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Best’s Market Segment Report: AM Best Maintains Negative Outlook on Peru’s Insurance Industry

Despite signs of pandemic recovery in Peru, ongoing economic challenges and other factors are keeping AM Best’s market segment outlook on the country’s insurance industry at negative.

In its Best’s Market Segment Report, AM Best specifically points to the extended negative impact of early withdrawals in the private pension funds (PPFs) on revenues and results, and difficult underwriting conditions as companies aim to reflect claims experience in key life and health segments as underpinning the negative outlook. A lower capital base in the system as a whole also is driving the outlook.

“Proposed changes to Peru’s PPF system aim to eliminate the mandatory pension savings scheme and make enrollment in the system voluntary, but this could adversely affect insurers’ earnings and the distribution of benefits over the short term,” said Eli Sanchez, associate director, AM Best.

Net income among domestic insurers has been limited by the resurgence in claims and an increase in administrative expenses as businesses start returning to normalcy. Disruptions in global supply chains and rising oil, gas, and grain prices have driven inflation to levels well-above the central bank’s target, while domestic political instability remains a challenge not only for the insurance industry but also for many insurance-related industries. At the same time, the challenges Peru’s insurers face could lead to significant opportunities; for example, a higher unaffiliated population to the PPF system could help boost microinsurance offerings targeted for this segment under the current regulatory framework.

Many of the actions taken to enhance economic recovery have aroused political interest, creating challenges for the current and future performance of the insurance market. Despite insurers’ experience navigating similar previous political and economic cycles, further positive developments would be needed for a stable outlook.

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=321475.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2022 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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