Impact of Mexico’s Cartel Violence on Economy and Insurance Sector: Insights from AM Best

Ongoing violence from criminal groups in Mexico has disrupted travel and attacked businesses in Puerto Vallarta over the weekend, posing significant challenges for the country. Tourism is a vital sector, accounting for approximately 10% of Mexico’s economy, as highlighted by AM Best in a recent commentary.

The violence erupted on Sunday, February 22, in retaliation for the killing of cartel leader Nemesio Oseguera Cervantes. This incident has raised concerns about the safety of tourists and the overall stability of the region.

“Although flights are expected to resume at Guadalajara and Puerto Vallarta’s airports, it may take more time for cruise ships to return, and the recent events could deter tourists from visiting oceanside resort areas on Mexico’s west coast,” stated Carlos De la Torre, managing director of operations for AM Best’s Mexico-based subsidiary.

The long-term impact of this violence remains uncertain. However, ongoing unrest could further complicate the challenges facing Mexico’s insurance sector. De la Torre noted that the country experiences moderate levels of economic and financial system risk, coupled with a high level of political risk.

He also warned that escalating unrest could pose significant challenges for Mexican President Claudia Sheinbaum.

Negative Outlook

AM Best has issued a negative outlook on Mexico’s insurance segment, which heavily relies on reinsurance for risk management and capital planning. De la Torre pointed out that global reinsurers have shown renewed interest in the region, particularly as market pricing trends downward.

“While the insurance market is expected to grow, the rate of growth is likely to slow compared to the previous two years, partly due to a slowing economy,” he explained.

Additionally, the elimination of ‘fiscal credit’—resulting from value-added tax (VAT) paid by insurers to third parties when settling claims—could potentially erase 40% of expected net profits for 2025. De la Torre emphasized that insurers are reassessing their strategies to mitigate the impact of this change, which may lead to a continued decline in financial products in 2025.

The anticipated low-interest-rate environment is expected to add more volatility to insurers’ results in 2026.

Currently, Mexico holds a level 2 travel advisory from the U.S. State Department, advising travelers to “exercise increased caution.” De la Torre noted that while the U.S. and Canadian governments have issued shelter-in-place orders for citizens in Jalisco and Nayarit, AM Best has not observed any disruptions in Mexico City.

Photograph: Pedestrians walk past a charred vehicle after it was set on fire on a road in Cointzio, Michoacán state, Mexico, on Sunday, February 22, 2026, following the death of Jalisco New Generation Cartel leader Nemesio Rubén Oseguera Cervantes, known as “El Mencho.” (AP Photo/Armando Solis)

Topics
AM Best

Ongoing violence from criminal groups in Mexico has disrupted travel and attacked businesses in Puerto Vallarta over the weekend, posing significant challenges for the country. Tourism is a vital sector, accounting for approximately 10% of Mexico’s economy, as highlighted by AM Best in a recent commentary.

The violence erupted on Sunday, February 22, in retaliation for the killing of cartel leader Nemesio Oseguera Cervantes. This incident has raised concerns about the safety of tourists and the overall stability of the region.

“Although flights are expected to resume at Guadalajara and Puerto Vallarta’s airports, it may take more time for cruise ships to return, and the recent events could deter tourists from visiting oceanside resort areas on Mexico’s west coast,” stated Carlos De la Torre, managing director of operations for AM Best’s Mexico-based subsidiary.

The long-term impact of this violence remains uncertain. However, ongoing unrest could further complicate the challenges facing Mexico’s insurance sector. De la Torre noted that the country experiences moderate levels of economic and financial system risk, coupled with a high level of political risk.

He also warned that escalating unrest could pose significant challenges for Mexican President Claudia Sheinbaum.

Negative Outlook

AM Best has issued a negative outlook on Mexico’s insurance segment, which heavily relies on reinsurance for risk management and capital planning. De la Torre pointed out that global reinsurers have shown renewed interest in the region, particularly as market pricing trends downward.

“While the insurance market is expected to grow, the rate of growth is likely to slow compared to the previous two years, partly due to a slowing economy,” he explained.

Additionally, the elimination of ‘fiscal credit’—resulting from value-added tax (VAT) paid by insurers to third parties when settling claims—could potentially erase 40% of expected net profits for 2025. De la Torre emphasized that insurers are reassessing their strategies to mitigate the impact of this change, which may lead to a continued decline in financial products in 2025.

The anticipated low-interest-rate environment is expected to add more volatility to insurers’ results in 2026.

Currently, Mexico holds a level 2 travel advisory from the U.S. State Department, advising travelers to “exercise increased caution.” De la Torre noted that while the U.S. and Canadian governments have issued shelter-in-place orders for citizens in Jalisco and Nayarit, AM Best has not observed any disruptions in Mexico City.

Photograph: Pedestrians walk past a charred vehicle after it was set on fire on a road in Cointzio, Michoacán state, Mexico, on Sunday, February 22, 2026, following the death of Jalisco New Generation Cartel leader Nemesio Rubén Oseguera Cervantes, known as “El Mencho.” (AP Photo/Armando Solis)

Topics
AM Best