Extracting insurance opportunities amid volatility in Brazil

31 Oct 2016

The combination of a severe recession and a political crisis, which has led to the impeachment of the President, has slowed growth in the Brazilian insurance sector.

Up to 2014,  the sector grew strongly with the annual figure for growth being 15%. However, in 2015 it fell to just below 5% as motor, property and liability insurers suffered from falling incomes and loss of business confidence in the country.
 

Low oil prices reduce opportunities for commercial insurers

The delays on oil exploration and extraction projects,  which have been caused by lower oil prices and the corruption scandal at Petrobras have led to significant cutbacks in investment the oil sector. In a press conference on September 20, 2016 Petrobras’ new chief executive Pedro Parente announced a 25% cut to investment. With Petrobras making up 10% of total Brazilian investment, this has had a significant impact on the flow of construction and exploration projects reaching commercial insurers in Brazil.
 

D&O insurance benefits from Petrobras scandal

While D&O liability insurance has been growing steadily over the past ten to fifteen years as domestic companies gain knowledge about the benefits of these policies from their foreign counterparts, the sector has seen a very large increase over the past year. This is in large part due to the corruption scandal involving the state owned oil major, Petrobras and the ruling Worker’s Party (PT) which has led to a number of senior executives in Petrobras being questioned by investigators and facing the threat of fines and imprisonment. This has alerted executives and companies in Brazil’s business community to the fact that following such a successful action from state prosecutors, they are likely to be bolder and well supported and so they are more likely to face legal action from these parties.  
 

Agricultural insurance suffers from uncertainty over subsidies

Agriculture is a strategically important sector in Brazil’s economy, making up almost one third of output and 42% of total exports. As a result the Brazilian government has a number of agricultural insurance subsidy programs to ensure as much stable and consistent output from the sector as is possible. However, its worsening fiscal position has meant that there is now uncertainty about the funding of the subsidies in the future. Timetric’s report explores how the cut in subsidies could impact upon demand for agricultural insurance, especially at a time when the industry is still recovering from global prices for agricultural goods falling since the 2016 peak.

 

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About this report

This information is taken from the Timetric reports: ‘Insurance Industry in Brazil – Key Trends and Opportunities to 2020’

For more information on this and related reports, please visit www.timetricreports.com/search/insurance/

 

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About Timetric

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For more information and updates, please visit www.timetric.com.

 

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Source: Company Press Release