aval) and Horizonte (acquired by Grupo AVAL from BBVA in 2013). The two largest PFAs (Protección and Porvenir) control 80% of the total assets in the private system. PFAs held COP110.3trn ($55.15bn) in assets at the beginning of 2014, a slight drop from the COP112.3trn ($56.15bn) in January 2013.

Skandia and Colfondos, the remaining two PFAs, have a minority share of the market, with 5.3% and 2.6%, respectively. Severance funds and voluntary pension funds play a smaller role in the pensions system, holding assets worth COP6.58trn ($32.9bn) and COP12trn ($6bn), respectively. The client-base for severance funds and voluntary pension funds is concentrated in medium- and high-income segments with deeper financial education. Reaching lower-income segments is an ongoing issue for the industry. Most of the clients investing in this kind of fund do so to obtain tax benefits. However, recent changes to the tax regime require people to maintain their investments for 10 years instead of five, with deductions now limited to the lesser between 30% of their annual income or COP100m ($50,000). It is expected that modifications to the tax regime will slow the growth of voluntary pension funds.

Regulatory Framework

Perhaps the most relevant regulatory change for the insurance sector in recent years was the enactment of Law 1328 in 2009, which marked the commercial liberalisation of financial services. This law permitted placing insurance contracts with companies established abroad with the exception of social security policies (such as occupational risk, disability pensions and long-term annuities) and the mandatory insurance policies. The objective of the reform was to provide consumers with further options of insurance policies and more transparency between domestic and foreign companies.

The same law allowed the purchase of international transportation risk policies for maritime, aviation and satellite traffic, which were previously forbidden. For this purpose, the SFC created a registry called RAIMAT for foreign companies interested in offering such policies. So far, the registry has only one listed company: Shipowners’ Mutual Protection and Indemnity Association from Luxembourg.

During 2013, the insurance sector experienced further modifications to regulations. Decree 2838 allowed foreign insurance companies to open offices in Colombia. These foreign-owned branches are required to adhere to the existing rules for banking and financial institutions. Decree 2973, issued in December 2013, reviewed the calculation of technical reserves and created two additional reserves: one for asset insufficiency, which is calculated quarterly and constituted in such a way as to compensate the insufficiency from expected liability flows that match the mathematical reserve against the asset flows of the institution. The second reserve is for premium insufficiency, aimed at complementing the reserve for non-accrued premiums.

Reforms continued into 2014, with Decree 673 obliging credit institutions to buy the life insurance and earthquake policies attached to the mortgages they offer in the open market, with the objective of reducing the insurance costs linked to mortgage products.

Another important change in the financial sector is the adoption of international financial reporting standards (IFRS), which are expected to enter into force in 2015, with 2014 acting as a transition period to adopt international accounting standards in the industry.


Since the industry has traditionally maintained negative technical results, its profitability depends principally on investment returns. As mentioned above, the insurance sector had COP31.4trn ($15.7bn) in investments by the end of 2013, having achieved a 14.5% growth rate that year. Long-term lines accounted for almost 80% of total investments.

The Colombian insurance sector invests principally in fixed-income instruments, which represent 80% of investments. Almost 33% of total funds are invested in domestic public debt, 25.3% in local financial sector debt, 8.4% in foreign public debt and 7.1% in other foreign issues. Only 6.7% was invested in stocks. One of the issues faced by insurers with long-term lines is finding comparably termed assets to match their liabilities.

Infrastructure Bonds

Insurance companies are awaiting the development of an infrastructure programme announced by the government. According to government figures, $47bn will be invested in the coming years, mainly for the development of new transport infrastructure (fourth-generation concessions). This will represent enormous business opportunities for most insurers, including international providers, since regulation does not allow companies to accumulate more than 10% of their portfolio in a single risk.

As well as the business opportunities they represent, companies are interested in the investment opportunities posed by the infrastructure programme. Even though the structure of the funding instruments is still unknown, insurance companies are anticipating long-term issuances which will allow them to balance their portfolio by further investing in long-term assets and reduce mismatches between assets and liabilities.

With investments currently driving profitability in the sector, insurance companies can have an important part in the development of long-term investment instruments and in the expansion of Colombian capital markets. As fixed-income issuances continue to achieve longer terms, insurers with long-term lines can find more opportunities to balance their portfolios.


The insurance sector has traditionally focused on medium- and high-income groups; but some industry players are exploring large-scale markets opportunities of low-premium policies such as microinsurance. Colombia does not yet have a legal definition or a regulatory framework for microinsurance, and so the segment is ruled by the same regulation as traditional insurance products. The SFC is currently working with the aid of the German development corporation GIZ on developing a regulatory framework specifically designed for the microinsurance segment.

“Lack of insurance contracting is often due to the high levels of inequality in this country,” said Arturo Posada, president of AP Corredores. “However, microinsurance has leveraged the opportunity to develop a client base among the lower strata,” he told OBG.

For statistical purposes, Fasecolda has defined microinsurance policies as those which are aimed at low-income groups with the following characteristics: a bimonthly premium equal or lower to a 12th of a monthly minimum wage (around COP78m, or $39,000), and an insured value equal or lower than 135 times the monthly minimum wage.

Using Fasecolda’s definition 17 insurance companies were offering products in the microinsurance segment in 2012 and premiums worth COP250bn ($125m) were issued, which is more than double the value of such premiums in 2008. Group life was the largest segment, accounting for 55% of the premiums, followed by personal accidents with 21% and funerals with 11%.

During the same year, more than 6m people were covered by some type of micro-policy. The strategy followed by many insurance companies is to offer such products in alliance with public services companies and remittance companies, which allows them to cover a larger area of the country.

The microcredit industry has also helped provide further financial services to their clients, including micro-insurance and micro-savings accounts. According to the Colombian Microfinance Association ( Asomicrofinanzas), at the end of 2013, 54% of the micro-loans’ clients also held some form of microinsurance.


As long as Colombia’s economy keeps growing, the insurance sector is expected to follow. Insurance penetration is still low compared to other Latin American countries, which means that there remains significant potential for growth. Increasing formal employment is expected to push growth in life segments and pension funds in particular, but as companies become more sophisticated, they are also anticipated to require general insurance policies.

Recent modifications to the regulatory framework are intended to bring further competition to the sector and thus reduce insurance costs to consumers. There is also still a lot of room for companies to become more efficient and reduce operational costs. Insurance providers understand that they need to enter new segments and expand their product portfolio.

One of the biggest challenges for growth is tackling labour informality and providing financial education. As Nicolás Romero the director of Economic Studies at PFA Porvenir told OBG: “High informality in our labour market leads to few workers actively making contributions (to the pension funds).” Out of a labour force totalling a little more than 21m people, 54.3% do not belong to a pension scheme. Even more significant is that only a third of the population of pensionable age is entitled to a pension and 34% of affiliates in the pension system contribute regularly due to job instability. This prevents many employees from quoting the minimum number of weeks required, reducing their chances of receiving an adequate pension upon retirement.