The rating outlook for the Peruvian insurance sector remains stable, according to data from Fitch Ratings.
Fitch believes Peru’s insurance companies are well supported by adequate capital positions and robust profitability, but still highly influenced by relatively volatile financial income.
It noted that the investment portfolios remains concentrated in domestic issuers, most of them capped by Peru’s sovereign rating.
Fitch said the stable outlook reflects its expectation that the insurance market will be supported by Peru’s economic performance.
It said key factors that could lead to a deterioration of the sector’s credit profile include: an economic downturn in Peru; persistent pressure in operational margins resulting from the intense competition in the local insurance market; a deterioration of investment credit risk portfolio, and an increasing trend of leverage.
Fitch estimates that the GWP for Peru’s insurance industry will end 2014 growing at around 9%, while for 2015 the estimate is in the 11% to 12% range (non-life 9% to 10% and life 12% to 13%).
The insurance market in Peru will remain highly concentrated, but immersed in a gradual process of de-concentration in the last years, according to Fitch.
However, the ratings agency believes that this process will be accelerated in the medium term due to the sudden entry of new companies and the attractive development expectation for Peru’s insurance industry for the medium and long term.