Transcript Slide 1

Regional
Watch
Broker Version
brazil
International Markets
Market Intelligence
February 2010
www.lloyds.com/marketintelligence
Disclaimer
brazil: country dashboard
GDP SIZE IN USD BN
AND GDP GROWTH
ECONOMY
Agriculture
7%
1500
1068 1178
Industry
28%
1252
OVERVIEW 2008
GDP SIZE: 10th worldwide (UK ranks 6th)
30%
GLOBAL COMPETITIVNESS: N/A
1000
20%
500
10%
Services
65%
0
0%
2006 2007 2008
INSURANCE
NON-LIFE DWP* 2008
USD 18BN
Construction &
Engineering 4%
Health
31%
LLOYD’S
NON-LIFE GWP 2008
USD 176M
MAT
10%
Misc
8%
30
TOP 5 INSURERS: Porto Seguro, Unibanco AIG,
Seguradora Lider, Mapfre Vera Cruz, Sul America
together control 37% of market share.
30%
15
Property
32%
Liability
46%
20%
13
0
0%
176
DISTRIBUTION
SIZE: 19th for Lloyd’s (UK ranks 2nd)
60%
TOP 5 MAs: write 65% of non-life GWP
KEY CLASSES: MAT and property
150
104
77
0
40%
REINSURANCE: USD 171m (97%)
20%
LLOYD’S MARKET SHARE: = 1.2%
0%
STATUS: Lloyd’s does not have a direct licence.
Lloyd’s is registered as an ‘admitted’ reinsurer.
-20%
2006 2007 2008
Insurance in Brazil has to be placed through a broker. At the
end of 2009 Brazil counted 17,820 registered broking
click forindividually
basic
companies and 19,550
registered active brokers
information
in the non-life sector.
click for detailed
information
Top 5 local broking
companies are: Harmonia, LAZAMMDS, OCS, Rodobens and Securitas Uniao Corretora de
Seguros. Top international broking companies are: Aon,
Guy Carpenter, Willis, JLT.
CATASTROPHES
INSURANCE PENETRATION (2008): = 1.6%
OVERVIEW 2008
GWP SIZE IN USD MN
AND DWP GROWTH
50
MAT
65%
REINSURANCE: USD 1.95bn (8%)
2006 2007 2008
100
Liability 3%
SIZE: 14th worldwide (UK ranks 3rd)
KEY CLASSES: Motor and Health
10%
200
Motor
1% Property
35%
CHALLENGES: structural reforms slowed by
political obstacles, a lack of investment in
infrastructure and high public debt.
OVERVIEW 2008
18
Motor
42%
STRENGTHS: extensive and varied natural
resources, strong manufacturing industry and an
attractive market for foreign investors.
DWP SIZE IN USD BN
AND DWP GROWTH
Property 13% 20
Liability 1%
MAT 6% 10
Credit
3%
EASE OF DOING BUSINESS: 125th worldwide
OFFICE: Type 3, www.lloyds.com/brazil
REGULATIONS
GDP 2008
USD 1,574BN
COMPULSORY CLASSES: no
information on Lloyd’s crystal
REGULATOR OF INSURERS AND
INTERMEDIARIES: www.susep.gov.br
Northern coastal regions susceptible to floods (high), hailstorms (high) & tornadoes (med).
click for basic
Market Intelligence data based on: SUSEP, NATHAN, FENACOR, Lloyd’s Regional Watch, Lloyd’s Exchanging, Global
information
Edge, Swiss RE, IMF, Global Opportunities, CIA world fact book, Exchange rate based on FX History figures.
click for detailed
*DWP: Direct Written Premium. ** MAT: Marine, Aviation, Travel.
information
Disclaimer
brazil: economy (1 of 2)
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Brazil’s economy fared favourably in the global economic crisis of 2009. Thanks to the resilience of its domestic
market and steady foreign demand for its commodities, especially from China, Latin America’s biggest
economy shrank only around 0.2% in 2009, compared to an estimated 4% contraction in the EU and 2.5%
shrinkage in the US.
The region is experiencing a sustained period of strong economic growth, not least through its exposure to the
global commodity boom. Political and fiscal instability have eased in recent years, raising the level of interest of
foreign investors.
THE TUPI OIL FIELD
Following announcements in November 2007 of major offshore deep-water discoveries, Brazil will move from
being self-sufficient to becoming a net exporter. If the government’s early estimates are confirmed- that the
broader area where the recent discoveries were made might hold as much as 70bn -100bn barrels - Brazil will
be able to boast of holding among the world’s ten largest oil reserves in the medium to long term.
The euphoria sparked by Tupi’s discovery is explained by indications that this field may be a large piece of the
major pre-salt layer (oil reservoir found under an extensive layer of salt deep below the sea level) in the Santos
basin, which extends from Rio de Janeiro to Santa Catarina. Although drilling in deep water is expensive
(estimated costs of between USD 70bn and USD 120bn) and risky, Petrobras- which is the operator of the field
and holds a 65% working interest in partnership with the UK’s BG Group (25%) and Portugal’s Galp Energia
(10%)- has developed the ‘know how’ technology to be able to carry out this kind of exploration.
overview
RISKS
Oil prices are currently at historically high levels and could decline substantially by the time commercial
production starts, probably around 2012-2013. However, currently the risk is moderate. Another major risk is
that the field’s potential falls much short of current expectations. Petrobras’s early estimates of new
recoverable reserves of 70bn -100bn barrels may prove exaggerated but there seems to be scope for
optimism. The announcement in early January 2008 of the discovery of the Jupiter gas field in the Santos
basin, which may be the same size as Tupi, has contributed to further cautious optimism among oil analysts.
