Fitch Ratings, the credit ratings agency, says Colombia’s August earthquake is unlikely to result in changes to insurers’ ratings, but warns that the disaster will put pressure on industry earnings during the second half of 2026, with the effects potentially extending into subsequent quarters as insurers receive, assess and settle claims.
Fitch attributes the limited ratings impact to the structure of Colombia’s insurance market. Insurance covers only a relatively small proportion of the economic damage caused by major disasters, while insurers transfer much of their catastrophe exposure to international reinsurers. In addition, regulated catastrophe reserves provide an additional financial buffer that can absorb losses before they affect insurers’ capital.
The sector was in a position to absorb the event when the earthquake struck, according to Fitch Ratings. The combined ratio for Colombian insurers rose to 99% during the first half of 2026, compared with a five-year average of 98%, reflecting continued soft market conditions. Despite the deterioration, Fitch says the ratio remains at a level that should allow the sector to withstand potential financial stress associated with the earthquake.
Profitability also provided some support. Industry return on equity was 13% in the first half, compared with a five-year average of 10%. Fitch says this level of profitability gives insurers scope to rebuild capital through retained earnings. For the insurers covered by Fitch Ratings, retained catastrophe exposure was also no more than 5% of equity, reducing the potential immediate effect of the earthquake on capital.
The impact will not be uniform across the market, Fitch Ratings says. Insurers with significant property or engineering portfolios could face greater claims pressure, particularly where they have substantial exposure to the departments affected by the earthquake.
Companies operating with narrower earnings margins could also see a more pronounced effect on second-half results. By contrast, insurers with more diversified portfolios, stronger catastrophe reinsurance arrangements or larger reserves may be better positioned to absorb the claims.
Fitch notes that Colombia’s property insurance sector is highly fragmented. The largest property insurer represented 17% of gross written premiums at the end of 2025. Fitch Ratings says this overall market position is less important to the earthquake’s financial impact than the individual insurers’ geographic exposure to the affected areas.
The magnitude 7.4 earthquake was centred on San Jose del Palmar and affected more than 15 departments and approximately 450 municipalities, covering close to one-third of Colombia’s territory. The Colombian government initially estimated direct physical damage at COP30 trillion, equivalent to 1.6% of 2025 GDP. Fitch notes that this assessment was based on early information from just five affected departments, meaning the eventual economic cost could be higher as damage assessments expand.
Claims have already begun to emerge. Fasecolda reported COP4.4 trillion in earthquake-related claims as of 14 September, representing approximately 15% of the government’s current damage estimate. Fitch expects claim notifications to continue rising over the next several months as property damage is identified and policies are assessed.
Fitch expects insured losses to account for only a relatively small proportion of the earthquake’s overall economic cost. Insurance penetration in Colombia was 3.3% of GDP in 2025, while earthquake and property policies represented 6.9% of total gross written premiums. The agency says the protection gap is particularly pronounced for residential and property risks relevant to the earthquake.
Mortgage-related earthquake insurance is one factor behind this gap. Fitch explains that such policies generally cover the outstanding mortgage balance rather than the property’s full value. Cover can also cease after the mortgage has been repaid unless the property owner takes out separate insurance, leaving some properties without comprehensive earthquake protection.
Reinsurance should substantially reduce the amount of insured losses ultimately retained by Colombian insurers, according to Fitch. Property cession across key Latin American markets stood at 64% in June 2026, while insurers generally retain less than 40% of catastrophe-exposed risks. International reinsurers are consequently expected to bear a significant share of the insured losses arising from the earthquake.
This does not mean insurers will be unaffected financially. Fitch says retained claims will still weigh on earnings, while insurers could also incur reinstatement premiums when catastrophe reinsurance cover is used. Differences in the timing of claims payments and reinsurance recoveries could create additional pressure on insurers’ results and cash flows.
Catastrophe reserves provide another layer of protection. Fitch says Colombian regulations limit the use of these reserves to qualifying events such as the earthquake. For all Fitch-rated Colombian insurers, catastrophe reserves exceed the attachment points of their catastrophe reinsurance programmes. Retained losses can therefore be absorbed by these reserves before they reach earnings or capital.
The treatment of reserves after the earthquake will be an area to monitor. Fitch notes that insurers have historically been expected to replenish catastrophe reserves following their use, although the approach after this particular event has yet to become clear. The extent to which insurers use their reserves, the requirements and cost of replenishing them, and any reinstatement expenses will all influence the financial impact.
Fitch says it will continue to track the development of claims as notifications increase, alongside the timing of reinsurance recoveries. The agency will also monitor the potential consequences for renewal pricing and the availability of reinsurance capacity.
Over the longer term, Fitch Ratings says an important question for Colombia’s insurance market will be whether the earthquake encourages greater take-up of standalone earthquake cover. Any sustained increase in demand could help reduce the country’s protection gap, although the extent of such a change will become clearer as the market responds to the event.
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