Covid-19 disrupts the reinsurance sector in Brazil

Brazil Reinsurance
Reinsurance has been a growing business in Brazil since the privatisation of the sector started in 2007 but as the Covid-19 pandemic takes its toll on the country’s people and economy the reinsurance sector is not spared.

Brazil is emerging as another hotspot for the virus. Public health experts and professionals have warned that more than 100,000 Brazilians are likely to die from Covid-19. Brazil is said to be particularly vulnerable due to the country’s widespread poverty and social inequality which are expected to fuel an explosive rise in cases.

In addition, president Jair Bolsonaro has regularly downplayed the seriousness of the disease, encouraging Brazilians to return to normality, potentially exacerbating the spread of the virus. The majority of Brazil’s state governors are nevertheless keeping social distancing measures in place. Brazil’s economy is forecast to shrink 4.7% in 2020, according to government estimates.  

Uncertainties around the current situation in Brazil is also affecting the insurance industry, prompting market leader IRB Brasil Re for example to withdraw its profit guidance for 2020. 

More recently, IRB Brasil Re has confirmed that the company was subject to an inspection by Brazil’s regulator SUSEP over potential liquidity issues. In a statement, IRB Brasil Re said the problem relates to exchange rate fluctuations that have taken their toll on its technical provisions as well as an increase in claims provisions during the first four months of 2020.

IRB Brasil Re maintained a monopoly in the Brazilian reinsurance market until 2007 when legislation was passed by parliament to reopen the Brazilian sector to private players. IRB was privatised in 2013 and currently holds around 40% market share. There are about a hundred reinsurers authorized to operate in Brazil, including Munich Re, Swiss Re and Chubb.

The reinsurance sector in Brazil has expanded fast in recent years. During 2019, the reinsurance volume ceded by Brazilian insurers (net of commission) reached BRL 10.13 billion (USD1.84 billion), an increase of 10.3% compared to 2018, according to the latest Austral Report.

Property is the most important reinsurance class by premium in Brazil with BRL 3.47 billion in 2019, up 9% YOY, followed by surety BRL1.42 billion (up 26% YOY) and agriculture with BRL 1.38 billion (up 1% YOY). For reinsurers, the underwriting business has been quite profitable with local reinsurers’ gross loss ratio at 72% in 2019. This does, however, represent a deterioration compared to the 60% reported for 2018. The negative trend was driven by agriculture and liability business. As a result of the gross loss ratio increase, the combined ratio deteriorated to 93.0% from 89.8% in 2018 (A ratio below 100 percent indicates that the reinsurer is making an underwriting profit). Despite the worse combined ratio, the net profit of local reinsurers increased during 2019, driven by investment gains. Overall, local reinsurers reported a net profit of BRL 2.02 billion after BRL 1.40 billion in 2018.

“The level of maturity the reinsurance market in Brazil has reached created the perfect opportunity for Lockton,” says Isabella Ximenez, reinsurance superintendent for Lockton Brazil.

Lockton Brazil has received the approval in March 2020 from the local regulator to operate as a reinsurance broker. The licence covers a wide range of risks, including life and health insurance, property and casualty (P&C) as well as facultative or treaty reinsurance. 

“There are now 16 local, 42 admitted and 85 eventual reinsurers approved to subscribe risks in Brazil. Premium ceded to reinsurers increased by more than 180% in the last 10 years,” Isabella notes.

The reinsurance licence allows Lockton to transfer risks by placing them locally and internationally in all lines of business, including corporate and life and health, both as facultative and treaty. Lockton will initially focus on facultative opportunities and the lines of business that Lockton is particularly strong in such as property, liability, financial lines and cargo.

“The main objective for the creation of Lockton Re Brazil is to cater for the needs of our clients and partners and to offer them the best terms and conditions available in the global reinsurance market,” says Marcelo Elias, Executive Director Risk Solutions at Lockton Brazil. “Our services are particularly relevant in the current hardening market post Covid-19,” he adds.

“Further, the reinsurance business complements well our strategy of accelerated organic growth in risk solutions, which is looking to double the large risk operations in the coming three years.”

Lockton Re Brazil will secure capacity and competitive rates from international reinsurers as well as access their global expertise and experience in the development of facilities, products and coverage. Innovation will be welcome in Brazil since many policies are still following the standard IRB coverage and clauses developed during the time it maintained a monopoly. 

For further information, please contact: 

Marcelo Elias, Executive Director Risk Solutions
Tel.: + 55 (0)11 3371 9066


Isabella Ximenez, Superintendent Reinsurance
Tel: + 55 (0)11 3371 9276

Similar articles

Artificial Intelligence

Artificial Intelligence — not that intelligent after all

Artificial Intelligence (AI) can help automate decision-making for repetitive, simple tasks with predictable outcomes. But even in these circumstances it often needs close human monitoring to help avoid costly errors.

COVID-19 impact on insurers

The COVID-19 impact on insurance

Insurers are facing higher claims in some insurance classes and lower premium in others due to the COVID-19 outbreak and both are likely to have consequences for insurance buyers for example in form of higher premium and the introduction of exclusions.

Working from home

Working from home amidst the COVID-19 outbreak

Wherever possible, companies are letting employees work from home to help slow the spread of the coronavirus. While this is generally a sensible decision, it adds cyber security risks to the company’s network, requiring staff to shift quickly to a new work routine which specifically addresses additional risk protection.


Remote consulting during the Covid-19 pandemic

In the 1920s, Hugo Gernsback, an inventor, science fiction enthusiast and founder of a scientific journal called The Electrical Experimenter, conceived of a device that would permit a doctor to conduct consultations from the comfort of the patient’s own home. The Teledactyl (from the Greek for ‘far’ and ‘finger’) would allow the doctor to see and speak to the patient while two remotely controlled arms would allow the doctor to examine the patient.