MEXICO CITY: AM Best has revised its market segment outlook to negative from stable on Colombia’s insurance industry, owing mainly to the COVID-19 pandemic and the resulting economic damage, which will strain the segment considerably.

A new Best’s Market Segment Report, titled, “Market Segment Outlook: Colombia Insurance,” states that economic conditions in the country have improved over the past few years. However, development will be limited by the uncertainty arising from the spread of the COVID-19 virus, which has forced the country to impose a mandatory quarantine and travel restrictions.

Additionally, Colombia relies on the hydrocarbon and mining sectors, which makes it vulnerable to shifts in global commodity prices and demands.

Since the outbreak, Colombia’s central bank has cut the policy rate by 100 basis points, positioning it below inflation, to mitigate the economic and social effects of the pandemic and boost the country’s economy. The main stock market index (COLCAP) has registered a sharp decline, reversing the growth of the last year.

As of November 2019, Colombia was the sixth-largest insurance market in Latin America, with USD 7.8 billion in premiums and an insurance penetration rate of approximately 2.6%. Despite an economic contraction of 2.4%, as estimated by the International Monetary Fund, AM Best expects Colombia’s insurance market to withstand the challenges of the current situation. Nevertheless, AM Best will continue to monitor the economic, political and regulatory landscape, and the impact on Colombia’s insurance industry.