Venezuela is a country where life insurance barely exists. Poverty is widespread, and many households cannot afford cover. There is also a substantial lack of understanding about the benefits of life insurance. However, the real problem is that actual and expected high inflation is a profound disincentive for people and companies to save for the long term in monetary assets. Inflation will be higher than we originally expected in ---- following rapid price growth at the beginning of H---. ...As a result, Venezuela s life insurance segment is very small both compared to that of its non-life sector and to other countries in the Americas. A deepening recession will further undermine demand for life products, with GDP forecast to contract by -.- in ----, a downwards revision from the -.- contraction forecast in the previous quarter.
...BMI View: We have made some forecast revisions in our Q- ---- Venezuela insurance update. We are of the opinion that the Venezuelan insurance market will remain severely affected by the ongoing economic crisis, political uncertainty and the prolonged slump in global oil prices. Furthermore, the hyper- inflationary environment in the country, the high interest rates and the increasingly chaotic policy environment exacerbate the woes of the insurance industry. Health insurance will be the main victim of these trends, particularly following President Maduro s decision to give substantial control to the insurance regulator to tax insurance companies to bolster public healthcare. While growth is impressive in local currency terms due to depreciation, the market experienced a sharp contraction in USD terms in ---- and future premium growth will be faced with a multitude of challenges. In an apparent attack on the insurance sector, President Maduro issued a Law-Decree in December ---- amending several provisions of the Insurance Activity Act of ----.
...January ---- saw changes to existing insurance legislation in Venezuela. The new regulation includes a Social Development tax, which requires insurance companies to pay an annual contribution of between --- of the premium income. ...
