Puerto Rico Insurance Industry Has Low Growth Opportunities Given its High Penetration Level, Claims Timetric
25 Mar 2013 • by Natalie Aster
The Puerto Rican economy contracted during 2007–2011 due to a decline in exports, the global financial crisis, falling investment in construction, and a significant decline in government spending. However, the country’s insurance industry posted positive growth during the review period, driven by the government’s healthcare reforms, implementation of the Medicare program and compulsory third-party motor insurance.
New legislation attracts global investors
The government of Puerto Rico in collaboration with the office of the Commissioner of Insurance enacted regulations to attract global insurers in 2011. According to Act No. 98 of 2011, a flat 4% tax rate applies to all overseas insurers starting business in Puerto Rico in the 2012 tax year. The allowance will be given for 15 years, with an additional option to renew the contract for two more 15-year terms. This initiative boosted investors’ confidence and a number of insurers showed interest in the Puerto Rican insurance industry in 2012.
A gateway to the Latin American and US insurance industries
Puerto Rico is treated by global insurers as a location from which to access both Latin America and US insurance industries. The country’s proximity to Latin America and the US enables Puerto Rican insurers to underwrite policies directly from these areas.
Insurance unaffected by negative economic growth
According to the report “The Insurance Industry in Puerto Rico, Key Trends and Opportunities to 2017” by Timetric, the Puerto Rican insurance industry is largely unaffected by the falling national GDP and the global financial crisis. GDP at constant prices fell at annual rates of -1.9%, -2.3%, -2.1% and -2.2% during 2007–2011. However, this did not have any significant impact on the insurance industry due to the government’s healthcare reforms and compulsory third-party motor insurance. The Puerto Rican insurance industry grew in terms of written premium value at a CAGR of 5.8% during the review period.
The Insurance Industry in Puerto Rico, Key Trends and Opportunities to 2017
Published: March, 2013
Price: US$ 1,950.00
High levels of insurance penetration discourage new entrants
The Puerto Rican insurance industry’s penetration (as a percentage of GDP) stood at 11.3% in 2012, significantly higher than Costa Rica with 1.9%, Guatemala with 1.3%, and the Dominican Republic with 1.2%. It was the highest penetration in Latin America, and above the global average of 6.8% in 2012. As a result, opportunities are comparatively few, and insurers considering venturing into Puerto Rico are instead likely to opt for other countries in the region with lower penetration levels. This is likely to limit the growth of the insurance industry in Puerto Rico over the forecast period.
More information can be found in the report “The Insurance Industry in Puerto Rico, Key Trends and Opportunities to 2017” by Timetric.
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