Transcript Slide 1

Regional
Watch
Broker Version
MEXICO
International Markets
Market Intelligence
February 2010
FOR BROKERS
Disclaimer
MEXICO: country dashboard
GDP 2008
USD 1,088BN
GDP SIZE IN USD BN
AND GDP GROWTH
1500
Agriculture
4%
1000
Industry
34%
OVERVIEW
GDP SIZE: 13th worldwide (UK ranks 6th)
15%
952
1025
1,088
10%
500
5%
0
0%
Services
62%
2006 2007 2008
NON-LIFE DWP 2008
USD 10.7BN
DWP SIZE IN USD BN
AND DWP GROWTH
INSURANCE
Property 12%
15
Liability 3%
MAT 4%
Rest
36%
Credit
5%
Motor
37%
10
10.7
8.4
5
0
Construction &
Engineering 3%
LLOYD’S
MAT
23%
Liability
4%
Motor
1% Property
35%
Liability
46%
Property
71%
15%
TOP 5 INSURERS: ING, GNP, Inbursa, Qualitas
and Aba/Seguros together control 36% of market
share in 2007.
10%
KEY CLASSES: Motor and Property
5%
REINSURANCE: USD 2.1bn in 2005 (estimate)
0%
NON-LIFE MARKET PENETRATION: ~ 1%
OVERVIEW
SIZE: 13th for Lloyd’s (UK ranks 2nd)
100%
Health 1%
MAT
10%
306
300
227
240
75%
200
50%
100
25%
0
0%
distribution
2006 2007 2008
The insurance market in Mexico is dominated by brokers
and agents. Direct sales and bancassurance currently
represent weak channels.
Since 1984, all brokers need to be registered with the
CNSF. Major international brokers playing in Mexico are:
Aon, Marsh and Willis.
catastrophes
click for basic
information
click for detailed
information
CHALLENGES: an economy affected by high
crime, the economic crisis and delays on
essential structural reforms.
SIZE: 21st worldwide (UK ranks 3rd)
GWP SIZE IN USD MN
AND DWP GROWTH
400
Misc
8%
STRENGTHS: a notable manufacturing power,
with good control over its foreign debt and a
young and growing working population.
2006 2007 2008
NON-LIFE GWP 2008
USD 306M
Misc 1%
GLOBAL COMPETITIVENESS: N/A
OVERVIEW
20%
9.9
EASE OF DOING BUSINESS: 56th worldwide
TOP 5 MAs: write 17% of non-life GWP
KEY CLASSES: property and MAT
REINSURANCE: USD 292m (95%)
LLOYD’S MARKET SHARE: ~ 2.9%
STATUS: no direct licence. Direct insurance only
if CNSF approves placement with a nonadmitted insurer. Licenced reinsurer.
OFFICE: no office
REGULATIONS
ECONOMY
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COMPULSORY CLASSES: Third party
liability for motor, fishing vessels, aircrafts
& fare paying passengers, liability for
carriers, hotelkeepers and transporters or
dealers of dangerous substances, D&O,
P&I and CAT on time-share apartments.
REGULATOR OF INSURERS AND
INTERMEDIARIES: www.cnsf.gob.mx
Mexico is susceptible to hurricanes (high), earthquakes (med) and droughts (med).
Market Intelligence data based on: AMIS, CNSF, Global Edge, Global Opportunities, Lloyd’s Crystal, Lloyd’s Xchanging,
Munich Re, Swiss Re Sigma and the World Economic Outlook Database. DWP = direct written premiums. GWP = gross
written premium (includes reinsurance). Claims ratio = claims as % of GWP earned from 2005 to 2008.
Disclaimer
MEXICO: economy
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overview
ECONOMIC CRISIS: Mexico is a free market economy with strong trade links to both the US and Canada, to
whom it delivers over 80% of its exports. This close tie to the US has left Mexico very exposed to the current
economic crisis, with Mexico recording no GDP growth over 2008 – 2009. The government, led by president
Calderon, claims that economic recovery is imminent, although there has currently been no published data to
support this statement and consumer confidence remains low.
