Mexico: Insurance: AN INTRODUCTION

21 September 2012 Publication
Authors: Marco Antonio Najera Martinez

Chambers and Partners

The insurance market in Mexico has grown tremendously over the last decade, doubling in size from 2001 to 2011. The market's value in premiums is currently worth in excess of US$22 billion, and has strong potential for continued rapid growth. Much of this growth has been fuelled by foreign investment. Mexico is open and ready for foreign investment. Insurance companies authorized to do business in Mexico have been able to be fully controlled by foreign shareholders since the mid- to late 1990s, when the North American Free Trade Agreement (NAFTA) and other international treaties became effective. Currently, more than 70 percent of insurers’ capital is controlled by foreign entities. Almost all global insurers, brokers, and reinsurers have a presence and/or are doing business in Mexico.

Mexico’s financial system, including the insurance sector, has proven to be one of the most solid and capitalized environments during the recent global crisis. Having learned from its own period of financial crisis-after-crisis experienced from the 1970s to the 1990s, Mexico has earned a strong reputation for fiscal stability due to its economic policies, macro-economic stability, and the regulatory and capitalization controls imposed on the financial and insurance industry. Mexico’s financial system has also proven to be one of the most profitable in the world for shareholders in recent years.

Although the insurance market in Mexico is quite mature, the challenges and opportunities are still enormous. Mexico is still in need of a number of innovative insurance products, improved public policies, and new regulatory developments. The country needs to move forward with mandatory civil liability vehicle insurance nationwide, to expand deductions to certain life insurance products, and to introduce regulation to allow the combination of integral health insurance and service products. There are also significant challenges in the catastrophe insurance market due to the enormous and constant vulnerability of Mexico to earthquakes, floods, and hurricanes. However, at the same time, significant opportunities exist in such coverage and reinsurance at both the government and private level.

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