BEST’S COUNTRY RISK REPORT

Colombia
CRT-4 Economic Risk Political Risk Financial System Risk
August 22, 2018
Region: Latin America Country Risk Tier 1 (CRT-1) Very Low Level of Country Risk

Country Risk Criteria Procedures Country Risk Tier 2 (CRT-2) Low Level of Country Risk
Guide to Best’s Country Risk Tiers Country Risk Tier 3 (CRT-3) Moderate Level of Country Risk
• The Country Risk Tier (CRT) reflects A.M. Best’s
Country Risk Tier 4 (CRT-4) High Level of Country Risk
assessment of three categories of risk: Economic, Political,
and Financial System Risk. Country Risk Tier 5 (CRT-5) Very High Level of Country Risk

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

economic risk and high levels of political and financial
system risk. After seven years of declining growth rates,
the Colombian economy is expected to grow 2.7% in 2018.
Conflict resolution with the FARC, the stabilization of oil
prices, and greater foreign direct investment will support
growth. Inflation is expected to decline and converge to the
target of 3%.
• The map depicts the countries A.M. Best evaluates in
Central America, South America and the Caribbean. The
majority of Latin American countries are categorized as
CRT-4 or CRT-5, with the exceptions of Chile (CRT-2),
Mexico (CRT-3), and Peru (CRT-3).
Regional Summary: Latin America
• Growth in the region is likely to continue in 2018 due to
expanding global growth, rebounding commodity prices, and
strengthening domestic demand. However, risks are tilted to the
downside owing to rising domestic political uncertainty, currency
volatility, growing trade protectionism, rising fiscal deficits, and
negative spillover effects from international financial markets.
• Conditions are largely positive, but several countries in the
region are experiencing heightened risk. Years of unsustainable
social programs, higher spending, and growing corruption have
led Canada
to significant challenges for Venezuela, as well as Brazil and Greenland
Iceland

Argentina, albeit to a lesser extent.

Vital Statistics 2017 • So far this year, there have been several presidential elections
Nominal GDP USD bn 309.20 in Colombia, Mexico, and Venezuela; Brazil’s is scheduled Isle of Man

Population mil 49.3 for later this year. The election environment is complex owing Ireland

GDP Per Capita USD 6,273 to mounting social conflicts, corruptions scandals, and policy
Unite
Kingd

Real GDP Growth % 1.8 uncertainty. According to the IMF’s 2017 estimates, four
Guernsey

Jersey

Inflation Rate % 4.3 countries are responsible for the largest proportion of the
United Nations Estimates
region’s economic output: Brazil at USD2,055 billion, Mexico at
Literacy Rate % 94.2 USD1,149 billion,
United States Colombia at USD309 billion, and Venezuela at Portugal
Spain
Azores
Urbanization % 77.0
USD210 billion.
Gibraltar

Dependency Ratio % 45.6 Morocco

Canary
Life Expectancy Years 75.9 Islands

Median Age Years 30.0 Mexico

Bahamas
Western Sahara
Insurance Statistics
(Occupied by Morocco)
British
Cuba Dominican Virgin
Republic Islands
Cayman Islands
Mauritania
Puerto Anguilla

Financial Superintendency of
Haiti
Mal
Rico St. Maarten
Belize Jamaica Antigua & Barbuda

Insurance Regulator
St Kitts & Nevis
Honduras
Dominica Cape Verde

Colombia Guatemala
El Salvador Nicaragua St Vincent & the Grenadines St Lucia
Curacao
Grenada
Barbados
Gambia

Guinea-Bissau
Senegal
Burk
Fa
Costa Rica Guinea
Premiums Written (Life) USD mil 2,802
Trinidad &
Panama Tobago Gha
Sierra Cote d'Ivoire
Venezuela Guyana
Suriname
Leone

Premiums Written (Non-Life) USD mil 6,089 Colombia

French
Guiana
Liberia

Premiums Growth (2016 - 2017) % 5.5 Ecuador Sao T

Regional Comparison
Country Risk Tier
Brazil
Colombia CRT-4 Peru
Argentina CRT-5 Bolivia
Brazil CRT-4 Paraguay

Chile CRT-2 Chile

Peru CRT-3 Argentina
Venezuela CRT-5
Uruguay

Source: IMF, UN, Swiss Re, Axco and A.M. Best

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 BEST’S COUNTRY RISK REPORT Colombia

Economic Growth (%) Economic Risk: Moderate

8
Real GDP CPI Inflation • Colombia’s heavy reliance on exports of energy and
7 minerals makes it vulnerable to shifts in global commodity
prices and demand conditions.
6
• The economy has been growing at a healthy pace on high
5 oil prices and strong private consumption. The increase in
investment encouraged by lowered corporate taxes has
4
also been supportive. The Colombian peso is expected
3 to depreciate in 2019 as prices fall, further encouraging
domestic and international consumption of Colombian
2
goods.
1 • Free trade agreements with many countries continue to
promote trade and economic integration.
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
• Union strength in the private sector poses property
Source: IMF World Economic Outlook and A.M. Best
damage and operational risks to businesses. Strikes and
demonstrations may increase in 2018 due to oil mining
plans.
• The International Monetary Fund has recommended
Political Risk Summary focusing on several economic priorities, including
Score 1 (best) to 5 (worst) promoting labor formality and education, as well as
World Average International Transactions improving infrastructure to raise productivity.
Colombia Policy
5
Legal System 4 Monetary Policy
Political Risk: High
3 • Iván Duque came into office on August 7 as the new
2 president, replacing Juan Manuel Santos. The government
under Duque is projected to remain broadly stable in 2018.
Regional Stability 1 Fiscal Policy

0 • Duque’s policy priorities are curbing corruption, reducing

tax evasion, and revising the FARC agreement, which has
greatly reduced the risk of terrorism from the group. Any
Social Stability Business Environment
revision is likely to meet strong opposition.
• High levels of judicial intervention, particularly in the
extractive industries sector, owing to environmental
Government Stability Labor Flexibility concerns, continue to hinder project implementation.
Legal uncertainties and inconsistent regulations create
Source: A.M. Best
difficulties for business operation.
• The judiciary is relatively independent and perceived as
less corrupt than other institutions, but legal processes are
GDP Per Capita and Population highly inefficient.
16,000 GDP Per Capita Population 250 • Corruption levels are moderate in Colombia. The anti-
corruption referendum in 2018 aims to reduce corruption
14,000
by increasing corresponding penalties.
200
12,000
Financial System Risk: High
10,000
150 • The Financial Superintendency of Colombia is responsible
for supervising the insurance sector.
Millions
USD

8,000

100 • The Conglomerates Law approved in 2017 will increase

6,000
supervision and gear the economy further towards Basel
4,000 III standards. The financial system is deemed by the IMF
50 to be generally resilient to shocks.
2,000
• Non-performing loans have increased to above 4%. Real
0 0 credit growth has been broadly stable and the credit gap
Colombia Argentina Brazil Chile Peru Venezuela
has closed. The contraction in commercial credit growth
Source: IMF and A.M. Best has decelerated, pointing at a positive investment outlook.

Page 2 of 2 August 22, 2018

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