OTHER CHALLENGES: The Mexican manufacturing industry is facing tough competition from China. It has
since become very competitive and is now focusing on logistics and value added products. Furthermore,
corruption, crime, fraud and violence remain a problem and the disparity between the poor and the rich is still
very large.
OIL AND PEMEX: In 2008, Mexico was the world’s 7th largest oil producer. State owned PeMex (Petroleos
Mexicanos) holds a monopoly on oil production in the country, and is one of the world’s largest oil companies.
The oil sector is still a crucial component of the Mexican economy – with the government relying on its
earnings to generate in excess of 40% of its tax revenues. Oil production is however on the decline, with few
funds available to invest in exploration.
Market Intelligence data based on Global Edge, local information and Google searches
Disclaimer
MEXICO: insurance market (1 of 2)
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Latin AMERICA
SMALL BUT GROWING: The Latin American insurance market is slow but with strong potential for growth,
with Brazil and Mexico dominating the region and accounting for approximately two thirds of all premiums.
LOW PENETRATION: The Latin American market displays many of the characteristics of emerging markets –
most notably low penetration rates. A non-life penetration of approximately 1% in Mexico compares to an
established markets world average of approximately 3.5%.
PROFITABLE: The Latin American insurance market is reported to be largely profitable and combined ratios
are generally strong. In Brazil and Mexico, returns on equity have been in excess of 10% over the last 5 years.
THE MARKET: The Mexican insurance market is the second largest insurance market in Latin America after
Brazil. Growth has been strong, excluding a lull between 2002-2004, with market size more than doubling in the
last decade. Premium growth is expected to be very low in 2009, as a result of weak economic conditions.
DWP SIZE (USD bn) AND GROWTH
15
30%
9.9
INSURANCE overview
10
6
5
4.2
6.9
6.7
7.1
7.6
10.7
20%
8.4
5
10%
0
0%
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
MARKET PENETRATION: Non-life insurance market penetration in Mexico is still very low at approximately
0.98% in 2008, just up from 0.93% in 2004 and 0.78% in 2000. AMIS, the Mexican Association of Insurance
Services, believes that this current low penetration level is a good indicator for significant future growth of the
Mexican insurance market.
Reinsurance OVERVIEW
MARKET PROFITABILITY: A report by Benfiled (2007) states that Mexico is a profitable, albeit small,
insurance market. Earnings in primary insurance have been positive for 2000-2005, with cumulative net profits
of USD 3.1bn. The average combined ratio over the same period was 97%.Notwithstanding major hurricanes in
2005, the market remained profitable (96%).
In 2007, 371 reinsurers were registered with CNSF. The reinsurance market however, was largely
characterised by 2 local reinsurers, 11 representative offices of foreign reinsurers and 30 reinsurance brokers.
The two (and only) local reinsurers are Reaseguradora Patria and QBE del Istmo. Active foreign reinsurers
include: Gen Re, Hannover Re, Munich Re, Mapfre Re, Mitsui Sumitomo, Tokio Marine Global and Swiss Re.
Little is known about the size of the Mexican reinsurance market, although 2005 estimates place it at
approximately USD 2.1bn. Of this total amount, only USD 115m (5.5%) was reinsured with the two local
reinsurers, with the remainder going to foreign reinsurers. The local market is hence heavily reliant on foreign
reinsurers, most probably due to the high CAT exposure and the low retention of local insurance companies.
This might change however, as Mexican insurers look to retain a greater proportion of the premiums.
Market Intelligence data based on AMIS, Benfield 2007 – Latin America Insurance Market Review - Focus on Brazil and Mexico, and CNSF,
Disclaimer
MEXICO: insurance market (2 of 2)
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INSURANCE Market players
MARKET COMPOSITION: Following the liberalisation of the Mexican insurance market in 1994 and the
relaxation of restrictions on foreign participants in 2000, foreign insurance companies have been strengthening
their presence in Mexico. Some of these international players include: ING, ABA, Zurich and AIG. The top 5
players, of which ING is the only foreign insurer, controlled 36% of market share in 2007. Overall, market share
was split 59% to 41% between foreign insurers and Mexican owned insurers in 2007.
