Monitoring the Insurance Industry
The Costa Rican Experience
OECD-ASSAL Regional Expert SeminarSeptember 26 and 27, 2013
Celia González HaugDirectora, División de Normativa y Autorizaciones
Agenda
Background and recent developments in the Costa Rican insurance market. Context of monitoring and insurance market statistics
Legal frameworkInsurance market monitoring strategyApplicable regulations
Current situation: What do we have?What are we working on to enhance transparency and monitoring of the insurance market?
Costa Rican Insurance Market Background
5 years since insurance market openingA unique state agency operated as a monopoly during 84 years, and currently maintains about 90% of the total market share. A limited insurance culture in most of the populationLimited banking and financial inclusion. Sectorial monitoring (banking, insurance, pensions and stocks) coordinated by a single direction board. IFRS adopted for the financial system prior to market opening, with some exceptions approved by the National Supervision Council.Existence of a uniform accounting manual for all supervised institutions in the financial system and information transparency norms established.
PREMIUMS/GDP 1925-20122,43%
2,05%
Source: Hasta 2003, Estudio del mercado de Seguros, Gilberto Arce; 2004 , actualizad by SUGESE
PREMIUMS/GDP & PREMIUMS PER CAPITAAMÉRICA LATINA: PROFUNDIDAD Y DENSIDAD DEL MERCADO DE SEGUROS, 2011.
Profundidad (Primas como % PIB) Densidad (primas per cápita)
Premiums/GDP (average):
2.52% (2009), 2.49% (2010), 2.43% (2011)
Premiums p.c. (average): US$190 (2009), US$204 (2010), US$236 (2011).
Costa Rica: Under the average, but around it. Increasing performance on premiums per capita
is opposed to Latin America’s trend.
Latin America: Premiums/GDP, 2011 Latin America: Premiums P.C., 2011
Year Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12
Total 83,4 92,8 116,7 137,4 140,5 163,0 172,0 198,9
Compulsory 24,5 29,1 35,8 45,9 37,9 50,2 54,9 61,8
Personal 11,1 13,6 13,2 17,8 20,1 22,1 29,7 40,1
P&C 47,9 50,1 67,8 73,6 82,4 90,7 87,4 97,1
Total 1,85% 1,80% 1,87% 2,14% 2,11% 2,01% 1,94% 2,06%
Compulsory 0,54% 0,56% 0,57% 0,72% 0,57% 0,62% 0,62% 0,64%
Personal 0,25% 0,26% 0,21% 0,28% 0,30% 0,27% 0,33% 0,41%
P&C 1,06% 0,97% 1,08% 1,15% 1,24% 1,12% 0,99% 1,00%
Total Received Premiums Per Capita (US$)
Total Received Premiums / GDP
TOTAL RECEIVED PREMIUMSTotal
Voluntary Insurance
Growing rate (US$)
29% 31% 31% 33% 27% 31% 32% 31%13% 15% 11%13% 14%
14%17%
20%
57%54%
58%54% 59%
56% 51%
49%
0
100
200
300
400
500
600
700
800
900
1.000
Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12
US$
Milli
ons
Compulsory Personal P&C
355,8
512,2
743,8
401,5
611,5 633,3
793,9
928,5
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12
Automobile Fire & associate Life Accid, Sickn & Health Other
42%
13%
14%
5%
43%44% 37%
7%4%
24%
7%
13%
26%
6%
12%
15%
27%
14%
13%
44%
12% 12%
22%
12%
12%
25%
46%
13%
41%
7%
37%
18%12%
16%
26% 24% 22%
10% 12%
12%
Insurance Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12
Total 13% 28% 19% 4% 17% 7% 17%Voluntary 10% 29% 15% 14% 11% 5% 18%Compulsory 21% 25% 30% -16% 34% 11% 14%Personal 25% -2% 37% 14% 11% 36% 36%P&C 6% 37% 10% 13% 11% -3% 12%
Insurers (June 2013)Insurer Owner Category Licensed
Instituto Nacional de Seguros Government Composite N.A.
MAPFRE | Seguros Costa Rica, S.A. Foreign private capital (Spain, Panama) Composite 2010
Assa Compañía de Seguros, S.A. Foreign private capital (Panama) Composite 2010
Seguros Bolívar Aseguradora Mixta S.A. Foreign private capital (Colombia) Composite 2011
Aseguradora Sagicor Costa Rica, S.A. Composite private capital (CR, Jamaica/Barbados)
Composite 2013
Seguros del Magisterio, S.A. CR private capital Personal Insurance* 2009
Pan American Life Insurance de Costa Rica, S.A. Foreign private capital (New Orleans) Personal Insurance 2010
Aseguradora del Istmo ADISA, S.A. Composite private capital (CR, Panama) Personal Insurance 2010
Best Meridian Insurance Company (Branch) Foreign private capital (Florida) Personal Insurance 2011
Atlantic Southern Insurance Company (Branch) Foreign private capital (Puerto Rico) Personal Insurance 2012
Quálitas Compañía de Seguros (Costa Rica), S.A. Foreign private capital (Mexico) Property and Casualty 2011
Oceánica de Seguros, S.A. Foreign private capital (Venezuela) Property and Casualty 2013
Context: Legal Framework(1)
Insurer obligations
Provide to SUGESE correct and complete information within the time limits and formalities
required.
