AM Best, the credit rating agency, has reaffirmed its stable outlook for Chile’s insurance market, attributing its assessment to continued growth in premiums, consistent profitability, and a more robust regulatory framework.

These findings are detailed in the company’s latest market segment analysis, “Market Segment Outlook: Chile Insurance.”

According to the report, insurance penetration in Chile remained just under 5% as of 2023. While modest, this figure positions Chile ahead of most countries in Latin America and significantly above the regional average of 3.1%.

Chile accounts for nearly 8% of the USD 203.3 billion in insurance premiums underwritten across the region, making it the fifth-largest insurance market in Latin America.

In 2023, the Chilean insurance industry recorded a real growth rate of 8.7%, largely driven by the life insurance segment, which expanded by 15.2% in real terms. This growth was mostly attributed to demand for annuities and pension-related products.

AM Best highlighted that, despite technical losses and a combined ratio of 119%, both life and non-life insurance segments continued to post profits, aided by strong investment returns in a high-interest-rate environment.

The report also noted that the Chilean insurance sector remains well-capitalized. As of September 2024, both the life and non-life segments showed reductions in financial leverage—2.3% and 22.9% respectively—staying well below regulatory thresholds.

Additionally, insurers have strengthened their capital adequacy, exceeding minimum regulatory capital requirements by 2.5%.

The regulatory environment continues to evolve in support of long-term stability. AM Best credited the Commission for the Financial Market (CMF) for advancing toward risk-based supervision and enhancing market transparency.

The CMF is aligning with international financial reporting standards (IFRS 17), while also preparing to adopt sustainability-focused guidelines (IFRS S1 and S2) by 2026. These measures are expected to bring greater consistency to financial reporting and risk assessment in the insurance industry.

Despite strong fundamentals, AM Best acknowledged that external and domestic pressures could pose future challenges. Economic projections from the International Monetary Fund (IMF), cited in the report, suggest Chile’s economy will grow by 2.4% in 2025.

However, inflationary pressures—exacerbated by the end of an electricity price freeze and broader structural issues—persist. Inflation remained above the Central Bank’s 3% target throughout 2024 and is expected to reach 4.2% in 2025. The central bank has responded by easing its policy rate from a peak of 11.25% in 2023 to 5% by the end of 2024.

In terms of sectoral performance, the non-life insurance segment registered modest growth of 1.9% in 2023. Earthquake and tsunami policies, along with auto and fire insurance, were primary contributors. However, other lines such as liability, transport, and credit saw contractions.

As of September 2024, the property and casualty sector showed a slight real contraction of 0.9% compared to the same period in the prior year, though a recovery is expected in 2025 with projected growth between 2.5% and 4.9%.

The annuity segment remains a focal point in the Chilean insurance landscape. After years of volatility linked to interest rate movements and pension system comparisons, the market rebounded with 40.5% growth in 2023. However, growth slowed to 2.6% as of September 2024, driven by a decline in old-age annuity products.

A comprehensive pension reform approved in early 2025 will gradually increase employer contributions and introduce measures to promote market diversity and accountability, which AM Best believes could reshape competition in the annuity market.

AM Best also noted the insurance industry’s exposure to the health sector, particularly through its ties to the private ISAPRE health institutions.

Legal developments in 2024 have altered the landscape significantly. The Chilean Supreme Court mandated that ISAPREs comply with new rules to eliminate discriminatory pricing and refund policyholders—estimated at USD 1.2 billion in total.

Legislation enacted in September 2024 outlines repayment plans and introduces a standardised pricing model, while expanding the role of the state health provider FONASA. This has led to increased interest in complementary private health insurance and could have long-term implications for both public and private healthcare financing.

Looking forward, AM Best anticipates continued growth for Chile’s insurance market in 2025, supported by the country’s economic recovery and ongoing regulatory improvements.

Although challenges remain—such as inflation, slower job creation, and pension-related competition—Chile’s insurers appear well-positioned to navigate these dynamics thanks to strong capital positions, diversified product offerings, and an increasingly sophisticated oversight framework.

“Despite the favourable bottom-line results, underwriting results have stayed on the negative side, driven by higher costs in the different segments and an increase in claims in the life segment. The positive net income reflects higher investment income, which benefited from the high rates in 2023,” added Inger Rodriguez, Financial Analyst, AM Best.

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