Costa Rica Insurance

Costa Rica: Major Insurance and Reinsurance Developments in 2008
15 January 2009

Article by M. Machua Millett

Although all of the Latin American jurisdictions had notable regulatory and market developments in 2008, Costa Rica stands out as particularly significant given the the fundamental nature of the developments seen there in the past year.

Opportunity and Risk in a "New" Market
While Costa Rica is relatively small in comparison to the major Latin American insurance markets, Costa Rica is the largest insurance market in Central America (excluding Panama). The country also has a uniquely diversified economy for the region, has experienced rapid annual growth in the insurance market (between 15% and 46% annual growth in recent years) and still has a relatively low insurance penetration rate (2.6%). Prior to 2008, however, the country had maintained a government monopoly over the insurance market through the Instituto Nacional de Seguros ("INS").

In August 2008, however, new legislation was passed in Costa Rica and signed into law by president Dr. Oscar Arias Sanchez that ended the more than eighty-year-old state-sponsored monopoly over the Costa Rican insurance business. While the new Ley Reguladora del Mercado de Seguros opens the insurance market to private competition from domestic companies and foreign companies with local branches, it also contains prohibitions and increased penalties that may come as a surprise to any foreign insurers that do not carefully review their activities in connection with any Costa Rican risks.