Colombia PDF

AMB Country Risk Report
August 18, 2015
Our Insight, Your Advantage.
Colombia
Country Risk Tier
CRT-4
Colombia, a CRT-4 country, has a moderate level of economic

risk and high levels of political and financial system risk. Gross
domestic product (GDP) growth is expected to slow this year
as a result of weaker domestic demand and the impact of
lower oil prices on investment. GDP is projected to be 3.4%
for 2015 and will gradually rise towards its potential of around
4.25% over the medium term.
Economic Risk
Iceland
Greenland
Moderate
Low
The Country Risk Tier (CRT) reflects A.M. Bests assessment

of three categories of risk: Economic, Political and Financial
System Risk.
High
Isle of Man
Very Low
Very High
Regional growth will rely, in part, upon U.S. and European

Canada
growth
rates as well as domestic demand growth and improved
economic policies. As various factors will affect each country
differently, the economic expansion process will not be
homogenous within the group.
United States
Political Risk
Irela
Guerns
Jer
Portugal
Azores
Gibraltar
Low
High
Mexico
Bahamas
Western Saha
(Occupied by Moroc
Dominican
Republic
Cuba
Puerto
Rico
Haiti
Cayman Islands
Belize
Jamaica
British
Virgin Anguilla
Islands
St. Maarten
St Kitts & Nevis
Honduras
Very Low
Very High
Guatemala
El Salvador
Mauritania
Antigua & Barbuda
Cape Verde
Dominica
Nicaragua
St Vincent & the Grenadines

Curacao
Grenada
Costa Rica
Panama
St Lucia
Guinea-Bissau
Guinea
Sierra
C
Leone
Guyana
Colombia
Financial System Risk
Liberia
Suriname
French
Guiana
Ecuador
Peru
Brazil
Moderate
High
Bolivia
Chile
Very Low
Paraguay
Very High
Argentina
For information on companies followed

Market Outlooks
Senegal
Gambia
Barbados
Trinidad & Tobago
Venezuela
Low
Canary
Islands
Moderate
Uruguay
Falkland Islands
South Georgia
Tierra Del Fuego
CRT 1 2 3 4 5
Copyright 2015 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
Colombia
Regional Summary: Latin America

Vital Statistics 2014
Economic expansion in Latin America is

expected to decline in 2015 before staging
a moderate recovery in 2016. Weakness in
the region is largely concentrated within
commodity exporters where falling global
commodity prices have compounded
country specific challenges.
Macroeconomic challenges affecting
the region include exchange rate volatility,
currency depreciation, the potential
consequences from the normalization
of U.S. monetary policy and the need to
address structural problems in order to
raise investment and job growth.
Access to capital markets and the cost
of financing vary widely across the region.
Nominal GDP
Population
GDP Per Capita
Real GDP Growth
Inflation Rate
Premiums Written (Life)
Premiums Written (Non-Life)
Premiums Growth (2013 - 2014)
USD bn
mil
USD
%
%
USD mil
USD mil
%
384.90
47.7
8,076
4.6
2.9
2,861
6,649
-5.6
Regional Comparison
Country Risk Tier
CRT-4
CRT-5
CRT-3
CRT-2
CRT-4
CRT-5
Colombia
Argentina
Brazil
Chile
Peru
Venezuela
Source: IMF, Axco, Swiss Re and A.M. Best
While governments vary widely across

the region, they all deal with a moderate
amount of corruption and the need
for improved transparency. Increased
and improved government regulation
and enforcement in recent years has
attempted to combat these issues.
Economic Risk: Moderate
Economic Growth
Foreign direct investment is focused on

energy and mining, with over 50% of the
capital flow going to these two sectors.
Investment is expected to increase if the
government can reach a peace agreement
with FARC, a local militant group.
As an oil producing country the decline
in oil prices will drag on growth, however
the governments investment into a new
4G infrastructure project and a recovery in
exports will partially mitigate the slowdown.
8
Real GDP
CPI Inflation
The country has used years of

