Mexico Insurance Report Q3 2013 - New Study Released

From: Fast Market Research, Inc.
Published: Tue May 28 2013

As of early 2013, it is clear that Mexico continues to be regarded by leading multinational insurers as too large a market to be ignored. Many of the positive trends that are evident elsewhere in Latin America are present in Mexico. Nevertheless, strong competitive pressures in both segments and competition from the US insurance sector, continue to keep a lid on growth. Several challenges need to be addressed if Mexico's life insurance segment is to reach its full potential.

Recent developments continue to highlight both strengths and weaknesses in Mexico's insurance sector. In the non-life segment, premiums have grown at double-digit rates, in real terms, in most lines other than accident and health, throughout 2012. Life premiums have also grown at a respectable rate. For many insurers, profitability has improved as a result of tighter control of costs and losses and/or higher prices.

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We doubt that there will be radical changes in the life segment unless: a) a sustained education programme effectively promotes life insurance and long-term savings; b) shifts in the distribution of household incomes mean that there is a dramatic increase in the number of households that can afford to buy the offerings of the life insurance companies; and c) at least one of the major players develops an innovative product that captures the imagination of the masses. The rapid rise in micro-insurance in Brazil over the last 18 months or so provides an indication of what could be achieved.

In some markets, development of insurance is hampered by desperate competition for business - regardless of profitability - from large numbers of undersized companies. This is emphatically not the case in Mexico. Unlike other emerging markets, the two main segments stand out in terms of the importance of companies present; insurance firms operating in Mexico are substantial by most standards and backed by wellcapitalised financial institutions. Indeed, the discipline and innovation shown by the leading providers of motor insurance are clear strengths of the overall insurance sector.

Various deals in the last year or so highlight how Mexico is still seen as a key opportunity by many multinational players. The first is the formation of the bancassurance joint venture across all of Latin America between Zurich Insurance Group and Santander. This deal takes advantage of three trends: rising demand for non-life insurance in economies that are developing relatively fast, the growth in organised savings and the further development of bancassurance as a very important distribution channel. Although Mexico's life segment remains in competition with its vastly larger counterpart in the US, all three trends are present in the country (Zurich is underwriting non-life risks as well).

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You may also be interested in these related reports:

- United States Insurance Report Q3 2013
- Brazil Insurance Report Q3 2013
- Argentina Insurance Report Q3 2013
- New Zealand Insurance Report Q3 2013
- Iran Insurance Report Q2 2013

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