The financial rise of purchasing power allied to the bad quality of services rendered by the government are motivating Brazilian people to increasingly seek for long term investments in private insurance plans.
According to the Ministry of Finance, the Brazilian insurance industry currently counts with 240 operating companies and 60 thousand insurance brokers. Despite of the high number of companies, the market is strongly established as an oligopoly, with ten of the biggest insurers detaining about 80% of revenues.
In 2011, Brazilian insurance activities invoiced BRL 218,6 billion, a 17,1% increase in comparison with the previous year. For 2012, the revenue forecasts an increment of 12,8%, totaling BRL 246,8 billion.
Once dominated by national companies, the Brazilian insurance market now counts with an ever-increasing participation of foreign companies, that in 2010, held 40% of the market share.
The insurance market in Brazil is basically regulated by the following institutions:
National Council of Private Insurance (CNSP): sets insurance policies guidelines and rules, regulating insurers creation, organization, and activity.
Superintendent of Insurance (SUSEP): is an agency subject to the Ministry of Finance, responsible for the supervision of the insurance and private pension market through a solvency index. It also establishes and monitors operational risk limits, supervises technical reserves, regulates open pension funds and insurance brokers.
IRB Brasil Resseguros SA : is a 51% state-owned company that offers re-insurance
New Regulatory Agency: is a new insurance sector regulatory agency that is being created to combine SUSEP, CVM ( Brazil's Security and Exchange Commission) and part of the Finance Ministry that oversees pension fund administration.
Best investment areas
Those are the areas that present the best prospects in the Brazilian Insurance market:
Property and Casualty Insurance
This segment is dominated by auto insurance, and it is easy to know why: in 2009, Brazil had about one car for every four Brazilians. Homeowner’s insurance is still not very purchased, but once interest rates dropped, homes are being more an more purchased on credit, which requires homeowner’s insurance.
Brazil's pension system is composed by public social security, provided by the National Social Security Service (INSS) and private insurers. Despite of the several reforms, the public social security still runs a deficit. Because of that, more an more Brazilians are opting for private plans.
Although Brazil ranks 35th in the life insurance sector worldwide, this area occupies a good portion of the market (about 30%). Group term insurances are the most contracted, but we can see an increasing demand for permanent life insurance products (endowments and whole life).
Despite of its huge number of inhabitants (about 190 million), Brazil has a comparatively small medical insurance market. That is because about 74% of the population receives medical care through the public health system (SUS), which, in Brazil, provides assistance to absolutely everyone.
Reinsurance in Brazil is a market of around US$ 1.3 billion. The biggest opportunities include: partnerships with the IRB and with Brazilian reinsurance brokers, opening a representative office in Brazil.
SUSEP has pointed to potential business opportunities in the insurance market:
Energy Sector: insurance to cover items such as excessive power loads, with policies that guarantee compensation in case of power blackouts, for example.
Rural Activities: like “crop insurance”, covering climate variation, for example.
There are also good opportunities in law firms, service providers, actuarial expertise, software companies, warranty, large risk segment, marine (platforms, cargo ships), aerospace, trip companies.
Getting into the Brazilian Insurance Market
Foreign companies wishing to enter Brazil's insurance market are advised to open a subsidiary, enter into a joint venture or acquire partnership with a local company. According to the legislation, insurance companies must be organized as corporations, request permission to SUSEP to operate, and if approved, compromise to not engage in any other activity than insurance.
As for setting up a new insurer in the country, investors should firstly open an insurance company, which requires an estimated minimum investment of US$ 5 million. It is imperative for foreign insurers to install a representative office in Brazil, in order to operate in the country. That excludes the possibility for the company to set up managing general agents in the territory.
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