Mexico Q3 Market Dynamics
Landscape
A third COVID-19 wave in the third quarter of 2021 brought reported new cases in Mexico to a peak in late August. Cases have since fallen, while vaccinations have proceeded so that by mid-September around half the population had received at least one dose. With vaccination rates rising, the country is expected to continue its economic recovery: GDP figures for the second quarter showed 19.5% growth compared with the same quarter in 2020, while the Bank of Mexico has forecast total growth for 2021 of over 6%, following the 8.5% fall in 2020.
The recovery has seen inflation rise, hitting an annual rate of 5.9% in September, far exceeding the central bank’s target of 3%; in response the bank raised interest rates by 0.25% to 4.75%. This follows similar rises in the previous two months. The June mid-term elections saw the governing Morena party retain power, though it lost its two-thirds super-majority.
Key Indices - Mexico
Market Dynamics
Mexico Featured Products Q3 2021
Q3 Automobile Summary
Overall (Stable) Market conditions remain moderate, driven largely by the continued impacts of the pandemic.
Rates (Flat) The pandemic has reduced driving and, as a result, accident frequency, leading to a flat pricing environment. Well performing risks can achieve pricing reductions.
Capacity (Ample) Capacity is sufficient.
Underwriting (Prudent) Thorough, robust underwriting detail is required.
Limits (Increasing) Limit increases are broadly available in the market.
Deductibles (Stable) Expiring deductibles can be achieved in most cases.
Coverages (Broadening) Insurers are innovating in this space – offering new options.
A Look Ahead (Stable) Current market conditions are expected to continue, although prices may increase once the economy is fully open and driving levels resume.
Q3 Casualty/Liability Summary
Overall (Soft) The market remains soft for most risks, with an abundance of capacity and insurers competing for business.
Rates (+1-10%) Market adjustments are seldom made; however, inflationary rate increases are prevalent.
Capacity (Abundant) Capacity is abundant.
Underwriting (Prudent) Despite soft market conditions, there is reduced appetite for auto parts, mining, trains, and other poor performing risks. These risks are also experiencing a challenging underwriting environment, with increased scrutiny and underwriting rigor. In addition, underwriting of Products Liability for exports to the US, Canada and Puerto Rico can be challenging.
Limits (Increasing) There is a growing trend for insureds to request increased limits, as required by contractual commitments. Additional limits are available in the market.
Deductibles (Stable) Expiring deductibles can be achieved in most cases.
Coverages (Stable) While coverages remain generally stable, Recall Endorsements are being added to Product Liability Policies with greater frequency.
A Look Ahead (Soft) Current market conditions are expected to continue.
Q3 Cyber Summary
Overall (Challenging) The market is very challenged across the board. Pricing is severely increasing, coverage terms are contracting, and capacity is extremely limited.
Rates (>+30%) Rates are increasing exponentially. Pricing is hard.
Capacity (Constrained) Insurers are withdrawing capacity, which is now constrained.
Underwriting (Stringent) Underwriting is rigorous and rigid. Extensive detail is required – especially related to ransomware. The process can be onerous and lengthy.
Limits (Stable) Existing limits can be achieved in most cases.
Deductibles (Increasing) Deductible increases are being mandated across the board.
Coverages (Restricting) Exclusions and clarifications are being broadly applied.
A Look Ahead (Challenging) Current market conditions are expected to continue.
Q3 Directors & Officers Summary
Overall (Challenging) Following a prolonged period of poor performance in this class, insurers remain focused on returning to profitability and market conditions are challenging.
Rates (>+30%) Material price increases continue.
Capacity (Constrained) Insurers are withdrawing capacity, which is now constrained.
Underwriting (Stringent) Underwriters have become increasingly strict and rigid, with little flexibility.
Limits (Stable) Despite insurer focus on a return to profitability, expiring limits are generally maintained.
Deductibles (Increasing) Deductible increases are being mandated.
Coverages (Restricting) Exclusions and clarifications are being broadly applied.
A Look Ahead (Challenging) Current market conditions are expected to continue.
Q3 Fidelty & Crime Summary
Overall (Challenging) The market is very challenged. Pricing is severely increasing, coverage terms are contracting, and capacity – especially, for Crime - is extremely limited.
Rates (>+30%) Rates are increasing exponentially, with poor performing risks experiencing the most significant increases.
Capacity (Constrained) Capacity contractions continue.
Underwriting (Stringent) There is minimal appetite for Crime. Underwriting is stringent, with very little flexibility.
Limits (Stable) Existing limits can be achieved in most cases.
Deductibles (Increasing) Deductible increases are being mandated, particularly for poor performing risks.
Coverages (Restricting) Coverages are tightening, and Social Engineering coverage is difficult to secure.
A Look Ahead (Challenging) Current market conditions are expected to continue.
Q3 Property Summary
Overall (Stable) Insurers have renewed their reinsurance treaties without material price increases or changes in conditions; however, there is a strong push from reinsurers for greater underwriting caution. This has created a shift in underwriting attitudes; underwriters are now requiring more information and demonstrating less underwriting flexibility.
Rates (Flat) Financial impacts of the pandemic continue for some insureds who have appealed to insurers for a pricing reprieve. In response, insurers have provided modest price reductions for some well-performing risks. Poor performing or complex risks are experiencing modest rate increases.
Capacity (Ample) Insurers are deploying capacity cautiously, and reducing it on some risks. There is a growing trend to share risk across multiple local insurers, offering the benefit of local treaties while reducing each insurer’s risk exposure.
Underwriting (Stringent) In many cases, underwriting subjectivities (e.g., engineering reports, underwriting information) must be met in full as a prerequisite to providing a quote. In the past, quotes would be provided with the agreement that subjectivities would be met.
Limits (Stable) Expiring limits can be achieved on most placements. Changes are mostly driven at the request of insureds rather than required by the insurer.
Deductibles (Stable) Expiring deductibles can be achieved on most placements. Changes are mostly driven at the request insureds rather than required by the insurer.
Coverages (Stable) Expiring coverages can be achieved on most placements with one exception: insurers are applying Pandemic Exclusions across the board.
A Look Ahead (Stable) Property insurers are expected to continue to follow local market (rather than international market) trends.
Q3 Surety Summary
Overall (Stable) Lack of public investment has led to a reduction in the number of projects. With fewer projects, insurer competition has become fierce, which is driving a favorable insurance market environment.
Rates (Down) The market is competitive and clients are increasingly price sensitive, leading to decreasing pricing.
Capacity (Abundant) Capacity is abundant and sufficient to meet client needs.
Underwriting (Prudent) The impacts of the pandemic led sureties in Mexico to become more stringent in their underwriting of some bonded risks; often collateral is requested to increase confidence.
Limits (Stable) – Limits are in accordance with contract terms.
Deductibles (Not Applicable)
Coverages (Stable) Coverages remain stable.
A Look Ahead (Stable) Current market conditions are expected to continue. Underwriting scrutiny and conservatism may increase as more projects come into the market.