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Latin America
AM Best: Economic Uncertainty, Record Low Interest Rates Impact Brazil’s Reinsurance Market

The AM Best outlook for the reinsurance market of the South American country remains at negative.
  • April 2021
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CITY LANDSCAPE: Sao Paulo with a view of the Octavio Frias de Oliveira Bridge. In comparison to most economies of similar size, Brazil’s insurance penetration is relatively low—with a correspondingly low level of reinsurance penetration and significant growth potential.
CITY LANDSCAPE: Sao Paulo with a view of the Octavio Frias de Oliveira Bridge. In comparison to most economies of similar size, Brazil’s insurance penetration is relatively low—with a correspondingly low level of reinsurance penetration and significant growth potential.

The following is an excerpt from the Best's Market Segment Report: Market Segment Outlook: Brazil Reinsurance. The entire report can be accessed at

Owing to the COVID-19 pandemic, previously tempered macroeconomic and political uncertainties have resurged, and Brazil has become more vulnerable to the global economy. The reinsurance market continues to grow, given its relatively low penetration and the low primary insurance penetration in the country. However, the segment's growth may be negatively impacted by a more modest capacity to underwrite risks if the financial flexibility provided by the local capital markets dries up and by global risk aversion as international investors and players focus more on their domestic markets. Persistently high government debt has the potential to crowd out investment opportunities in the private sector when interest rates go back up.

Given the corporate nature of the reinsurance segment and its correlation to the domestic economy, losses have grown, with companies feeling the effect of the COVID-19 crisis. Record-low interest rates offer little help to grow capacity through retained earnings, for reinsurers to increase their underwriting activity. As local and global immunization efforts reach critical thresholds, economic growth may resume and Brazil may regain stability. However, when that will happen remains an open question.

Following a significant devaluation of its currency, Brazil now has a low current-account deficit and a solid foreign-exchange reserve position, which offers the potential for future foreign direct investment. Inflation has been under control, with the global pandemic reducing aggregate demand. Brazil ranks in the lower quartile on “ease of doing business” (at 124) by the World Bank and faces a long road with regard to implementing much-needed reforms. Once reforms have been implemented, however, foreign investment may return, bringing stable demand to the economy and to business in general—a key factor for development of the primary insurance market and the natural trickle-down effect for the reinsurance market.

When discussing Brazil's future, two themes come to mind: the country's potential and its macroeconomic instability. Before the pandemic, Brazil appeared to be emerging from its recent economic and political turmoil stronger and better equipped to address the challenges it was facing, which would have led to a thriving reinsurance market to support the country's future economic growth, facilitating prudent risk taking and resulting in improvements in the average person's daily life. Unfortunately, Brazil was once again caught off guard, by the shock caused by the pandemic.

In comparison to most economies of similar size, Brazil's insurance penetration is relatively low—with a correspondingly low level of reinsurance penetration and significant growth potential. However, growth potential doesn't always translate into prudent risk selection or underwriting profitability. Investment income has been a major contributor to the profitability of the country's reinsurance industry in recent years. Just a few years ago, nominal interest rates on Brazilian sovereign bonds were as high as 14% and were sufficient to mitigate underwriting losses. Interest rates are now around 2%, and inflation, in the 3.5%-4.5% range, leading to lower investment income—and underwriting needs to make up the difference. In addition, global companies that send dividends or cede premiums abroad, or are consolidated with operations outside Brazil, are exposed to foreign exchange swings when paying out claims in Brazilian reais. Reinsurers based in Brazil have a competitive advantage by being somewhat insulated from currency fluctuations.

