AM Best is maintaining its stable outlook on Panama’s insurance industry, citing its consistently profitable underwriting results with favorable prospects moving forward, despite pressures from the macroeconomic environment, according to a newly issued report.

Panama’s gross domestic product grew by 10.8% in 2022, according to the IMF, which is forecasting 6% growth in the country’s economy for 2023. However, Panama still faces a deteriorated fiscal regime, pressured public finances owing to the government’s significant dependence on Panama Canal revenue, and material pension system imbalances due to depleting reserves. Economic headwinds include disruptions in global commercial trade, climate changes shocks that impact the Panama Canal and political uncertainty stemming from the upcoming 2024 elections, among others.

In its Best’s Market Segment Report, “Market Segment Outlook: Panama Insurance,” AM Best states country’s insurance industry grew by 5.6% in 2022, based on gross premiums written (GPW). Non-life insurance premium, which accounts for almost three quarters of the market, is still driven by the health and auto segments. The health sector leads the domestic industry, having expanded over 17% in 2022, sparked by the population’s greater post-pandemic awareness of the need for health coverage and postponement of various treatments, as well as medical inflation.

“Fine-tuned underwriting practices among vaccinated and non-vaccinated policyholders partly helped the health segment recover in 2022, with profitable technical results,” said Salvador Smith, senior financial analyst, AM Best.

Panama’s auto segment expanded by a marginal 2% in 2022, pressured by increasingly expensive automobiles due to inflation and a surge in claims, leading to price rises. AM Best expects persistent negative technical results for this segment, but medium-term improvements could alleviate the pressure on the industry’s overall profitability.

Panama’s insurance industry remains concentrated, with five companies accounting for more than three quarters of GPW market share. “With a combined ratio below 100, underwriting remains healthy, consistent with the segment’s historically sound performance,” Smith said. “Strict curbs on operating expenses and acquisition costs continued to support underwriting performance.”

To access the full copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=339455.

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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