Recently released market study: Brazil Insurance Report Q3 2013

As of early 2013, the major trends that make Brazil one of the most exciting and dynamic insurance markets globally remain intact. Thanks to the steady fall in interest rates, the general improvement of perceived macro-economic risks and commercial initiatives by the insurance companies themselves, premiums are growing rapidly: this is at a time that leading players in both the non-life and the life segments are achieving high levels of profitability. Over the medium-term the only constraint on growth will be insurers' ability to raise capital to support their businesses.

To a greater extent than their counterparts in other large emerging markets, the Brazilian majors are ready to undertake (very) large scale corporate deals. Bank distribution accounts for about 40% of all insurance sales in the country and, as such, is often a key to success: this explains the strategic partnerships between Zurich and Santander and between MAPFRE and Banco do Brasil, as well as the long-standing commercial links between Porto Seguro and Itau Unibanco. The banks have the imagination to recognise the opportunities that are available from 'open architecture' - the distribution of products that are sourced from unrelated suppliers. However, we also stress the various players are taking active and positive steps to develop their own brands, to invest in platforms and systems, to improve underwriting and profitability and to introduce new products.

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Collectively, the composite insurance groups which dominate Brazil's insurance sector were upbeat about how their operations performed in 2012. In the life segment, premium growth continued strongly in spite of the falling/low interest rate environment and the occasional volatility in financial markets. In the non-life segment, some companies achieved only single digit growth in particular lines: this was usually as a result of deliberate corporate policy to focus on profitability ahead of premium growth. Given the large numbers of uninsured cars, houses and, in relation to possibly substantial private healthcare expenses, people, the increase can continue.

As noted above, it is possible to identify many growth drivers that result from the nature and decisionmaking of the suppliers of insurance products. It is also possible to see many demand-related factors that will drive premiums higher. Life insurance is clearly developing rapidly as a conduit for organised savings in Brazil. Auto-related insurance lines are growing, although we would expect prices and rates to be under downwards pressure for much of the forecast period. Penetration appears to be rising as a result of construction (both residential and non-residential). Most crucially, increased private spending on healthcare means that health premiums - already the largest component of the overall insurance sector - will achieve steady rises over the coming five years.

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