Surety premium growth outpaces market, but faces sharp claims rise

Surety is the fastest growing product line in Panama's insurance sector, according to figures from industry regulator Superseguros. Almost US$65mn in surety premiums were written in Panama in July, up from US$52mn in July 2010. During the period, surety has increased its share of the total insurance premiums by 167 basis points to 11.71%, becoming the fourth biggest subsector after auto, health and collective life lines. The growth is being driven by Panama's ambitious infrastructure investment program that includes the expansion of the Panama Canal, as well as new highways and housing projects. The rapid growth of the premiums, however, is being outpaced by rising claims. Losses from claims rose 268.4% in July year-on-year to US$11.5mn. Premiums in the same period increased only 29.8%. According to Latin American ratings agency PCR Ratings, the runaway claims losses are partially explained by Panama's growing inflation rate, which is overshooting government estimates on the back of the near-double digit economic growth.