MEXICO CITY–(BUSINESS WIRE)–AM Best has maintained its stable market segment outlook on Guatemala’s insurance industry, citing the country’s quick reaction to the COVID-19 outbreak and insurers’ limited exposure to foreign exchange and capital markets.
In a Best’s Market Segment Report, AM Best states that its stable outlook also is supported by limited concerns about higher claims costs and reserve requirements, owing to a stable foreign exchange rate, the low interest rate environment and controlled inflation.
Guatemala is currently the third largest insurance market in Central America. The country’s recently elected president, Alejandro Giammattei, promptly implemented mobility restrictions in response to the COVID-19 outbreak, and worked with the legislature to develop an economic stimulus package. Despite these positive measures, Guatemala’s economy is expected to contract for the first time in two decades, which could result in reduced opportunities for insurance business during 2020.
The solid Guatemalan insurance market appears to be well-prepared to face the expected economic contraction. During the last five years, the Guatemalan insurance industry’s combined ratio has reflected the capacity of the market to manage claims while maintaining an efficient cost structure. The short-term effect of the COVID-19 restrictions could benefit claims costs due to lower frequency, but once activities are resumed collection efforts and customer service will be key to adequate performance as frequency normalizes. AM Best does not expect claims costs to be influenced by a weaker quetzal, as the currency has remained stable, but AM Best will continue to monitor its performance as well as its effects on insurers’ income statements.
To access the full copy of the Guatemala market segment report in English and Spanish, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=296549.
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 New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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