Brazil insurance report

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Tuesday, September 5, 2017

Brazil's insurance industry is active with over 100 local and international players – but highly concentrated, with the eight largest companies representing more than 80% of the sector in terms of premiums.

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Insurers linked with major banks take a leadership position as they have the advantage of offering products via the banks' branch networks, tapping into a huge customer base increasingly via digital channels.

Top 10 insurance groups in written premiums (excluding health):

Source: Siscorp.

Insurance sector revenues, including savings bonds and excluding health and dental insurances, totaled 118bn reais (US$37.4bn) in H1, up 3.5% from the year-ago period, according to figures from industry regulator SUSEP that were compiled by insurance confederation CNseg.

Revenues linked to private pension plans, through the so-called VGBL and PGBL plans, are losing ground as the ongoing cuts to the country's Selic key interest rate has hurt the appeal of those products as an investment mechanism, according to CNseg. Nevertheless, private pension plans represent around half of total revenues for the insurance industry.


THE PLAYERS

Local and foreign players are allowed to operate after receiving separate authorizations from the finance and health ministries.

Insurance companies in Brazil offer a wide range of life and P&C products. However, private companies are not able to sell insurance to cover workplace accidents or unemployment insurance. These are provided exclusively by the government's national social security institute, the so-called INSS.

The auto insurance market is covered by both the private and public sectors. Vehicle owners are required to purchase compulsory traffic accident insurance, known locally as DPVAT.

Created in 1974, DPVAT provides protection to drivers, passengers and pedestrians in three situations: death, permanent disability and reimbursement of hospital expenses.

In addition to helping victims of accidents, DPVAT insurance also supports the national health fund (FNS) and the national traffic department (Denatran), which use the funding to finance preventive programs.

The regulation and supervision of the Brazilian insurance market are the responsibility of the following watchdogs:

SUSEP (Superintendência de Seguros Privados or superintendence of private insurance): Oversees insurance, private pension, savings bonds and reinsurance companies since 1966.

CNSP (Conselho Nacional de Seguros Privados or National Council of Private Insurance): Implements the rules that regulate the insurance, private pension, savings bond and reinsurance markets.

ANS (Agência Nacional de Saúde Suplementar or national supplementary health agency): Regulates and supervises the health insurance market. The agency also monitors prices, adjustments of health plans, coverage limits, and the procedures of sector players.

SECTOR RESULTS

In the first half of this year, insurers posted combined earnings of 6.45bn reais, down 9% versus the year-ago period, excluding health and pensions operations, according to SUSEP figures compiled by local consultant group SISCORP.

Source: Siscorp.

 The performance of insurance companies has been hurt by Brazil's deep recession and high level of unemployment in the past two years.

With the economy likely to remain very weak throughout the year, insurers are expected to post tepid revenue growth in the coming quarters. The aggressive reduction of the Selic rate has also taken a toll on insurance firms' investment income.

The vehicles segment - which excluding pensions has historically been the largest in terms of revenues - was eclipsed by the health insurance segment last year due to the combination of falling car sales and an ageing population.

Health insurance revenue amounted to 36bn reais (US$11.5bn) in 2016, an increase of 11% versus 2015, while revenues in the vehicles insurance segment fell 2% to 32.6bn reais, according to figures compiled by the insurance brokers' union in São Paulo, known as Sincor-SP.

Insurance and pension billing:

In 2006, the vehicles segment commanded 30% of total insurance premiums and today it has decreased to around 25%. Health has moved in the opposite direction, from 21% to 27% in the past 10 years, according to Francisco Galiza, an economist and adviser of Sincor-SP

BILLS IN CONGRESS

Pension reform - The government is pushing for the approval of a major pension reform in order to reduce public debt and spending.

The reform includes an increase in the minimum retirement age and higher contribution requirements.

Online insurance - The lower house is holding public hearings to analyze the impacts and operations of online insures, who could potentially offer services without the intermediation of brokers.

SUSEP's role - Congress is considering giving SUSEP more decision and regulatory powers, transforming it from a unit that answers to the finance ministry into a full-fledged insurance regulator.

The issue of SUSEP's role is still in the lower house and there is no timetable for a decision on this matter.