Colombian surety insurers stand to benefit from new highway infra initiative

The Colombian government's recent announcement about implementing a significant infrastructure program for highway construction over the next decade will increase the demand for surety products owing to government contracts requiring surety insurance to protect public resources. Higher demand of these types of P&C insurance coverage will help insurers absorb their fixed costs, thereby improving underwriting results and reducing insurers' reliance on investment yields to sustain their profitability, Moody's said in a report. According to the local financial regulator Superfinanciera, premiums for surety and construction accomplishment risk constituted 11% of Colombia's total P&C insurance premiums in 2012, with more than 25 companies participating in these insurance lines. Through the program, known as Autopistas para la Prosperidad, the Colombian government plans to spend 14tn pesos (US$7.4bn) over the next 10 years on infrastructure to improve and construct more than 8,000km of road and more than 100 tunnels via concessions to private companies. "We expect that the ten Colombian general insurers with the largest surety and construction accomplishment risk premiums to benefit the most, but note that other lines of business will also expand," the rating agency said. These insurers include Confianza, Seguros Generales Suramericana, Estado and Liberty Seguros.