high commodity prices to reduce its
vulnerability to external shocks by
improving the public debt profile.
However, the current low oil price
environment will be a headwind.
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Source: IMF World Economic Outlook and A.M. Best
Colombia
Political Risk: High
Political Risk Summary
President Santos was re-elected for

a second term in June 2014. He has
renewed the promise to use his legislative
capital to modernize Columbias political
and judicial institutions and to tackle
social inequality.
Score 1 (best) to 5 (worst)
Colombia
World Average
International Transactions
Policy
5
4
Legal System
Monetary Policy
The government has prioritized peace

negotiations with the militant group,
Fuerzas Armadas Revoluncionarias de
Columbia (FARC), in an effort to end the
50-year conflict. On-going negotiations
have advanced with both sides agreeing to
three out of five points, making reaching
an agreement more likely.
2
1
Regional Stability
Fiscal Policy
Social Stability
Business Environment
Government Stability
Progress in the peace talks with FARC

has led to a significant reduction in
terrorist attacks and kidnapping. However,
the group is still considered a potential
threat to stability.
Labor Flexibility
Source: A.M. Best
There has been resistance to the

privatization of the states share of
Isagen, a power generation company.The
potential sale has met with a series of legal
challenges and political opposition, making
future privatization deals less likely.
GDP Per Capita and Population

for Selected Countries
Financial System Risk: High

250
16,000
GDP Per Capita
Population
14,000
200
12,000
150
Millions
USD
10,000
8,000
100
6,000
The Financial Superintendency of

Colombia is responsible for supervision of
the insurance sector.
The banking system and the corporate
sector remain in good financial health.
Exposure to the oil sector is limited as
companies do not borrow domestically
and finance themselves largely through
the re-investment of profits.
4,000
50
2,000
Colombia
Argentina
Source: IMF and A.M. Best
Brazil
Chile
Peru
Venezuela
In June 2015, the IMF and Colombia

reached a flexible line of credit
arrangement of 5.5 billion USD.The country
does not intend to draw on the funds, but
has pursued the credit in order to defend
against any potential external shocks.
3
Colombia
GUIDE TO BESTS COUnTry rISk TIErS

A.M. Best defines country risk as the risk that country-specific factors could adversely affect the claims-paying ability of an insurer. Country risk is
evaluated and factored into all Bests Credit Ratings. Countries are placed into one of five tiers, ranging from CRT-1 (Country Risk Tier 1), denoting
a stable environment with the least amount of risk, to CRT-5 (Country Risk Tier 5) for countries that pose the most risk and, therefore, the greatest
challenge to an insurers financial stability, strength and performance.
A.M. Bests Country Risk Tiers are not credit ratings and are not directly comparable to a sovereign debt rating, which evaluates the ability and
willingness of a government to service its debt obligations.
Country risk Tiers

Country risk Tier
Definition
CRT-1
Predictable and transparent legal environment, legal system and business infrastructure; sophisticated financial
system regulation with deep capital markets; mature insurance industry framework.
CRT-2
Predictable and transparent legal environment, legal system and business infrastructure; sufficient financial system
regulation; mature insurance industry framework.
CRT-3
Developing legal environment, legal system and business environment with developing capital markets; developing
insurance regulatory structure.
CRT-4
Relatively unpredictable and nontransparent political, legal and business environment with underdeveloped capital
markets; partially to fully inadequate regulatory structure.
CRT-5
Unpredictable and opaque political, legal and business environment with limited or nonexistent capital markets; low
human development and social instability; nascent insurance industry.
Country risk reports

