Premium Growth Potential

Still small, with 2013 premiums written of Ps30.5 billion (up by Ps1.352 billion YoY)—according to industry regulator, the Superintendency of Insurance—and accounting for 1.3% of GDP, there is clear growth potential in the Dominican insurance industry, not least as its economy has the most punch in the Caribbean. Juan José Guerrero Grillasca, Executive Vice-President, Seguros Constitución, told TBY that, “The sector represents 1.3% of GDP. In terms of premium per capita, which is below $100, the Dominican Republic is 30th in the ranking among Latin American countries.”

Another catalyst indicative of sector growth, if a little far off, is the nation’s firm relations with the US, which has ensured government dedication to pursuing economic stability. Moreover, many Americans and other foreign nationals opt to retire in the country, raising demand for health, retirement, and home content coverage.

Meanwhile, according to World Bank data, GDP per capita for 2012 was at $5,059.03, having averaged at $2,452.42 since 1960. And as the economy increasingly leverages its tourism offering, new jobs and rising disposable income, too, will cement the need for a wide range of insurance coverage.

The insurance sector of the Dominican Republic is home to 39 companies. And yet their operations are significantly concentrated to the extent that five companies account for over 80% of premiums generated, according to official figures. The market leader is Universal, alone standing on a 25% share of premiums collected in the January to October 2013 period. The next biggest player for the above-mentioned period is Mapfre BHS, which is a part of Banco BHD, the second largest private bank in the country, on 16.7%. Pointing to consolidation of the industry, back in December of 2013, Mapfre BHS, along with Banco León (owner of insurer Banca Seguros), combined their entire financial operations. The move put Mapfre hot on the heels of Universal Insurance’s market share.

HEALTH PROBLEM

The landmark Social Insurance Act 87-01 of 2001 introduced mandatory health insurance, with the Service Health Plan (PDSS) commencing in 2007. Yet as incomes rise more will turn to private alternatives of higher quality. As Executive Vice President of ARS Humano, José A. Zapata, told TBY, “We foresaw the possibility of reaching out to as many as 4 million people… By 2007 we already had 500,000 affiliates, and today we have over 1.2 million.” Meanwhile, health insurers in general continue to derive the bulk of their premiums from social insurance. For 2013 overall, the health insurance market was led by Universal, The Colonial, and Seguros Banreservas on respective market shares of 28%, 18%, and 9%.

Quoted in World Finance, key local insurer Seguros Banreservas, the only Dominican insurer to have received five consecutive annual ratings of A+ by Fitch Ratings, identified a sticking point in the regulatory landscape. The Dominican Republic levies a 16% tax on life insurance policies, whereas international rivals operating in the market are exempt, which yields an unfair advantage, while many citizens buy coverage abroad.

REINSURANCE

While already buffeted by the global crisis due to its deep trading and commercial ties to the US, the 2010 Haiti earthquake brought further turbulence to the insurance sector. This, like Hurricane David back in 1979, underlined the significance of reinsurance to ensure the continued solvency of sector players. The Dominican Republic hosted its first international reinsurance conference in 2012, ironically coinciding with Hurricane Sandy. Among the conclusions were the need to facilitate the organic growth of sector professionals, and a revisiting of the taxation system to incentivize insurance uptake across a broader demographic.

MICROINSURANCE

Coop-Seguros is unique in the Dominican Republic’s insurance sector as the only comprehensive insurer that comprises a cooperative. Launched in 1990, its mission was to provide coverage to social groups for which paying insurance premiums was unthinkable, and to spread awareness of insurance as an investment instrument among cooperatives, trade unions, and other NGOs. Coop-Seguros is a member of the International Cooperative and Mutual Insurance Federation (ICMIF), which, with assets of $1 trillion in 70 countries, promotes affordable insurance in emerging markets.

THE FIGURES

According to the Superintendency of Insurance, 1Q2014 total net premiums written were up 8.1% YoY to Ps7.8 billion. Net earned premiums for non-life coverage were at Ps6.6 billion, up 9.5% YoY from Ps6 billion. Net total life insurance premiums were up 0.8% to Ps1.2 billion. Among the non-life segment, agriculture and livestock insurance premiums posted the greatest YoY rise of 186%, while holding just a 0.4% market share. The largest non-life premium generator was the fire branch, with a market share of 33.5% and net premiums of Ps2.6 billion, up 8.7%. This was closely followed by motor insurance, which with a market share of 31.2%, saw quarterly revenues of Ps2.4 billion, up 6% YoY. For 2013 overall, general insurance, coughed up 75% of total premiums on a YoY rise of 2.84%.

In terms of the sector player rankings, in 1Q2014 the top-three companies were Seguros Universal, Mapfre BHD Cia de Seguros, and Seguros Banreservas on respective net premium prints of Ps2.2 billion, Ps1.1 billion, and Ps1 billion. For 2013 overall, the three companies had respective overall market shares of 27.6%, 14.7%, and 15.6%. Seguros Banreservas leverages the bancassurance channel afforded by its parent bank, the Reserve Bank of the Dominican Republic (BanReservas) with a nationwide network of around 180 branches.

Factors common to all developing nations, such as disposable income and education on the broader applications of policies will, over time, shape the Dominican Republic’s insurance sector. Meantime, micro solutions are making headway among small businesses in a country prone to acts of God.