Last month, the Uruguayan government made minimum automobile insurance coverage mandatory for all vehicles. Nonetheless, insurers are not obligated to sell the mandatory coverage and some 40% of the nation’s automobiles do not have the obligatory minimum coverage. In other Latin American countries, compliance with mandatory auto insurance has been slow in coming and insurers have struggled to profit from the sector given uncertainty about risk and pricing. Market participants therefore remain cautious about the new sector despite its potential for additional premium.

In a recent Weekly Credit Outlook, Moody’s noted the issues discussed above and concluded that “it will take time to assess whether the credit implication of the new legislation is positive or negative, and which companies are particularly affected.”

For an excerpt from that report focused on the Uruguayan legislation and its potential implications, please click here.