A.M. Best Country Risk Reports are designed to provide a brief, high-level explanation of some of the key factors that determine a countrys Country
Risk Tier assignment. It is not intended to summarize A.M. Bests opinion on any particular insurance market or the prospects for that market.
Categories of risk
Country Risk Reports provide scores for three categories of risk for each country. These scores are (1) Very Low; (2) Low; (3) Moderate; (4) High
and (5) Very High.
Category of risk
Definition
Economic Risk
The likelihood that fundamental weaknesses in a countrys economy will cause adverse developments for an insurer.
A.M. Bests assessment of economic risk evaluates the state of the domestic economy, government finances and
international transactions, as well as prospects for growth and stability.
Political Risk
The likelihood that government or bureaucratic inefficiencies, societal tensions, inadequate legal system or
international tensions will cause adverse developments for an insurer. Political risk comprises the stability of the
government and society, the effectiveness of international diplomatic relationships, the reliability and integrity
of the legal system and of the business infrastructure, the efficiency of the government bureaucracy, and the
appropriateness and effectiveness of the governments economic policies.
Financial System Risk
Financial system risk (which includes both insurance and non-insurance financial system risk) is the risk that financial
volatility may erupt due to inadequate reporting standards, weak banking system or asset markets, and/or poor
regulatory structure. In addition, it includes an evaluation of whether the insurance industrys level of development and
public awareness, transparent and effective regulation and reporting standards, and sophisticated regulatory body will
contribute to a volatile financial system and compromise the ability of an insurer to pay claims.
Political risk Summary

To provide additional detail on the political risk in a given domicile the Country Risk Reports include the Political Risk Summary. The Political Risk
Summary is a radar chart that displays scores for nine different aspects of political risk scored on a scale of one to five with one being the least
amount of risk and five being the highest amount of risk.
Category
Definition
International Transactions
Policy
Measures the effectiveness of the exchange rate regime and currency management.
Monetary Policy
Measures the ability of a country to effectively implement monetary policy.
Fiscal Policy
Measures the ability of a country to effectively implement fiscal policy.
Business Environment
Measures the overall quality of the business environment and ease of doing business.
Labor Flexibility
Measures the flexibility of the labor market, including the companys ability to hire and fire employees.
Government Stability
Measures the degree of stability in a government.
Social Stability
Measures the degree of social stability, including human development and political rights.
Regional Stability
Measures the degree of stability in the region.
Legal System
Measures the transparency and level of corruption in the legal system.
Country risk Tier Disclosure

A Country Risk Tier (CRT) is not a credit rating, rather it represents a component of A.M. Bests Credit Rating Methodology that is applied to all
insurers. A CRT is not a recommendation to purchase, hold or terminate any security, insurance policy, contract or any other financial obligation
issued by a government, an insurer or other rated issuer, nor does it address the suitability of any particular policy, contract or other financial
obligation for a specific purpose or purchaser.
Version 091714

All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.

Colombia PDF

Uploaded by

Copyright:

Available Formats

Colombia PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Colombia PDF

Uploaded by

Copyright:

Available Formats

AMB Country Risk Report

August 18, 2015

Our Insight, Your Advantage.

Colombia, a CRT-4 country, has a moderate level of economic

The Country Risk Tier (CRT) reflects A.M. Bests assessment

Regional growth will rely, in part, upon U.S. and European

St Kitts & Nevis

Antigua & Barbuda

St Vincent & the Grenadines

Financial System Risk

For information on companies followed

AMB Country Risk Report

Regional Summary: Latin America

Economic expansion in Latin America is

While governments vary widely across

Foreign direct investment is focused on

The country has used years of

Source: IMF World Economic Outlook and A.M. Best

AMB Country Risk Report

Political Risk: High

Political Risk Summary

President Santos was re-elected for

Score 1 (best) to 5 (worst)

The government has prioritized peace

Progress in the peace talks with FARC

Source: A.M. Best

There has been resistance to the

GDP Per Capita and Population

Financial System Risk: High

The Financial Superintendency of

Source: IMF and A.M. Best

In June 2015, the IMF and Colombia

AMB Country Risk Report

GUIDE TO BESTS COUnTry rISk TIErS

Country risk Tiers

Country risk reports

Financial System Risk

Political risk Summary

Measures the ability of a country to effectively implement monetary policy.

Measures the ability of a country to effectively implement fiscal policy.

Measures the degree of stability in a government.

Measures the degree of stability in the region.

Measures the transparency and level of corruption in the legal system.

Country risk Tier Disclosure

Copyright 2015 by A.M. Best Company, Inc.

You might also like