The growth of Ecuador's middle class and recent changes to the regulatory environment have created a range of new opportunities for international companies in the insurance sector.

Ecuador's insurance market is a small, rather overstocked pond, but with a burgeoning middle class and a 75% urbanization rate, it promises to be one of Latin America's fastest growers, and is the third-fastest after Brazil and Peru, according to market intelligence firm Latino Insurance. This growth will heavily depend on an ongoing process of consolidation, and the prospect of price rationalization necessary to turn healthier profits. The arrival of international insurers in Ecuador, bolstered by regulatory amendments has continued to underpin this consolidation and make the pond more breathable.

The dollarization of the economy in 2000 also prompted the sector's pronounced growth. The market is now worth close to $1.3 billion, up from approximately $200 million in 2000. Over the past five years, the insurance sector has seen double-digit growth, with the exception of 2009.

Despite its modest size, the local insurance market it is highly competitive, with 45 private insurers competing for just 0.9% of the total premium market share in Latin America. Just 15 insurers operate in Peru and 12 in Colombia, which have more than double the population of Ecuador. The top 10 companies in Ecuador accounted for just 10.8% of total Gross Written Premium (GWP) in 2012, and the top five for 42%. Data of Ecuador's insurance regulator, Superintendency of Banks and Insurance, shows an increase in ceded premium of 20% in 2011 compared to the previous year, from $34.34 million to $41.11 million.

Over the past five years, insurance has grown as a percentage of the Ecuador's GDP from 1.5% to 2%, still trailing the regional average of 2.7%, and well behind market leaders such as Chile and Peru, where premiums are worth more than 4% and 5% of GDP, respectively, according to Latino Insurance. Non-life insurance premiums, as a percentage of GDP for 2011 was at 1.8%, up from 1.1% in 2000. The respective figures for the life segment for the same years were 0.4% and 0.1%. Over the past decade, the insurance sector has seen compound annual average growth of 14%.

The market still has relatively low penetration rates, although the past three years have seen premiums per capita rise from $67.27 in 2009 to $92.29 in 2011 and premiums per member of the economically active population have risen from $158 to $290 over the same period. Throughout 2010 and 2011, this figure grew at an average rate of 16.9% annually. The Ecuadorean insurance industry grew in terms of gross written premium value at a compound annual growth rate (CAGR) of 18.5% during the period of 2007-2011.

Growth has mainly stemmed from higher demand for group life insurance schemes. In 2012 premium income in Latin America overall rose by 17%; thus, outperforming both the average pre-crisis growth of 2004-2007 and the post-crisis average from 2009-2012. Meanwhile, the non-life insurance segment accounted for the largest share of 70.5% of total insurance industry written premiums in 2011.

Of the sector players, 22 offer both life and non-life insurance, generating $836.7 million in premiums in 2011; 14 (28.4% of the sector) operate only in the non-life insurance market, and made $390.8 million in premiums in 2011; and 8 (8.3% of the sector) operate exclusively in the life insurance market, and made $109.1 million in premiums in 2011.

The leading company in the market, QBE, has just a 10.84% share of the total premium market as at September 2012. Furthermore, the five largest insurance companies combined only account for 41.45% of total premiums in the market. Among the local Ecuadorean companies that comprise the remaining 63% of the market, Equinoccial is the largest, with close to 10% of premiums generated.


The market is highly focused on credit-linked insurance products, with automotive insurance making up, by far, the largest segment of Ecuador's insurance market and accounting for 26% of premiums collected in 2011. Following behind are group life insurance, which comprises 15.5% of the market, and fire insurance, which accounts for an additional 9%. Together, these three lines account for just over half of all policies in Ecuador (nearly 51%), according to the Superintendent of Banks and Insurance. Personal accident, transport, and surety bonds are also large segments of the market, comprising an additional 18% of the insurance market. In general, commercial property and casualty insurance remains a strong segment of the market. The continued government drive to expand Ecuador's infrastructure, diversify its energy matrix, and improve healthcare, suggests that segments such as transport and surety bonds are destined for further growth.

