Published on
22 October 2025
Latin America is among the fastest-growing regional insurance markets globally, generating well over $200 billion in premium annually. It is also one of the most dynamic emerging markets for insurers, with GWP growth consistently outpacing most other emerging regions for the last five years.
The region’s economic strength continues to grow despite significant challenges, most notably the increasing frequency and severity of extreme weather events. The inverse correlation between that and softening insurance rates also presents challenges for insurers. However, while underwriting discipline is clearly important – with competition notably strong in parts of Latin America at time of writing – weather trends and unmodelled risks remain the most pressing obstacles to progress.
With its well-known exposure to a broad spectrum of natural hazards, from floods and wildfires to earthquakes, Latin America is one of the most disaster-prone regions in the world. While the past two years have been relatively benign overall, there have been significant outliers. In 2023, a category-one hurricane in Mexico intensified into a category five in just 24 hours, while another category five hurricane made landfall in Jamaica unusually early in the 2024 season. Brazil also suffered catastrophic floods the same year, which some classified as an 800-year-return-period event, emphasising the region’s high vulnerability to shifting climate patterns. Smaller but frequent events, such as hail in Argentina or wildfires in Mexico, rarely make international headlines but often accumulate into significant, sometimes outsized secondary losses. Worldwide, 60% of all market losses came from secondary perils.
Unlocking the potential of Latin America will therefore require the industry to apply considerable ingenuity in producing innovative solutions capable of addressing these challenges. The region remains relatively untapped compared to mature markets such as North America and Europe. Of the region’s economic losses from natural catastrophes over the past decade, averaging tens of billions of USD annually, less than 30% were insured, highlighting the huge headroom for growth. In addition to developing innovative solutions, a key factor in addressing Latin Americas low penetration is misconception, with many regarding insurance as a luxury rather than prudent protection, further requiring an educational and awareness-raising effort by the industry.
This is not to say much-needed innovation is not already happening in South America. Parametric insurance, proven to be highly effective in mitigating natural perils risk, is a dynamic and growing area, with both businesses and governments seeking swift, cost-effective risk transfer solutions that traditional capacity is sometimes unable to provide. Further innovation and investment is required to bridge the gaps, with definite scope for more disaster risk financing and parametric insurance initiatives.
Innovation in Latin America is less about new ideas and more about disciplined delivery in markets where execution is complex. Also, when offering parametric solutions, it is essential to ensure clarity among all parties about trigger points and payments. Public–private partnerships are emerging, especially for agriculture, with government-and-reinsurer collaborations bringing coverage to previously uninsured communities. For example, in July the Mexican government launched a multiperil parametric programme; a significant sovereign contract providing national disaster risk financing.
In April, a satellite-based parametric solution was developed and launched by LM Re with Floodbase and EarthDaily Agro for Colombian farmers. It employs technology proven in commercial, public sector and humanitarian applications. This not only enables flood monitoring on a vast scale but provides the independent, objective and externally verifiable data needed to sustainably offer parametric insurance.
More investment in initiatives like these is needed, yet with elections happening in nine countries at different times this year, a temporary investment lag may occur, as is typical around the time of any elections. Despite this, parametric insurance solutions are now starting to gain momentum in Latin America. Further innovation is required to bring additional parametric solutions and, crucially, risk modelling capabilities to the region, especially for climate risks as they become more frequent and costly.
A report published by the UN in August made the stark prediction that climate change could reduce GDP in the region by 7.9% and push 10 million more children into poverty by 2050. The insurance industry has begun to address this through various initiatives, yet more are needed. Through the continued development of innovative solutions, the industry will benefit from building resilience into the fast-growing economies of Latin America and play a vital role in the process.
