Argentina insurance industry enters 2nd year of contraction

Argentina's insurance market continues to shrink, as an unfavorable operating environment takes its toll.

Premiums written in January were 45.0bn pesos (US$1.22bn), up 34.1% year-on-year in nominal terms but down 19.5% in real terms.

All segments and lines contracted, with the smallest fall registered in individual life, of -0.5%.

Premium growth has been in negative territory since January 2018, according to monthly estimates from watchdog SSN. Inflation was 47.6% last year.

Argentina's economic woes are denting demand, with January premiums in the two biggest segments - auto and workers compensation insurance - down 18.5% and 29.5%, respectively, in real terms. Overall P&C premiums were down 19.1% in real terms to 38.5bn pesos and life premiums were down 21.2% to 5.69bn.

The government has announced tax incentives to help spur growth of the life segment. A factor that partly explains the relative small size of Argentina's life segment is that the country has a pay-as-you-go, or public, pension scheme, which has dampened demand for life products such as annuities.

Last year economic activity in Argentina contracted at its fastest pace since 2009. Data from statistics agency Indec shows activity in December fell 7.0% year-on-year, pulling down the reading for the full year to - 2.6%.

Economic growth is forecast to remain in negative territory this year, although some observers say slim green shoots of recovery are possible in the second half. The government is implementing a fiscal belt-tightening program as part of the country's multibillion-dollar bailout package from the IMF. Measures have helped keep the peso broadly steady, vital to efforts to bring down inflation and interest rates - and spur growth.

In a statement Monday, IMF South America chief Roberto Cardarelli said: "Economic activity has been weak but there are good prospects for a gradual recovery."

ALSO READ: Argentina Insurance Report