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Reinsurance and insurance giant Swiss Re announced the purchase of a 51% stake in Compañía Aseguradora de Fianzas S.A. Confianza, a specialist in the Colombian surety market, as the country gears up for a significant infrastructure spending rise.
The planned increase in infrastructure spending has attracted the interest of both insurers and brokers in recent months, with Axa's November purchase of Colpatria and Howden's recent purchase of Wacolda and Proseguros now being followed by Swiss Re's deal for Confianza.
With multibillion-dollar spending plans on infrastructure in coming years, the potential is clear, given that the Colombian surety industry is the third largest in Latin America, accounting for 17.4% of the region's market as of June 2013.
In Colombia, sureties accounted for just 3.8% of overall insurance activity, according to the BNamericas Intelligence Series report Underwriting Latin America's Infrastructure Build-Out.
Colombia's insurance penetration level amounted to 2.5% of GDP at the end-2012, according to a separate report from Swiss Re, with non-life insurance penetration running at just 1.7%.
Established in 1979, Bogotá-based Confianza is the largest local surety bond provider (17% market share in Colombia), in a regional market dominated by international firms. It is also the seventh largest surety writer in Latin America with 3.2% market share. It offers surety insurance products, third-party liability and all-risk construction insurance solutions.
At end-2013 the company recorded total assets of 626bn Colombian pesos (US$307mn) and profits of 23.4bn pesos compared to 39bn pesos in 2012.
For 2013, Confianza posted insurance premiums of 170bn pesos and reinsurance premiums of 54.3bn pesos.
"We are very pleased to join forces with Confianza, a firm with an excellent reputation and understanding of the local market," Swiss Re Corporate Solutions CEO Agostino Galvagni told BNamericas in an e-mail. "The combination of our capabilities and expertise will create a strong commercial insurer for corporate clients in Colombia."
Terms of the transaction carried out by Swiss Re Corporate Solutions were not disclosed. It is subject to regulatory approval and expected to close in the second half of 2014.