Mexican insurers see peso rate as boon to sector

The exchange rate for the Mexican peso, driven higher by Donald Trump's surprise win in the US last week, will have an impact on growth in the insurance sector, according to national insurer association (AMIS).

AMIS director Recaredo Arias sees Trump's win raising insurance premiums, particularly with respect to auto insurance, which has seen 18.3% annual growth recently, as reported in the BDS América Latina newsletter. Arias added that the industry as a whole has been growing at 11.8% year-on-year.

The executive attributed the overall expansion of the insurance industry in Mexico to the increase in new car sales, backed in particular by special financing.

Arias pointed to auto distributor association (AMDA) data showing new car sales up 18.4% year-on-year from January to June 2016, where the number of cars acquired through financing grew 25.3% in the same period.

That trend has carried forward. Mexican auto industry group (AMIA) reported new car sales up 18.0% year-on-year from January to October 2016, despite a 1.0% drop in exports in the same period, as sales growth was directed heavily to domestic consumption.

The AMIS director added that a new transit law in Mexico City and requirement for car owners to carry minimum liability insurance will also have a positive impact on the insurance sector.

Despite the short-term benefits for the sector, Trump's determination in addressing Nafta and other free trade agreements has great high potential to change the auto industry in Mexico. Like, insurance, the steel industry, which has seen recovery with the improved auto production sector, faces uncertainty.