A factor providing ballast for the reinsurance segment had been the evolution of the surety market and, in particular, the development of judicial surety bonds. However, due to political and economic stress, the market for surety products such as performance or bid bonds has largely disappeared, and the pandemic is now putting demand for these products on hold. Judicial bonds have been profitable, but are characterized by significant tail risks, concentration, and accumulation risks that are subject to local jurisprudence. As general economic conditions improve, performance bonds and other traditional surety products should continue to support growth for the surety reinsurance segment. The growth in performance bonds may come from infrastructure projects the country needs for both economic and human development. Specialty and agricultural product lines also have growth potential. Brazil remains a developing economy with a developing (re)insurance regulatory framework that has played a large role in the market and that will continue to evolve and influence the segment's prospects. AM Best believes that a couple of factors in particular could stabilize the reinsurance market. The most notable would be the continuation of meaningful economic reforms, which could facilitate long-term growth and boost confidence both domestically and abroad. Another important factor is underwriting profitability. The ability to generate strong overall earnings mainly from underwriting is critical for a sustainable and prosperous reinsurance segment in Brazil.

Best’s Rankings

Largest 30 Latin American Insurers 2019 Ranked by Gross Premiums Written

(US$ thousands)

Rank AMB # Company Country of Domicile Gross Premiums Written Capital & Surplus
1 85165 Bradesco Saúde S.A. Brazil 5,995,064 2,050,674
2 93357 Amil Assistencia Medica Internacional SA Brazil 5,292,621 3,095,942
3 92225 Sul América Companhia de Seguro Saúde Brazil 4,303,155 1,631,254
4 85612 Grupo Nacional Provincial S.A.B. Mexico 3,609,997 813,194
5 84188 MetLife México, S.A. Mexico 2,925,309 979,852
6 77089 Seguros BBVA Bancomer, S.A. de C.V. Mexico 2,495,763 795,399
7 87168 Porto Seguro Companhia de Seguros Gerais Brazil 2,312,619 984,396
8 85571 AXA Seguros, S.A. de C.V. Mexico 2,136,158 1,015,136
9 78644 Citibanamex Seguros, S.A. de C.V. Mexico 2,119,880 493,972
10 85590 IRB - Brasil Resseguros S.A. Brazil 2,113,539 979,344
11 84189 Brasilseg Companhia de Seguros, S.A. Brazil 2,107,574 347,248
12 89951 Bradesco Vida e Previdência SA Brazil 2,063,562 1,799,391
13 83016 Quálitas Compañía de Seguros SA de CV Mexico 1,820,094 442,055
14 89953 Caixa Seguradora S.A. Brazil 1,712,836 1,055,629
15 93956 Notre Dame Intermédica Saúde S/A Brazil 1,664,434 978,089
16 85870 Seguros Monterrey New York Life SA de CV Mexico 1,604,931 829,093
17 85883 MAPFRE Seguros Gerais S/A Brazil 1,543,370 623,592
18 86287 MAPFRE México, S.A. Mexico 1,493,826 277,750
19 84237 Tokio Marine Seguradora S.A. Brazil 1,470,256 456,102
20 86855 Bradesco Auto/Re Cia de Seguros Brazil 1,429,310 397,656
21 86279 Seguros de Vida Suramericana S.A. Colombia 1,423,320 710,949
22 78007 Seguros Banorte SA de CV Grupo Banorte Mexico 1,408,245 1,261,588
23 77317 Rimac - Internacional Cia de Seg y Reas Peru 1,330,325 635,370
24 77080 MetLife Chile Seguros de Vida S.A. Chile 1,295,824 588,777
25 77770 Zurich Santander Brasil Seg e Prev S.A. Brazil 1,179,885 1,026,318
26 77318 Pacifico Compañia Seguros y Reaseguros Peru 1,115,451 734,376
27 90692 Seguros de Vida Alfa S.A. Colombia 1,099,996 532,841
28 94267 Unimed Belo Horizonte Coop Trabalho Brazil 1,089,981 524,817
29 86238 Instituto Nacional de Seguros Costa Rica 1,072,280 1,897,697
30 77981 Chubb Seguros Mexico S.A. Mexico 1,067,350 399,956


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