Brazil Insurance Report

Monday, February 26, 2018

Brazil-based insurers recorded slightly lower profits last year, even amid the country's economic recovery, as the drastic reduction in the Selic benchmark interest rate damaged their financial results.

Insurance companies reported total net income of 13.4bn reais (US$4.12bn), down 1% from 2016, according to figures from insurance regulator Susep compiled by local consultancy Siscorp for BNamericas.

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The central bank's slashing of the benchmark interest rate has undermined insurers' results due to lower returns on their investment portfolios.

After years of seeing the Selic rate in double digits, insurers parked their cash in governments bonds, guaranteeing a high rate of return - now they must look for a new strategy to increase revenues. Currently, the Selic stands at 6.75% per year, its lowest level ever.

Thus, insurers were unable to capitalize on the Brazilian economy bouncing back to growth in 2017, at a projected level of 1%, ending a two-year recession.

"The reduction in interest rates in Brazil is positive for the country's economy, but in a scenario of low rates we have to work harder to produce more and gain scale," said Bradesco Seguros president Octavio de Lazari Junior, who also was recently named as the new CEO of Bradesco bank.

Bradesco Seguros is looking to generate greater uptake of insurance products among its client base. At the moment, each of the firm's clients has an average of 1.6 products and the company wants to increase that to two products.

"We also want to offer more products in the pension segment and increase our digital footprint," said Lazari Junior, without provide further details.


The insurance industry of Latin America's largest economy is highly concentrated, although there are over 100 local and international players active in the market. Insurers linked with major local banks - Banco do Brasil, Bradesco, Itaú Unibanco and Caixa Economica Federal - dominate the segment in terms of profits and premiums.

The volume of written premiums in January-December period increased 4% to 210.38bn reais, according to Siscorp.

"I believe that in 2018, due to the resumption of economic growth, we will have an insurance market that is set to generate double-digit growth. We should see premiums this year expanding by at least 10%," Alexandre Camillo, president of São Paulo insurance broker union Sincor-SP, told BNamericas in an interview.

Health and vehicles, two main insurance segments, will likely show a positive performance this year. "The improvement of the labor market should contribute to growth in the health insurance segment. In the past few years, with unemployment levels increasing, the health area lost many beneficiaries," said Camillo.

"Meanwhile, the reduction of the Selic rate is likely to give a boost to the vehicle industry. I expect an increase in the sale of vehicles and this will be positive for vehicle insurers as well, which is a very important segment for the sector."

The executive also presented a bullish view for property insurance that is linked with the protection of industrial machines, as businessman resuming their investment plans, along with more demand for surety coverage since it will be a required feature by the government at future tenders.


The financial volume of claims by insurers contracted 3% last year, totaling 57.48bn reais, excluding health segments, according to Siscorp figures. Figures segmented by each insurer were not available.


Brazilian senators are finalizing the review of a bill to allow workers to keep their corporate health plans after retirement.

The bill would guarantee the right to the same conditions that applied when the employment contract expired, assuming full payment even if contributions to the plan are incomplete, the senate said recently on its website.

Currently, most health insurance providers opt to offer group plans via companies, as it is considered more profitable and less risky. Such plans, however, tend to be terminated after a person leaves the job or retires.

Meanwhile, earlier this year, Brazil's private health insurance regulator ANS adopted a new rule to reduce fraud in the corporate health segment.

In recent years, health insurers have focused more on corporate plans and reduced the number of individual plans due to rising costs in the segment.

But during the 2015-16 recession many Brazilians lost their jobs, including their healthcare, and started their own firms in order to obtain coverage. ANS says many small businesses were created with the sole purpose of acquiring health insurance.

The agency is now requiring such firms to share information sent to the tax authority by healthcare providers to detect if such small businesses are operational. At the start of February, a supreme court ruling confirmed that private health insurance providers have to reimburse the country's public health system (SUS).

The ruling covers cases when customers of private health operators have received a treatment by SUS, which could have been provided by the private operator. The reimbursement obligation is part of a 1998 law, but private operators were challenging the rule.

"The rule prevents the illicit enrichment of companies and the perpetuation of a model in which the market for health services is submitted solely to the logic of profit, albeit at the expense of the treasury," said Marco Aurélio, one of the supreme court judges.


The long expected pension reform, considered crucial to control government debt and spending, failed to materialize as the government was not able to line up political support for a proposal that private pension players called for, but which was very unpopular among the country's population.

The reform push is expected to be taken up by the country's new administration following the October presidential election.


The regulation and oversight 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.