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  • Writer's pictureThe San Juan Daily Star

Economist: Growing insurance industry is integral part of island’s reconstruction

Economist José Joaquín Villamil, CEO of Estudios Técnicos Inc.

By The Star Staff

Despite inflation and rising interest rates, the insurance sector continues to grow. Still, José Joaquín Villamil, the CEO of economic planning and advisory firm Estudios Técnicos Inc. (ETI) urged the government Thursday to consider measures to support the industry, which he pointed out is crucial in the reconstruction of Puerto Rico’s economy.

“The insurance industry is highly regulated but should also be supported in some areas related to development. In the short and mid-term, economic growth will depend on construction more than anything else,” Villamil said in a presentation to the International Association of Insurance Professionals. “Insurance is essential for investment in construction, including infrastructure. Access to reinsurance services is key, but an adequate legal framework supports and strengthens the industry’s role as an important development infrastructure. This may call for changes in the current legislation and the responsibilities of the Office of the Insurance Commissioner.”

Villamil highlighted that the insurance industry’s gross domestic product (GDP) amounted to $1.45 billion in fiscal year 2021, representing 28% of the financial sector’s GDP. The insurance industry employed 14,000 workers in fiscal year 2021 (32% of finance employment), and has created 1,125 additional jobs since fiscal year 2010. Likewise, the number of establishments in the insurance industry increased moderately, although written premiums have risen notably by $7.7 billion since 2014, he said.

ETI’s report on the insurance industry also noted that the premiums in the property and casualty segments increased more. In contrast, life and disability premiums remained stable in recent years.

Regarding Puerto Rico’s economic outlook, Villamil emphasized that “investment in infrastructure projects will be the primary driver of short-term economic growth.”

“In addition, $2.7 billion of annual debt service savings could help finance public sector capital improvement projects,” he said. “Because of this, the disbursement of reconstruction funds is essential to support short-term economic growth. However, of the $74.2 billion in funds allocated by the U.S. Congress for the reconstruction efforts in Puerto Rico, only $21.7 billion have been disbursed as of January 23, 2023.”

The economist said the government must accelerate the disbursement of funds for reconstruction to continue and for the economy to benefit.

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