Hispana de Seguros has a presence in the main cities of the country, including Quito, Guayaquil, Loja, Machala, Santo Domingo, and Cuenca. Director Juan Carlos Verdú explained the company's value proposition in these terms, “The cost-benefit ratio we offer to our clients is one of our main advantages as a company… The wide range of products, coverage, and value we offer to our clients has enabled us to quickly achieve double-digit, sustainable growth over recent years."

Despite the dominance of commercial and group policies, personal lines are a fast-growing component of the insurance market. In 2011, the personal segment grew by 25%, compared to 20% for the overall insurance sector. The compulsory sector of the market remains small. Third-party automotive insurance only became compulsory in 2008, with the passage of a law on Compulsory Insurance for Transportation Accidents (SOAT), and currently represents just 4% of the insurance market.


Insurance sector growth has been spurred by ongoing consolidation and the more rational pricing environment it promises to herald. The arrival of international insurers in Ecuador, bolstered by regulatory amendments will continue to underpin this consolidation, as foreign companies seek to leverage Ecuador's growth potential. Changes to the regulatory framework have also fueled transformation in the insurance landscape. The anti-monopoly law passed in 2011 required financial institutions to divest themselves of any business within the insurance sector. In that year, bank-linked insurers represented 36% of the market, and were important contributors to growth. Also accelerating consolidation was the move to implement Solvency II standards for the insurance industry based on EU directives imposing new technical and financial requirements on insurers in terms of accounting procedures, capital adequacy, and risk management.

Mapfre's acquisition of Atlas—valued at approximately $1.3 billion— marked its entry to the Ecuadorean market in 2008. General Manager Rafael Suárez told TBY that, “Atlas was a very solvent company… but… too heavily focused on Guayaquil. The challenge was to implement the Mapfre model, which has a more national scope. He announced a period of innovation involving technology investment of around $700,000."

Global insurer QBE acquired Long Life Seguros to participate in the Ecuadorean life sector. Data from local financial regulator SBS for September 2012 indicated that QBE Seguros Colonial ranked 1st in terms of financial assets at $114.2 million, with around a 15% total market share. In 2012, Boston-based Liberty Mutual purchased Panamerica de Seguros del Ecuador and Cervantes Compañia de Seguros y Reaseguros. Both are engaged in property and casualty branches, as well as group and life insurance, and have complementary distribution channels. The move made Liberty Mutual the 5th largest player in the sector. Meanwhile, global insurance giant Ace Group bought Ecuadorean insurer Rio Guayas Compañia de Seguros y Reaseguros. According to the company, the $55 million deal yielded access to small- and middle-market businesses and individual consumers, positioning ACE as one of Ecuador's key general insurers.


The insurance industry in Ecuador has historically been heavily reliant on reinsurance, with levels of ceded premium among the highest in Latin America. Moreover, Ecuador has the highest rate of public investment as a percentage of GDP of any nation in Latin America at 15% in 2012. The Correa administration's large infrastructure projects, including roads, hydroelectric power plants, and the oil industry, have fueled P&C and surety lines. Due to the high atomization and the comparatively small size of the Ecuadorean insurance industry, most companies suffer from relatively low capitalization. Accordingly, over the past decade the industry has generally witnessed high levels of reinsurance and risk transferring of around 70%. Data from Latino Insurance shows that ceded premium as a percentage of GDP in 2011 was 1.2%, or 61% of the total written premium, the highest in the region. The percentage of ceded premium in Brazil was only 4% in 2011. Ecuador only has two domestic reinsurers, and hence the bulk of reinsurance takes place with international players. Over the past decade, this rate of reinsurance has gradually fallen, from around 62% in 2002 to around 58% in 2011. This trend is expected to accelerate with the arrival of more international players and greater consolidation of the local market.