Financial Health and Rapid Response to Catastrophic Events
The Mexican insurance industry stands as a success story, not only for its robust management but also for its swift response to unique catastrophic events. This sector has practically “kept its hair” in terms of the resources paid out, without significant financial strain.
Impressive Financial Metrics
The collective insurance companies in Mexico currently hold 3.5 times the regulatory capital required by authorities. They have covered sums insured equivalent to 13 times the country’s Gross Domestic Product (GDP).
- For instance, insurers paid out $3,065 million for the COVID-19 pandemic in Mexico and $2,100 million for Hurricane Otis.
- Despite these extraordinary payouts, the insurance sector remains stable and solvent.
In the past year, insurers paid out 522,000 million pesos daily, amounting to 1,500 million pesos per day.
Supporting Families, Businesses, and Government
According to the General Director of the Mexican Insurance Institutions Association (AMIS), insurance penetration in the Mexican market has risen from 1.88% to 2.64% of GDP, indicating significant progress over the past decade.
Life insurance policies cover nearly 13 million people, with life insurance policies making up 40% of the portfolio. Additionally, there are 111 million policies for workplace and credit-related insurance.
AMIS’s Vision for a More Resilient Mexico
AMIS’s Director emphasizes the insurance sector’s role in building a more resilient Mexico. The industry is analyzing risk management for new markets, climate change, catastrophic risks, population protection gaps, and the need to safeguard families, businesses, and government.
The industry recognizes the need to evolve, with digitalization and artificial intelligence enabling better risk measurement. The insurance sector aims to transition towards a more proactive and preventive model.
Challenges and Opportunities
Despite its successes, the insurance industry still faces challenges. These include making medical expense coverage for major illnesses more accessible and addressing growing customer complaints about policy exclusions.
Moreover, the industry must improve its dialogue with authorities to facilitate greater and faster insurance market penetration in Mexico.
Central Bank’s Monetary Policy Decision
Banxico Reduces Reference Rate by 50 Basis Points
As widely anticipated, Banxico (Mexico’s central bank) reduced the reference rate by 50 basis points, placing it at 8.5%. The bank signaled potential for another reduction of the same magnitude.
This marks the third consecutive rate cut. Banxico cited economic weakness (0.2% growth) in the first quarter and international uncertainty amidst trade tensions as reasons for this decision.
