MEXICO CITY--(BUSINESS WIRE)-- AM Best is maintaining a negative market segment outlook on Argentina’s insurance industry.

The new Best’s Market Segment Report, titled, “Market Segment Outlook: Argentina Insurance,” notes that uncertainty stemming from the COVID-19 pandemic recovery, the country’s high debt burden, ongoing public debt restructuring and upcoming elections will hinder any short- to medium-term improvements in the weak economy, and will continue to pressure the industry´s overall balance sheet strength and financial performance. The industry posted a combined ratio below 100%, reflecting premium sufficiency levels, partially resulting from inflationary adjustments. Auto claims benefited from lockdowns in addition to improvements driven by these adjustments. However, workers’ compensation deteriorated owing to COVID-19.

Investment income continues to support overall profitability, although the industry’s large exposures to government-backed obligations remain pressured by low interest rates and foreign exchange volatility. Insurers with long U.S. dollar positions, a robust capital base, diversified business profiles and good distribution capabilities are better position to contend with the weak fundamentals of Argentina’s economy. The country’s developing capital markets and the few financial instruments approved by the local regulator that can adequately match insurance liabilities and regulatory requirements continue to limit market participants’ financial flexibility to withstand the difficult economic environment in light of the pandemic and slow recovery. Life companies are still facing more difficulties with regard to asset-liability mismatches owing to debt tenor extensions, which could exacerbate solvency and liquidity issues.

The industry’s ability to withstand the country’s difficult economic environment is compounded by overall risk-adjusted capitalization assessed at weak levels, as measured by Best’s Capital Adequacy Ratio (BCAR). Argentina’s challenging market requires that insurance companies continually adjust prices and implement strict expense containment strategies to maintain policy coverages, limit business contraction and navigate macroeconomic conditions. However, AM Best expects that the industry’s underwriting performance will become more stable following the regulatory mandate in 2020 on inflation adjustments.

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=314138.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2021 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.