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FOR IMMEDIATE RELEASE
OLDWICK - APRIL 30, 2020 12:05 PM (EDT)
AM Best continues to hold a negative market segment outlook on Brazil’s reinsurance sector, citing the country’s vulnerability to the COVID-19 pandemic and the macroeconomic stresses that were present before the outbreak.
A new Best’s Market Segment Report, titled, “Market Segment Outlook: Brazil Reinsurance,” states that the COVID-19 pandemic is translating into record market and foreign exchange volatility, with unforeseen impacts on growth, affecting businesses, services, and consequently, the insurance and reinsurance industries. Additionally, economic stimulus packages may delay economic reforms designed to reduce debt and fuel long-term sustainable growth. From an underwriting perspective, AM Best currently believes losses related to COVID-19 should be manageable, but it will continue to monitor market conditions.
Other contributing factors to the negative outlook are slow and stable growth; expectations tempered due to lingering uncertainty; a declining interest rate environment, leading to lower investment income; foreign exchange fluctuations; and evolving reinsurance market conditions.
Brazil’s potential and its macroeconomic instability are constant themes when discussing the country’s future. Brazil appeared to be emerging from its more recent economic and political turmoil stronger and better equipped to address upcoming challenges. This may lead to a thriving reinsurance market that supports Brazil’s future economic growth, facilitates prudent risk taking and results in improvements for the average person.
Despite the negative outlook, AM Best believes that a couple of factors could stabilize the reinsurance market. The continuation of meaningful economic reforms could facilitate long-term growth and boost confidence both domestically and abroad. The other important factor is underwriting-driven profitability. The ability to generate strong overall earnings from underwriting would go a long way toward creating a sustainable and prosperous reinsurance segment in Brazil.
To access the full copy of this market segment report in English, Spanish and Portuguese, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=296545 .
AM Best is a global credit rating agency, news publisher and data provider specializing in the insurance industry. The company does business in more than 100 countries. Headquartered in Oldwick, NJ, AM Best has offices in cities around the world, including London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.