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

AM Best is maintaining its negative outlook on Argentina’s insurance industry, citing marginal industry growth, volatility in bottom-line results and economic challenges.

In its Best’s Market Segment Report, “Market Segment Outlook: Argentina Insurance,” AM Best states that inflation has pressurized growth of Argentina’s insurance industry. Although the industry has grown since 2021, the growth totaled 0.5% as of year-end 2023. The industry recorded a combined ratio below 100 in 2023, reflecting consistent premium sufficiency levels, driven mainly by increasingly expensive auto policies, which offset claims and operating expenses. However, results have been adjusted for inflation since 2020 under RECPAM (Resultado por Exposición al Cambio en el Poder Adquisitivo de la Moneda) reporting, leading to some bottom-line distortion as gains or losses owing to changes in the currency’s purchasing power had to be identified separately.

“AM Best expects distortions to gradually diminish as Argentina’s macroeconomic conditions improve and negative real interest rates and foreign exchange volatility gradually lower pressure on float, despite the industry’s large exposures to government-backed obligations, which are predominantly of non-investment grade credit quality,” said Salvador Smith, associate director, AM Best.

Macroeconomic conditions have begun to improve, according to the report, and have produced tailwinds for the insurance industry, but Argentina’s market remains complex and challenging as insurance companies continually must adjust prices and implement strict expense containment strategies to maintain policy coverages and limit business contraction, as well as address limitations due to tight regulatory requirements.

To access the full copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=350959.

To view current Best’s Market Segment Outlooks, please visit http://www.ambest.com/ratings/RatingOutlook.asp.

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.

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