Insurance penetration remains low in Latin America, but demand for reinsurance capacity is rising as the region faces a range of natural hazards.
According to the latest report from AM Best, insured natural catastrophe losses totaled US$11.6 billion in 2024, but only US$1.5 billion of those losses were actually insured, reflecting the limited reach of insurance in the region.
Global reinsurers have renewed their interest in Latin America, while local companies are working to grow and strengthen their brands. These local players are seeking to fill gaps left by the hard market of previous years. The region continues to see growth in reinsurance markets, even as economic conditions in 2025 remain challenging.
Slower disinflation and decelerating economic growth, combined with increased commercial tensions and uncertainty, have led the International Monetary Fund to revise its GDP growth forecast for the region from 2.5% to 2.0%.
Reinsurers in Latin America face additional challenges from foreign exchange headwinds, which highlight the importance of asset liability management. The region is exposed to a wide variety of natural perils, with 82 hazard-related disasters recorded in 2024, including 26 natural catastrophe events.
Despite these risks, insurance penetration remains below 5% of GDP. The demand for reinsurance capacity has increased, driven by recent catastrophe experience and changes in risk culture, contributing to a more dynamic reinsurance landscape.
According to Aon’s recent renewal report, global reinsurance capital reached US$735 billion as of June 30, 2025, with alternative capital hitting a record US$121 billion. Catastrophe bond issuance exceeded US$17.3 billion for 2025, reflecting a surge in alternative risk transfer options and expanded investor participation in the market.
Fitch Ratings also revised its outlook for the global reinsurance sector to “deteriorating” for 2026, citing abundant capacity and rising competition as factors likely to result in gradual price erosion across most reinsurance lines. The agency expects that while pricing remains high by historical standards, underwriting margins will come under pressure as the market softens.
Since the second half of 2024, AM Best has observed an overall softening in the market, despite significant catastrophe events. Renewals in 2025 are expected to reflect increased competition and ample capacity, supported by a stronger capital base in the industry.
Social inflation, political shifts, and regulatory changes continue to be monitored for their impact on rated entities’ business profiles.
Pricing trends show discounts on flat renewals ranging from 5% to 30%, depending on the line of business. Facultative reinsurance for property, terrorism, and health and medical expenses has seen discounts, while life business discounts vary, with some major players reducing rates by up to 10%.
Catastrophe lines, particularly in countries with major exposures such as Mexico, Guatemala, Costa Rica, Peru, and Chile, involve more complex negotiations, but pricing remains competitive and conditions flexible. Loss experience and enterprise risk management continue to be central in reinsurance contract negotiations.
The use of managing general agents to provide capacity or assume risk is gaining traction, and as global interest rates decline, the region may see increased demand for delegated underwriting authority enterprises. Digitalization and artificial intelligence are also changing the insurance and reinsurance landscape, aiming to improve efficiency and expand product offerings to underserved populations.
Highly rated reinsurers are leveraging better risk modeling to price reinsurance more accurately and manage capital costs, while alternative risk transfer vehicles such as parametric coverages and captives are becoming more common, though issuances remain limited.
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