Canadian Underwriter


October 7, 2011   by Suzanne Sharma

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Brazil has the largest gross domestic product (GDP) in Latin America at about US$1.5 trillion, and expects a growth rate of more than 4% per year in the coming years. Its insurance industry is expected to grow faster than its GDP, according to predictions by industry experts.

The country features not only strong growth but also has a strong presence of foreign insurers and businesses.

“It is an attractive market in the sense that it has a big participation of foreign countries,” says Thomas Holzheu, senior vice president, economic research and consulting at Swiss Re. “The sector was unscathed by the financial crisis, and also the economy is in a sweet spot with strong demand for commodities.”

Holzheu adds that at a time when other markets are facing issues with weak demand and aggressive price competition, this is not the case in Brazil, which has also experienced an increase in capital.

Commercial insurance has strong prospects because of large infrastructure projects and the fact that Brazil is home to some very large Fortune 500 companies that operate internationally.

Marcello Addeo, commercial director at TRR Securitas, network member of Gallagher Global Alliance, agrees. “The economic reforms introduced by the Brazilian government in the last years, mainly the economic stabilization plan, as well as the deregulation process, the opening of the market to foreign insurers and the privatization program had a profound impact on the insurance market. These conditions provide a favorable environment for non-life insurance lines.”

The Superintendence of Private Insurance (SUSEP) is the local regulator for the Brazilian insurance market, which consists of about 160 companies, 72% of which are insurers (the remainder are various service providers), adds Addeo. “In addition to financial and operational oversight, SUSEP has a role in consumer protection and in the resolution of disputes between policyholders and their insurers.”

The only mandatory coverage for property is fire and for motor is DPVAT (compulsory insurance for third party liability). There is no particular limit/minimum established in the local legislation, according to Zurich.

Broker involvement is mandatory in placing business and is protected through regulation. According to Holzheu, brokers will be around for the long run and business volume is growing strongly.

Non-admitted insurance is not allowed in Brazil, which includes difference in conditions (DIC) and difference in limits (DIL) coverages. However, there is an exception that may allow for some coverage to be placed out of the country.

According to Zurich, the exception states that cover may be provided if it is not available in the local market, provided that the placement is not contrary to the local laws and public order. It must be documented that the cover is not available, and at least ten negative formal answers of placement issued in the local market would be required. SUSEP has to be informed in order to be able to officially transfer premium payments from Brazil and claim payments into Brazil (e.g. through the Central Bank of Brazil).

In terms of reinsurance, the Brazilian reinsurance market was opened to foreign reinsurers in December 2008, and this ended the monopoly of the state-backed market leader at the time, IRB Brasil Re, says Addeo.

However, new regulations in December 2010 put certain restrictions on the legislation. Among them is that insurers must place at least 40% of every reinsurance cession through local reinsurers, notes Addeo. Additionally, the insured or reinsurer may not transfer to related companies more than 20% of the premium.


Insurance Snapshot

  • US $30.8 billion non-life premiums in 2010
  • US $32.2 billion life premiums in 2010
  • Just under 40% of Brazilian market is foreign insurance
  • Broker involvement is mandatory
  • Examples of compulsory insurance: motor third-party injury liability, bodily injury to commercial aviation passengers, civil liability for airplane owners

Sources: Axco Insurance Information Services; Thomas Holzheu, senior vice president, economic research & consulting at Swiss Re

More on BRIC countries: For Russia, click here. For India, click here. For China, click here.


Copyright 2011 Rogers Publishing Ltd. This article first appeared in the July/August 2011 edition of Canadian Insurance Top Broker magazine.

This story was originally published by Canadian Insurance Top Broker.