A fair trade

Costa Rican market opens up

Costa Rica's insurance market will be opened up to US insurers once the country's congress ratifies its entry to the Central American Free Trade Agreement (Cafta).

Cafta was set up in December 2003, and is made up of the US, Guatemala, Honduras, El Salvador and Nicaragua. Like the North American Free Trade Agreement, Cafta aims to abolish almost all trade barriers between member states. The Costa Rican government pulled out of the initial talks last year, but then finally joined Cafta at the end of January after intensive negotiations. However, the agreement is still highly controversial.

Costa Rica's insurance market is the only one in Latin America that is still a state monopoly, with all insurance being handled by government insurance company INS.

Under the terms of Cafta, Costa Rica has committed itself to opening up the majority of its insurance market by 1 January 2008, with full opening by 1 January 2011. US companies will be able to open branches, joint ventures and 100%-owned subsidiaries within Costa Rica.

The new agreement has already had an affect on the Costa Rican insurance market, when President Abel Pacheco announced that proposed legislation that would have set up a regulatory agency for INS was being withdrawn.

The legislation would have clashed with Cafta as it would not have provided the faculties to regulate the private sector insurers that will enter the market in 2008.

The US Government is hoping the creation of Cafta will accelerate the development of a proposed Free Trade Agreement of the Americas (FTAA), which will cover North, Central, and South America.

Challenge ahead for Colombia

The Colombian insurance market had a mixed year in 2003 and is facing new challenges, according to William Fadul, executive president of the Colombian Insurers Federation.

Mr Fadul said the number of loss events fell in 2003 and Colombian insurers paid out 2.1bn Colombian pesos ($771.3m), less than in 2002. However, market profits fell 3%, reaching 471bn pesos due to falling rates as well as premium income, which went down 13.8%.

Mr Fadul also referred to the current discussions over the creation of FTAA. He said: "Colombian insurers believe that foreign investors should be freed to establish themselves in our country in the same terms as domestic companies, but foreign insurers should not be allowed to trade in our country without establishing themselves here".

Good 2003 for Mexican market

The Mexican insurance market reported a 55% rise in net profits last year, according to the Mexican Association of Insurance Companies (AMIS).

AMIS claimed that the rise in net profits was due to greater efficiency in the sector and the absence of any major disasters. However, total premiums fell from 129bn Mexican pesos ($11.8bn) to 118bn pesos - the first fall in almost a decade.

AMIS said the fall could have been caused by a number of factors, including the fact that several large financial service groups had chosen to sell insurance through banks, and the fact that sales of group life policies had been reduced at the request of the treasury department. The currently sluggish growth of the Mexican economy was also blamed.

AMIS predicted that 2004 would see a gradual economic recovery and that consumers would have to be encouraged to trust financial services companies again, especially in the wake of the 1995 economic crash which wiped out many people's savings.

Rimac deal with RSA

Royal & SunAlliance Insurance Group (RSA) has announced that it is selling its general and life insurance interests in Peru to Rimac Internacional Compania de Seguros y Reaseguros (Rimac).

RSA also announced that it is selling its 14.6% stake in Rimac. The total deal will be worth around £12m ($22.7m), but is still subject to regulatory approval.

Simon Lee, chief executive of RSA's international businesses, said: "The disposal of both our insurance interests in Peru and our stake in Rimac represents another step in the ongoing group transformation and capital release programme. We are pleased to be able to achieve an exit via a single deal and at a price which delivers value to our shareholders. In our capacity as a shareholder in Rimac we have had a good relationship with the buyer for many years and we wish every success to our Peruvian colleagues in the future."

According to Rimac it held a 26.7% stake in the Peruvian insurance market at the end of 2003. The addition of RSA's business will increase that to 32.2%, putting it ahead of rival company Pacifico Peruano Suiza, which has a 30% share of the market. Rimac's position was bolstered by a strong performance last year, with premium income rising by 56% from $147m in 2002 to $230m in 2003.