Positive outlook for Panama’s insurance industry

28 Jun 2016

A new report from Timetric's Insurance Intelligence Center (IIC) forecasts a bright outlook for the Panamanian insurance industry during the next couple of years.

In 2014 the industry's gross written premium reached US$1.5 billion - a growth which is expected to continue up until 2019. Consequently, the insurance industry will expand at a CAGR of 9.3%, with the gross written premium reaching US$2.3 billion.

Increased construction activity, positive demographic trends and falling unemployment are some of the major factors promoting growth in domestic insurance in the country. Moreover, Panama's insurance industry is also benefitting from the growth of captive insurance and reinsurance as a result of a favorable tax structure.

Panama Canal opens up opportunities for insurers

The Panama Canal expansion project, which is set to be completed within the next few months, will likely double the capacity of the canal and enable it to accommodate not only much larger ships but also a larger volume of ships. The benefits of this increased marine activity are expected to generate growth for marine and property insurance over the forecast period. It is estimated that marine cargo values will increase by $1.3 billion per day.

"The increase in the value of cargo transported in and out of Panama should benefit insurers as more economic activity will have to be insured, but they may also be exposed to a wider and more loss intensive range of risks," comments Jay Patel, Insurance Analyst at Timetric.

Captive insurance is gaining prominence

The role of captive insurance in the industry increased over the previous few years, finds the report. Captive growth was supported by the use of the US dollar as the national currency, the absence of a central bank to impose monetary restrictions, and monetary benefits for foreign investors. According to the SSRP, there are 11 captive insurance companies and seven captive insurance brokers in Panama in 2016, but Timetric predicts that this number is set to increase until the end of the forecast period.

Patel comments: "Captive insurance thrives in Panama due to its tax benefits for foreign investors. No tax is charged on corporate dividends earned from foreign-sourced income. Additionally, dividends paid by captive insurers to shareholders, and premiums earned by captive insurers, are exempt from income tax."

All information is based on the Timetric report: 'The Insurance Industry in Panama, Key Trends and Opportunities to 2019'.

Source: Company Press Release