Quake may hit insurer 2017 profits; finmin provides support for victims

Fitch Ratings has stated the September 19 earthquake that struck central Mexico will contribute, with other natural disasters this year, to an increase in Mexican insurers' claims ratio and affect profitability.

"It is too early to determine whether the effects of the disaster will have a capital or ratings impact, though Mexico's insurance sector as a whole is well positioned to face catastrophe losses owing to high quality reinsurance coverage and low retained exposures relative to capital," read the note to investors.

Hitting greater Mexico City and parts of the states of Morelos, Puebla, Mexico, affected areas represent 49.6% of premiums underwritten nationally and 51.6% of earthquake premiums, added Fitch.

The ratings agency noted that even before the earthquake, Mexican insurers' claims ratios had been increasing and profitability was likely to be affected.

"According to the local regulator, in June 2017 the average cost of claims had increased to 76.5% of premiums from 70.8% a year earlier. [Insurance sector data] showed that hurricane and flood damage had led to a spike in claims in 1H17. Insured vehicle theft has also risen significantly, causing an increase in claims," said Fitch.

Tax assistance expanded for quake victims

Mexico's finance ministry unveiled further support on Monday for victims of September's earthquakes, including tax breaks and a coordinated effort with banks to facilitate access to recovery funds.

The measures, detailed in ministry announcements, indicated the government will channel preferential loans through the federal mortgage agency (SHF) and housing operation and bank finance fund FOVI for rebuilding damaged properties. It will also allow owners sell properties tax-free in the event of a total loss with restrictions.

For residents living in Mexico City and multiple municipalities in the states of Morelos, Puebla and Tlaxcala, the ministry extended tax breaks, which already available to residents hit hard in the first quake, including reduced reporting requirements and leniency in tax payments.

In a joint statement with the Mexican banking association (ABM) and the central bank, Mexico's finance ministry also unveiled an initiative dubbed 'Plan billetes', which will attempt to coordinate dispersal of Fonden relief funds through bank cards at five strategically located ATMs in the hard-hit state of Oaxaca.

The plan will coordinate fund disbursement through development banks Bansefi and Banjercito.

The announcement from the finance ministry can be found here in Spanish.