Despite the challenging conditions in Latin America in 2025, reinsurance markets in the region continue to expand, driven by increased demand and greater dynamism, according to a recent AM Best report.
Reinsurers may also face additional challenges from foreign exchange (FX) headwinds, which will highlight the importance of their management’s asset-liability management (ALM) capabilities, the report noted.
Latin America’s exposure to natural perils is a key driver of the increased demand for reinsurance capacity. In 2024, the region experienced 82 natural hazard-related disasters, including 26 natural catastrophe events, which resulted in USD 11.6 billion in losses.
However, only USD 1.5 billion of these losses were insured, reflecting the region’s low insurance penetration rate and subsequent high protection gap, which remains below 5% of GDP, AM Best explained.
“Global players have a rekindled interest in the region, following a shift from a risk-averse position seen in 2022-2023. Local participants aim to continue growing while strengthening their brands, taking advantage of the spaces created by the past hard market,” the report stated.
AM Best has observed an overall softening of the market since the second half of 2024 despite significant catastrophe events. This trend continued through 2025 renewals, driven by increased competition and sufficient capital in the industry.
The report highlights potential downward trends in pricing, with discounts on flat renewals ranging from 5% to 30% across various lines of business, including property, terrorism and health.
The life business has seen more variable discounts, with some major players lowering rates by up to 10% while others remain hesitant to offer any discounts on renewals.
“While CAT lines involve more complex negotiations, especially in countries with major exposure (Mexico, Guatemala, Costa Rica, Peru, and Chile), pricing has been very competitive, with conditions flexible overall. Loss experience and enterprise risk management (ERM) capabilities remain key elements in the negotiation of reinsurance contracts,” analysts noted.
AM Best has also observed that the use of managing general agents (MGAs) and delegated underwriting authority enterprise (DUAEs) is gaining popularity, providing both global capacity to the region and allowing regional reinsurers to take on risks from abroad.
As global interest rates move downward, the attractiveness of the region may create more demand for delegated underwriting authority enterprises (DUAEs) focused in the region.
Furthermore, the rapid pace of digitalisation and the increasing use of artificial intelligence are transforming the industry. These tools are being leveraged to enhance transaction efficiency, optimise cost structures, and improve distribution.
AM Best concluded: “Highly rated reinsurers find that better risk modelling allows them to more accurately price reinsurance and manage the cost of capital. Alternative risk transfer vehicles such as parametric coverages and captives have become more popular among rated companies, although issuances have been limited.”
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