OLDWICK, N.J.--(BUSINESS WIRE)--Although Brazil’s overall operating market is not favorable, the country’s reinsurance market has remained resilient in the face of hobbled economic growth, according to an A.M. Best special report.
The Best’s Special Report, titled, “Brazil Reinsurance Market Review,” notes that while factors such as corruption in the country’s state oil company, the drying up of infrastructure projects and fears over the Zika virus have depressed Brazil’s economic woes even further than the damage done by the financial crisis, the majority of local reinsurers reported positive net income in 2015.
IRB Brasil Resseguros S.A. (IRB), the largest reinsurance company in Brazil, saw 35% year-over-year growth in gross premiums in 2015, according to the country’s regulator, with 76% of the premiums from Brazil and 24% from abroad, mainly in the property, rural and life lines. Its return on equity recorded in 2015 was 29%, almost double the 15% reported in 2014. IRB represented 85% of the reinsurance underwriting profit in the country in 2015, and its market share was nearly half of the entire local market.
The other reinsurance market participants’ local balance sheets are currently much smaller than IRB, but as this market continues to evolve, the competitive landscape will change and competition will increase.
Despite ongoing negatives and uncertainty, glimmers of hope for the future remain. Economists’ estimates vary, but some are predicting GDP to be positive in 2017, including the International Monetary Fund, which has forecast 0.5% growth in 2017, with more robust growth in subsequent years. However, the Brazilian (re)insurance market remains highly competitive and despite some niche opportunities, market conditions could hardly be described as hard or hardening. There are indications that proposed regulatory changes could steadily liberalize the Brazilian reinsurance market and potentially help to spread risk more organically and with fewer restrictions. Nevertheless, given the difficulties that exist in Brazil and when combined with the challenging overall global reinsurance conditions, the current reinsurance environment for Brazil remains adverse.
To access a copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=254689.
To see a Portuguese version of the report, please visit http://www3.ambest.com/bestweek/OpenMedia.aspx?mc=237&rc=254689.
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