Mexico's economic contraction my put pressure on insurers: Fitch Ratings
- Latin America's No. 2 economy is facing the deepest recession in decades. Its sovereign bonds are edging closer to a downgrade to speculative grade, or junk.
- "Fitch expects the financial pressure on Mexican insurers and surety companies will persist at year end 2020.
MEXICO CITY: Mexico's economic contraction may pressure the country's insurance industry and hurt its profitability, Fitch Ratings said on Monday.
Latin America's No. 2 economy is facing the deepest recession in decades. Its sovereign bonds are edging closer to a downgrade to speculative grade, or junk.
Demand for insurance products is highly correlated with economic activity, and the ratings agency said this might put pressure on premium volume.
During periods of economic stress, including equity market volatility and interest rate uncertainty, the quality of assets could deteriorate, it said.
"Fitch expects the financial pressure on Mexican insurers and surety companies will persist at year end 2020, with a contraction in premiums between 7.7% and 5.2%," its report said.
The ratings agency, which cut the country's sovereign bond rating to BBB- earlier this year, forecasts a 10.8% contraction in gross domestic product by the end of this year and a 7.0% unemployment rate.
It did not say whether developments in the insurance sector will affect the sovereign rating.
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