Introduction to Mexico’s Comprehensive Risk Strategy
As the hurricane season begins, Mexico’s Secretariat of Finance and Public Credit (SHCP) highlighted that the government will renew a disaster insurance policy worth 5,000 million pesos through public tender. This move is part of an integrated risk strategy that ensures Mexico’s protection against natural disasters, totaling at least 34,311 million pesos ($2.6 billion), replacing the previously discontinued Fonden.
Key Figures and Their Roles
Héctor Santana Suárez, head of the SHCP’s Insurance, Pensions and Occupational Safety unit, announced that the disaster insurance policy will be renewed within a month and a half via public tender during the 34th Congress of the Confederation of Pan American Insurance Producers (Copaprose).
Four Levels of the Integrated Risk Strategy
Santana Suárez explained that the integrated risk strategy consists of four levels:
- Four disaster bonds worth $595 million (USD) or 16,311 million pesos for high-severity events such as earthquakes and hurricanes.
- Two earthquake bonds: one for low-frequency earthquakes worth $225 million (USD) and another for high-frequency earthquakes worth $75 million (USD).
- Two hurricane bonds: one for $125 million (USD) in the Atlantic Ocean and another for $175 million (USD) in the Pacific Ocean.
- Disaster insurance: Covering lower-severity events with a coverage of 5,000 million pesos. This insurance will be renewed through the upcoming public tender.
Additional Components of the Strategy
Santana Suárez also mentioned:
- Budget line for disaster management: 18,000 million pesos approved in the Federal Budget Expenditure (PEF) 2025, transferred to relevant departments and civil protection entities following a disaster declaration and under Hacienda’s guidelines.
- Government federal department insurance: Acquired through consolidated purchasing, with undisclosed amounts.
These insurance policies cover broader events and protect each department from higher-frequency, lower-severity incidents.
Historical Context and Recent Changes
In 2021, the previous government dissolved the Fonden natural disaster fund, which was financed by 0.4% of the annual PEF and reached up to 58,367 million pesos in 2011, according to Mexico Evalúa data.
Upcoming Renewal of Disaster Insurance
Santana Suárez emphasized that the disaster insurance (including excess rainfall coverage) will be renewed within the next month and a half through public tender. Currently, potential insurers are being researched.
Mexico’s Preparedness for Hurricane Season
Ricardo Rosado Mañón, president of Amasfac’s National Directing Council, stated that the Mexican insurance sector is ready to face the hurricane season.
Mónica Estrada Neiszer, national secretary of Amasfac, noted that water-related hazard insurance premiums have grown by 8-9% annually in recent years, which is lower than increases observed in other sectors like major medical expenses or auto insurance.
Key Questions and Answers
- What is the total insurance coverage for natural disasters in Mexico? Mexico’s integrated risk strategy ensures protection against natural disasters worth at least 34,311 million pesos ($2.6 billion).
- What types of events are covered under this strategy? The strategy covers high-severity events like earthquakes and hurricanes, as well as lower-severity events such as excess rainfall.
- How will the disaster insurance policy be renewed? The disaster insurance policy, which covers lower-severity events, will be renewed through a public tender within the next month and a half.
- What other components does Mexico’s integrated risk strategy include? The strategy also includes a budget line for disaster management, government federal department insurance, and growing water-related hazard insurance premiums.
