Ultimate Loss Ratio in Colombia’s Surety Line: A Strategic Diagnosis

Abstract

This paper presents a comprehensive strategic analysis of the Ultimate Loss Ratio in Colombia’s surety insurance market, based on the “Loss Ratio by Underwriting Year Project” (Siniestralidad por Año de Suscripción - SXAS) led by Fasecolda between 2008 and 2022. The study consolidates information from eleven insurers representing 89% of the market, applying internationally recognized actuarial methodologies such as Chain Ladder, Bornhuetter-Ferguson, and Cape Cod.

Results show that the ultimate loss ratio of the surety line remains structurally high — exceeding 71% on average — with significant peaks in 2008, 2009, and 2018, largely driven by large claims in state-related products. The analysis confirms the long-tail nature of the line, where 90% of incurred losses are reported within 12 years, underscoring the importance of adequate reserving and technical rigor in underwriting.

Beyond its statistical scope, this study positions the SXAS Project as a strategic tool for insurers and reinsurers to anticipate trends, calibrate tariffs, refine risk selection, and strengthen sustainability in a market characterized by high severity, delayed development, and exposure to public sector obligations.