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The last few years of economic growth in Latin America have been accompanied by increasing need for infrastructure. As that growth begins to slow, addressing the region's persistent infrastructure gap has become even more pressing if its countries are to increase their competitiveness and build on recent development gains. Enter surety bonds. Although it represents just a small slice of the regional insurance market, this specialty product is an attractive tool for the governments region looking to underwrite the contract risk associated with these generally large-scale projects. The Latin American surety industry is also reaping the benefits a global shift away from bank guarantees as the go-to method of securing contracts.
INCLUDED IN THIS MONTH' EDITION:
Surety writers across Latin America raked in premiums of US$2.274 billion over the 12 months through June 2013. By the end of 2012, that figure had expanded at an average annual rate of 15% since 2005, when it was just US$849 million.
Profitability has also improved steadily in Latin America, from a net combined ratio of 75% in 2005 to 61% in 2012.
But still a long way to go
The surety business accounted for just 1.32% of all insurance premiums in Latin America during 2012, and equaled less than half of 1/10th of a percentage point of the regional GDP.
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