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In 2012, premiums grew by 9.8%, almost twice the rate of GDP, to reach a value of $1.5 billion. That put the value of the sector at 1.8% of GDP, a figure that remains low compared to Peru’s 4.9% and Colombia’s 6%. And then in 2013, net premiums came in at $1.7 billion, with foreign companies accounting for 35.4%. Foreign firms are certainly raking it in, with the top three—Pichincha, AIG, and ACE—bringing in 58% of the sector’s total net profits of $42 million for the year. According to EIU Viewswire, the industry registered a net outflow of $386.8 million in 2013, including payments to foreign reinsurers.

In conversation with TBY, ZHM Seguros Executive President Oscar Zuloaga discussed the rise of foreign insurers; “Before 2011, an estimated 40% of Ecuadorean premiums were in the hands of financial bank-led holdings. Regulations over market power and control came through during that year banning all banking institutions from the ownership of any business aside from the banking business itself,” continuing that then, “a swift sale process began taking shape very quickly, with interest from the big names wanting to come in, either buying in through the acquisition of bank-owned insurers or landing a spot through local privately owned companies at the time when the market would present them with much more attractive conditions and opportunities.” And just like that, big names such as Liberty, Mapfre, and QBE joined the likes of AIG, Generali, and ACE in the sector. From a competitiveness perspective, Zuloaga believes “this trend will continue and… will have a positive impact.” But not everyone shares his sentiment, with Enrique Talbot, Executive President of Vaz Seguros, suggesting that the big foreign players lack that local touch; “The arrival of these companies into the Ecuadorean insurance market has led to a loss in the quality of service and relations between companies and clients. For these large insurance companies, clients are merely statistics. We have the advantage of knowing the particularities of the Ecuadorean market.”

But for the smaller player, consolidation is a distinct possibility. According to Gal Semblantes Vorbeck, General Manager of Universal Compañia de Reaseguros, “Ecuador has 38 insurance companies, which is a relatively high number given the size of the market, and this spells tough competition.” Some spectators warn, then, that local companies could be squeezed out amid tough competition, with industry insiders also worried over talk of tighter regulation on premiums and possible caps on executive salaries in the sector, according to EIU Viewswire.

In reinsurance, there are two companies at work in the sector, the state-owned Seguros Sucre and Seguros Rocafuerte. They are tasked with ensuring that the entire public sector is insured. Discussing their importance, Juan Ribas Domenech, Chairman of Seguros Sucre and Seguros Rocafuerte, commented that, “all in all, it is important for the government to have a state-owned insurance company in order to protect its vast public structure and insure its properties.”

As of end-2013, reinsurance cessions were approximately 50%, a figure that is only just behind the average of 55%-60% in Latin America. But with the two reinsurers in Ecuador ceding much business to reinsurers abroad, a drive is now underway to ensure more retention in the sector and possibly develop a deeper domestic reinsurance business with a view to keeping more dollars at home. According to a new code, the minimum capital for insurers could be increased to $8 million and $13 million for reinsurers. QBE Seguros’ CEO Diego Sosa Villaquirán delved deeper into the matter in an interview; “With motor insurance, for example, business can be retained within the country; however, this is not the case for insurance related to earthquakes or other disasters,” he said, adding his take on the need, or lack of need, for more reinsurance; “A local catastrophe requires payments from abroad, and I do not agree that establishing reinsurance within the market is necessarily the best idea. We and other multinational companies are offering reinsurance products, meaning we are acting as both insurer or reinsurer.”

While it isn’t clear how the sector will look in just a few years, what is clear is that there is plenty of margin for growth. With penetration levels still low, increased foreign interest in the sector will result in stronger awareness and more robust premium offers. The problem of making sure the money stays in the country, however, is the medium-term challenge.