The Premium Sector


A paradox of the nascent middle classes of emerging markets is that amid the novelty of disposable income, the concept of insurance coverage—indeed saving of any kind—is often a pill […]

A paradox of the nascent middle classes of emerging markets is that amid the novelty of disposable income, the concept of insurance coverage—indeed saving of any kind—is often a pill too bitter to swallow. Thus, while consumption feeds the broader economy, the more vulnerable among the population, such as small farmers (agriculture accounts for 11% of GDP) especially in the natural disaster prone Dominican Republic, bear heavy risk.

The Dominican insurance market hosts around 40 companies, but is hugely concentrated. When adding two local reinsurance companies and brokerage houses, the number of actors reaches close to 1,200. Yet five insurance firms hold 80% of the overall market—between 2006 and 2013 generating premiums of approximately Ps200 billion. Industry watchdog, the Superintendency of Insurance, indicated total net premiums generated between January and November of 2013 of Ps27.768 billion, up 4.83% YoY. Meanwhile, sector potential is clearly evidenced in the growth in premiums generated of between 8% and 20% in the 2006 to 2012 period, and in the low 1.21% share in GDP, well short of the 3.8% Latin American average. Meanwhile, premium per capita is below $100, ranking the country 30th Latin American nations.

On the positive side, a number of factors will ultimately spur sector growth, one of which is the republic’s close relations with the US, and consequent pursuit of stabilizing economic policy. The IMF estimates Dominican economic growth at a stable pace of 4% to 5% over the 2012—2016 period. Moreover, many Americans—among other foreign nationals—opt to retire in the country, increasing demand for health, retirement, and home content coverage. Meanwhile, World Bank data indicates GDP on the march, at $5,826.13 for 2013, up from $5,059.03 a year earlier. And then of course there is tourism, which creates employment in tangential sectors, raising both the demand for diverse coverage, and disposable income to pay for it.


Mandatory health insurance was introduced by the landmark Social Insurance Act 87-01 of 2001, with the country’s Service Health Plan (PDSS) commencing in 2007. And as incomes gradually rise, examples from around the world indicate that more people opt for private coverage of higher quality. Meanwhile, though health insurers continue generate the bulk of their premiums from social insurance. For 2013, the health insurance market was led by Universal, Colonial, and Seguros Banreservas on respective market shares of 28%, 18%, and 9%. For 2013 health coverage registered YoY growth of 21.83%. Pointing out another brake on to personal insurance premium growth, namely 16% taxation, Rafael Nolasco, the President of Patria Compañí­a de Seguros told TBY that, “we probably are one of the only countries in the world to levy a tax on life insurance, which really does not help. It’s just as well that the country has been rather lucky that since 1998 it hasn’t seen a hurricane affect it in the way that Hurricane Georges did.” The 15 members of the Dominican Chamber of Insurers and Reinsurers (CADOAR) manage roughly 95% of the total Dominican insurance market. Executive President Miguel Villamán in a TBY interview Miguel Villamán put a number to the above-mentioned loss by citing sector reports showing, “that due to these issues we lose about $125 million of insurance products every year.”


As if the global meltdown was not enough to rock the Dominican Republic due to its extensive trading and commercial links to the US, the 2010 Haiti earthquake added seismic woe to the insurance sector. This, like Hurricane David back in 1979, brought home the vital nature of reinsurance in ensuring the continued solvency of sector players. The Dominican Republic hosted its first international reinsurance conference in 2012, which in a cosmic joke, coincided with Hurricane Sandy. Main takeaways were the need to promulgate the organic growth of sector professionals, and rethink the, some consider, punitive taxation system to incentivize insurance participation across a broader demographic.


With so few of the Dominican Republic’s 10 million population covered by insurance, alternative paths are being followed to extend peace of mind to a wider swathe of citizens. A large part of this is affordable premium conditions and public understanding. Coop-Seguros (COOP-INSURANCE) is a unique force in the Dominican insurance sector as the sole comprehensive insurer to comprise a cooperative. Active since 1990, its objective is to provide coverage to social groups unable to contemplate paying insurance premiums, and moreover to inform on the benefits of insurance as an investment instrument among cooperatives, trades unions, and other NGOs. General Manager Ruth Soto explained how, “Education is one of our main cooperative principles and is part of our strategic plan to increase efforts to further educate our market and deepen understanding.”

Another advocate of micro insurance is Seguros Sura, which closed 1H2014 on a net profit of $221.4 million, up 19.2% YoY. President Carlos Ramón Romero B. explained his performance in a TBY interview thus, “The growth of the total insurance market in terms of written premiums was 5.8% in 1H2014. In the Dominican Republic Sura grew by 6.5%, and our goal for 2014 growth of 10%.” And in terms of the motivation that underpins it he added, “We are firm believers in what we call ‘microseguros’, selling through alternative channels to a broader base. We have a department dedicated solely to that because we think we should go down the pyramid so that everyone is protected. This is also a social responsibility.” In an example of the lateral approach adopted to convert the uncovered citizen, the company has partnered Universidad Tecnológica de Santiago, “which has 7,500 students to provide personal accident insurance, which is not yet required by law.”


According to the Superintendency of Insurance, 1Q2014 total net premiums written soared 8.1% YoY to Ps7.8 billion. Net non-life premiums were at Ps6.6 billion, up 9.5% YoY from Ps6 billion. Net total life insurance premiums rose 0.8% to Ps1.2 billion. And among the non-life segment, Agriculture & Livestock insurance premiums led the pack on a YoY rise of 186%, despite holding a slender 0.4% market share. For 2013 overall, general insurance, coughed up 75% of total premiums on a YoY rise of 2.84%. The largest non-life premium generator was the fire branch, with a 33.5% stake and net premiums of Ps2.6 billion, up 8.7%. This was closely followed by motor insurance, which with a market share of 31.2%, posted quarterly revenues of Ps2.4 billion, up 6% YoY. Miguel Villamán summarized the logjam in automotive premium generation as follows, “More than 60% of all the vehicles sold last year (2013) are not actually insured. What’s more, over 50% of registered Dominican vehicles are motorbikes—almost 1.7 million—of which only around 10% are insured. Regarding other vehicles (the other 50%), only around 30% is insured.”

By sector player rankings, in 1Q2014 the top-three companies were Seguros Universal, Mapfre BHD Cia de Seguros, and Seguros Banreservas on respective net premium readings of Ps2.2 billion, RD$1.1 billion, and RD$1 billion. For 2013 overall, the three companies had respective market shares of 27.6%, 14.7%, and 15.6%. Seguros Banreservas makes use of the Bank-Assurance channel made available by its bank, the Reserve Bank of the Dominican Republic (BanReservas) and its nationwide network of roughly 180 branches.

Consolidation has been observed in the sector, notably when in December of 2013, Mapfre BHS, along with Banco Leon (owner of insurer Banca Seguros), combined their entire financial operations. In consequence, Mapfre found itself breathing down the neck of sector giant Universal Insurance.

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