KEY PLAYERS: Of the top 5 insurers in Mexico, the top insurer (ING) is international, whilst the other 4 are
Mexican owned.
ING: After purchasing Santander’s pension assets and selling its Mexican non-life insurer, ING is shifting its
Mexican focus to the pensions and life insurance. Its share of Mexican market premiums was 9.5% in 2008.
GNP: The largest Mexican owned insurer and part of the Mexican financial group Grupo BAL – one of Mexico’s
largest and most diverse business conglomerates. Its share of Mexican market premiums was 8.3% in 2008.
INBURSA: The company is part of the local group Grupo Financiero Inbursa and as an insurer covers most
major business classes. Its share of Mexican market premiums was 7.4% in 2008
QUALITAS: Established in 1994, Qualitas is a specialist motor insurer and Mexico’s largest motor insurer
controlling 20% of motor premium. The company has risen rapidly, most probably due to its widespread office
network, and in 2007 controlled 7.3% of market share.
ABA: The company is part of GMAC Insurance, ABA specialises in damage to home, companies and cars as
well as casualty. Its share of Mexican market premiums was 3.4% in 2007.
Key classes
MOTOR: At USD 3.69bn in 2008, motor is currently Mexico’s largest class. Motor insurance is nor yet a legal
requirement in Mexico (excepting third party motor liability) and it is estimated that only 40% of cars are
insured.
PROPERTY: At USD1.28bn in 2008, property is Mexico’s second largest class. At USD 217m in 2008, Lloyd’s
writes a significant proportion of this class (17%). Current estimates indicate that about 20% of Mexico’s 25m
households do not hold any type of insurance coverage at all, with 97% of all households having no earthquake
coverage whatsoever. Clearly, there is scope for growth within this class. It should be noted however, that the
prevalence of hurricanes on Mexico’s coast can lead to exceedingly high claims ratio for property, such as
210% in 2005 following hurricanes Emily, Stan and Wilma.
INFRASTRUCTURE: Massive government investment in infrastructure projects should also present future
opportunities, especially for the London market, perceived as it is as a centre of excellence for the underwriting
of such projects.
The following slide shows size, growth and claims ratio for all classes of business between 2006-2008 based
on data gathered from AMIS.
Market Intelligence data based on AMIS data, the Insurance Information Institute, the website of relevant insurance companies and Google
searches
Disclaimer
MEXICO: classes of business
CLASS SIZE
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GWP SIZE (USD M) & GROWTH
CLASS OVERVIEW
15
10
9.9
10.7
8.4
5
0
CLAIMS RATIO
20%
100%
15%
75%
10%
50%
5%
25%
0%
0%
2006 2007 2008
PROPERTY
Property
12%
1800
1200
1260
20%
Other
88%
0%
0
-20%
LIABILITY
600
400
350
57%
49%
25%
100%
Liability is a small class (3%) with erratic
growth;
330
0%
50%
25%
0
-20%
600
20%
29%
400
40%
410
20%
100%
MAT
Other
88%
0%
0
52%
-20%
6000
0%
2006 2007 2008
20%
MOTOR
4060
4000
3950
3605
10%
100%
75%
74%
73%
71%
2000
0%
0
-10%
25%
0%
2006 2007 2008
2006 2007 2008
Construc & eng.
Other
88%
600
20%
400
270
310
52%
0%
50%
-20%
0%
2006 2007 2008
2006 2007 2008
477
530
426
15%
10%
100%
Credit is a small class (5%) showing strong
growth since 2006;
75%
Along with construction and engineering, it
was the only class to grow in 2008;
credit
50%
200
Credit
5%
5%
0
0%
2006 2007 2008
Along with credit, it was the only class to grow
in 2008;
Claims ratio for construction and engineering
alone are erratic.