Properly carry, accounting or legally required registries.
Define control policies and procedures. Establish accounting, financial, informatics,
communications and internal control systems.
Refer and publish complete and correct information required by
the public.
Context: Legal Framework (2)
Superintendency Functions
Make available to the public all the relevant information about insurance market and insurance
companies activities.
Dictate all other technical or operative rules and guidelines.
Propose general norms for accounting registry and the
preparations and presentation of financial
statements.
Propose accounting manuals to allow the
accounting information to reasonably reflect
the situation.
Information Infrastructure
Solvency Capital
Requirement
SBR
Evaluation Model SBR
Accounting Norm ReformIn force 2014
Integral Solvency ReformIn force 2014 Pilot Scheme
(october 2012 )
Context: Insurance market monitoring strategyt
Context: Applicable Regulations
Accounting Plan for the Insurance
Market
Referral information Standards
Insurer´s Financial Statements Model
Standards.
General Accounting disposition for
Financial System.IFRS Adoption
External Auditor Regulation
Audited Statements publishing norms.
Current situation: What do we have?
Information submission through excel files, market´s basic information revelationImplementation of Insurance Supervision System began, for remission, processing and storage of financial and accounting information from insurer companies. Monthly publication of information for the public through website.Availability of financial statements in website.
Audited (annual and intermediate)Monthly summary of financial statements in website
Current situation: What do we have?
Available Information
Accounting Balances-M
(Trial Balance
Financial Statements (T)
Direct premiums, by branch, by
insurer (M)
Clains by branch, by insurer. (M)
Ceded and retroceded reinsurance
information. (M)
solvency and minimum equity information. (M)
Current situation: What do we have?
Current Admonitory for supervisory tasks
• Accounting registry and consistency revision.
• Accounting registry reasonability
• Solvency and minimum capital regimes monitoring.
• Basic indicators construction.
What are we working on to enhance transparency and monitoring of the insurance market?
Insurance Supervision
System
Early Warning Indicator System
Improve information revelation
for the public
• Charge• Validate• Process• Notify
SUGESE
Insurer
Information Models
Notification
Consultation of Remittance Status
Intermediary Supervision I Intermediary Supervision II Electronic FleManagerial Info. Panel
In Site SupervisionInsurer Supervision
Remittance Procedure
Consultation Procedure
Supervision Procedure
PROCESO GENERACION
INSURANCE SUPERVISION
Web Service
What are we working on to enhance transparency and monitoring of the insurance market?
Stages of Insurance Supervision System (SSS)
1IV T 201
3
• Marketing Channels information (T)• Run off (T)• Production Information: contracts, insured and premiums (T)
2I T
2014
• Accounting Balances (trial balance) (M)• Technical Account by branch(T)• Solvency information detail (M)
3201
4
• Financial Intermediaries Information (T)• Information for equity adequacy(M)
4
2014
• Insurance companies information for Central Bank (national accounts, monetary statistics and Balance of Payments)
What are we working on to enhance transparency and monitoring of the insurance market?
Early Warning Indicator System (SIAT)
• Product generated from the development of the Insurance Supervision System. (SSS)
• System synthesizes indicators of early warning with the one that assesses identified risk areas for monitoring purposes of the insurance company.
• Relevant areas are established: • Capital and debt adequacy.• Management and profitability.• Liquidity and asset management.
What are we working on to enhance transparency and monitoring of the insurance market?
Early Warning Indicator System (SIAT) (1)
Capital and debt adequacy• Total Debt• Financial Debt• Net equity loss gross provision.• Net equity loss net provision. • Gross risk rate• Equity retaining or net risk rate. • Minimum capital index• Capital adequacy index• Capital adequacy index variation
Liquidity and asset management. • Liquidity Ratio• Technical provision coverage.
What are we working on to enhance transparency and monitoring of the insurance market?
Sistema de Indicadores de Alerta Temprana (SIAT) (2)
Management and profitability.• Direct insurance premium growth. • Return on Investements• Return on equity (ROE)• Sinister Index• Expenses index• Combined Ratio • Run off Indicator • Sinister average cost • Liquidation average velocity • Rescue index• Reinsurance Concentration index • Rescue amount divided by average mathematic provision.
Concluding Remarks…
• Costa Rica has many pending statistic tasks and much more to learn.
• The country has sought to establish the basis to build a system of statistics and an integral and adjusted to international practices monitoring.
• Having a proper statistical system will require coordination and negotiation of the Superintendency with the Insurance Industry.