Colombia Life Insurance Drives Market Growth Amid Rising Non-Life Leverage Risks

Colombia's insurance market is experiencing notable growth, particularly driven by the life insurance sector, according to a recent AM Best report. While the non-life insurance segment remains larger in terms of market participants and benefits from demand in commercial, motor, and liability lines, life insurance premiums have surpassed non-life premiums in volume and growth rates by 2024. Between 2020 and 2024, non-life premiums increased from approximately COL 15 trillion to COL 26 trillion, whereas life insurance premiums surged more sharply, exceeding COL 30 trillion in 2024. The report emphasizes that non-life premium growth has been more stable due to frequent policy renewals and localized underwriting strengths. Although life insurance growth slowed in 2023 because of economic sensitivities, it rebounded to around 15% growth in 2024, underscoring its emerging prominence as a driver of market expansion. However, AM Best raises concerns about rising financial leverage in the non-life insurance sector, noting that debt levels have increased faster than capital and surplus, bringing the debt-to-capital ratio perilously close to 100% in 2024. This heightens risk considerations and potential regulatory scrutiny should earnings or capital reserves deteriorate. In contrast, life insurers held a more moderate debt-to-capital ratio of 55% in 2024. Operational improvements in the non-life segment have contributed to enhanced profitability, with the combined ratio improving by over 40 percentage points to 74% in 2024. Key factors driving this advancement include improved claims handling, tighter expense management, and strategic shifts in business focus. Both life and non-life insurers face investment challenges linked to market volatility, elevated interest rates, and fixed-income asset markdowns. The report suggests that more stable international and domestic financial markets, alongside easing inflation, could support better investment outcomes. Overall, the AM Best analysis projects a phase of balanced and sustained growth for Colombia’s insurance market, led by life insurance expansion and supported by underwriting discipline in non-life lines. This growth trajectory reflects increasing sector resilience amid cyclical and structural challenges. Industry stakeholders and regulatory entities may need to monitor leverage risks in the non-life segment, while life insurers continue to capitalize on improving market opportunities. The report’s insights offer valuable guidance for insurers, investors, and policymakers focused on Latin American insurance dynamics and regulatory compliance.