29%
0
400
64%
25%
600
Other
88%
Construction and engineering is a small class
(3%) showing growth since 2006;
100%
75%
345
200
Construction & Engineering
3%
Motor is the largest class (37%) in Mexico;
The claims ratio for motor alone are
consistently above the average Mexican
claims ratio.
50%
Motor
37%
MAT is a small class (4%) with erratic
growth;
The claims ratio for MAT alone are
comparable to the average Mexican claims
ratio.
50%
25%
2006 2007 2008
Other
88%
73%
75%
50%
200
The claims ratio for liability alone are low
(approx 25%) and consistently below the
average Mexican claims ratio.
2006 2007 2008
495
395
24%
0%
2006 2007 2008
MAT
4%
Claims ratio for property alone are erratic.
Hurricane Dean and landslides in Chiapas
resulted in a 92% claims ratio in 2007.
Hurricanes Emily, Stan and Wilma gave a
210% claims ratio in 2005.
0%
75%
200
Other
88%
Property is a relatively large class (12%);
92%
2006 2007 2008
20%
395
Key classes in Mexico (discounting unknown)
are motor and property;
Average claims ratio across Mexico are medium
(between 60% and 70%).
75%
2006 2007 2008
Liability
3%
61%
Insurance market growth has been strong;
100%
50%
600
67%
2006 2007 2008
40%
1520
1170
61%
OVERVIEW
25%
19%
13%
14%
0%
2006 2007 2008
Claims ratio for credit alone are very low
(approx 15%) and consistently below the
average Mexican claims ratio.
Disclaimer
MEXICO: LLOYD’S POSITION
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LLOYD’S GWP SIZE (USD MN) AND GROWTH
400
CLASS GWP AS % OF TOTAL DWP
100%
120%
LIABILITY
300
80%
200
40%
100
0%
MAT
MISC
HEALTH
overview
0
80%
PROPERTY
-40%
02 03 04 05 06 07 08
60%
40%
20%
0%
01 02 03 04 05 06 07 08
Lloyd’s GWP growth since 2002 has been erratic if largely positive. CAGR since 2002 has been approximately
14%.
The chart on the right illustrates how different classes have been fairing within Lloyd’s, as a percentage of total
GWP written by Lloyd’s that year. Lloyd’s key classes have always been property and MAT. In the past
however, the two classes were more fairly balanced. Over the last 6 years, the proportion of GWP written in
property has increased at the expense of that written in MAT. Note that Lloyd’s is a significant player in both the
property and MAT Mexican market. Liability, Miscellaneous and Health have always been minor classes for
Lloyd’s.
Lloyd’s top 10 Managing Agents write approximately 30% of GWP, whilst Lloyd’s top 10 brokers place
approximately 45%of Lloyd’s GWP.
overview
MEXICO: REGULATIONS
The CNSF (Comisión Nacional de Seguros y Fianzas or the National Commission For Insurance And Surety),
is the sole regulator of insurance in Mexico.
overview
MEXICO: catastrophes
Mexico is susceptible to natural catastrophes. In particular, its coastal regions are very susceptible to hurricane
damage. In the last 5 years, Mexico has witnessed the following major natural catastrophes:
- September 2009, Hurricane Jimena, approx USD 40m
- July 2008, Hurricane Dolly, approx USD 300m
- November 2007, floods and landslide in Chiapas, approx USD 2500m
- August 2007, Hurricane Dean, approx 600m
- October 2005, Hurricane Wilma, approx 5000m
Market Intelligence data based on Lloyd’s XChanging, the CNSF, and Munich Re Nathan.
Disclaimer
Disclaimer
This document is intended for general information purposes only. Whilst all care has been taken to ensure the
accuracy of the information Lloyd's does not accept any responsibility for any errors or omissions. Lloyd's does not
accept any responsibility or liability for any loss to any person acting or refraining from action as a result of, but not
limited to, any statement, fact, figure, expression of opinion or belief obtained in this document.