Beyond the “Peruvian Miracle”. Peru’s Booming Insurance Industry.

Peru is growing faster than any other economy in South America. This steady growth has been called “The Peruvian Miracle” and the country the “South American Tiger”. While Peru is still a long way from becoming an emerged economy, recent news imply that this Andean country will move forward in the right direction. Pedro Pablo Kuczynski –a right wing economist and former investment banker- won the 5 June run-off presidential election against Keiko Fujimori by a narrow margin. Peru’s free-market policies –set forth by Alberto Fujimori (Keiko’s father) in the late 1990’s- have been strengthened and expanded under three consecutive democratic presidents: Alejandro Toledo, Alan García, and Ollanta Humala.

According to the World Bank, Peru has better investor protections than rich countries such as Japan, Norway, Denmark, and Sweden, as well as every nation in Latin America and the Caribbean except Colombia. In the 2015 Ease of Doing Business Index, Peru ranks ahead of every independent Latin American or Caribbean country except Mexico and Chile. As stated by Lloyd’s country profile on Peru, the size of the Peruvian economy will have tripled its size between 2006 and 2018 and the wealth per capita will have doubled in that period.

Peru is praised for its macroeconomic stability and for high levels of efficiency in its goods, labor, and financial markets. However, its weak public institutions, poor infrastructure, and low educational quality are still serious problems that need to be, and hopefully will be, addressed the coming new government. In the long run, if Peru wants to become a rich country with an innovation-driven economy, it must improve its innovative capacity through better education and infrastructure.

Mr Kuczynski has pledged to sustain Peru’s current economic momentum by increasing public investment, especially in infrastructure and educational projects in order to integrate towns located in the Andes or in the Rainforest into the economy. Also, the middle class has grown exponentially over the last years. This scenario is ideal for insurers and reinsurers acting in the Peruvian market and it has attracted the attention of several major insurance carriers, such as Sura, Liberty Mutual, Chubb (formerly known as Ace in Peru), Security, BMI, among others. Some of these companies are recently incorporated or are in the process of incorporating their Peruvian affiliate.

Peruvian insurance market: Clash of the Titans

The Peruvian insurance market is controlled by only two carriers (both local and both part of major local financial groups), Rimac and Pacifico, which control 58% of the non-life market, followed by Spanish Mapfre and La Positiva (also local) with 18% and 16% respectively. Peru has an insurance penetration of 1.8% of the GDP, which is low if compared to the Latin American average of 2.8%. Premiums and underwriting have been growing in two digit figures yearly for more than ten years, amounting USD3.5bn in 2015…

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