OIL: PROVEN RESERVES IN BRAZIL IN THOUSAND MN
BARRELS
14
12.6
12
10
8
7.4
6
4
2.8
2
1988
1998
2008
0
Source: http://online.wsj.com/article/BT-CO-20100105-710599.html, Economist.com, Euromonitor Archive, www.bp.com
Disclaimer
brazil: economy (2 of 2)
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AGRICULTURE
Brazil has vast agricultural resources, with two distinct agricultural environments. The first, composed of the
southern one-half to two-thirds of the country, has a semi-temperate climate and higher rainfall, the better
soils, higher technology and input use, adequate infrastructure, and more experienced farmers. It produces
most of Brazil's grains and oil seeds and export crops.
The drought-ridden northeast region and in the Amazon basin, lacks well-distributed rainfall, good soil,
adequate infrastructure, and sufficient development capital. Although mostly occupied by subsistence
farmers, the latter regions are increasingly important as exporters of forest products, cocoa, and tropical
fruits.
Agriculture accounts for 7% of the country’s GDP and employs about 19% of the labour force. Agribusiness
accounts for about one third of Brazil’s GDP.
overview
2009 FACTS
> 22% of the world’s arable land
> One of the top five producers of fruit: 33 mn tonnes a year
> 15.3 mn tonnes of oranges produced annually (1st worldwide)
> 1st sugar-cane (367 mn tonnes)
> 1st coffee (31.1 mn sacks)
> Harvested 50 mn tonnes of soybeans
> Beef (7.5+ mn tonnes), poultry (8+ mn tonnes) and pork (2.5+ mn tonnes)
> The world’s largest commercial herds, with 172 mn heads of cattle
> Brazil is the world's second largest producer of ethanol fuel and the world's largest exporter
> In 2008 Brazil produced 24.5 billion litres (6.47 billion U.S. liquid gallons), which represents 37.3% of the
world's total ethanol used as fuel.
GROWING MIDDLE CLASS
Tax cuts and improved credit conditions amid an aggressive easing in monetary policy and the stability of
spending power for middle and low income households meant that demand for consumer durables continued
through the worst crisis. Consumer incomes have risen across the board, amid stronger growth with low
inflation, which has boosted real wages. There has also been increased government support for low-income
earners under President Lula da Silva. The result has been a sharp increase in consumption and retail
demand.
The volume of consumer credit expanded around 30% in 2009. By 2015, 7.5% of Brazilian households are
expected to have an annual disposable income over USD15k. Its young population (mean age 29.4 in 2006),
makes Brazil one of the most attractive new consumer markets in the world.
Source: http://www.brazilbrand.com/brazil_industry_import_export_agribusiness.htm
Disclaimer
brazil: INSURANCE MARKET (1 of 2)
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NEW BRAZILIAN ENTRANTS
Brazil has attracted new entrants into the insurance market for various reasons: the country’s large economy,
favourable economic prospects, currently low penetration of primary insurance products, and low natural
catastrophe exposure. Entrants also benefit from a well-established industry and clear regulations. Brazilian
GDP increased 15% in 2008 from 2005 and SUSEP projects that the Brazilian insurance industry will grow at
a compound annual growth rate of almost 10% between now and 2012.
overview
BRAZILIAN MARKET PENETRATION
The economic reforms introduced by the Brazilian government in the last years, mainly the economic
stabilisation plan, as well as the deregulation process, the opening of the market to foreign insurers and the
privatisation programme had a profound impact on the insurance market, which in the last few years evolved
from a mere participation of 0.8% in the GDP in 1994 to 2.55% in 2006. Considering capitalisation and open
private pension schemes, this percentage reached 3.24 %. Nevertheless, low insurance penetration rates
somewhat offset the potential that the country’s sizeable economy offers. SUSEPS’s projections indicate
growth, but still at a low rate of 3.4% in 2010. These ratios are in line with or in some cases slightly above
other Latin American countries, but are still far below those of developed countries.
LATIN AMERICA OVERVIEW
The Latin American insurance market displays many of the characteristics of emerging markets - most
notably that of low insurance penetration. It is a relatively small market compared to its geographical size but
demonstrates strong growth potential.
.
0
500
1,000
1,500
2,000
2,500
3,000
ITAU UNIBANCO
PORTO SEGURO
Key market players 2009 ((USD m)
SANTANDER
BRADESCO
MAPFRE VERA CRUZ
SUL AMÉRICA
ALIANÇA DO BRASIL
ALLIANZ
TOKIO MARINE
Loss ratio
LIBERTY
DWP
MARITIMA
RSA
0%
10%
20%
30%
Source: Clyde and Co, ‘Insurance in Emerging Markets 2009-2010’. SUSEP
40%
50%
60%
70%
80%
Disclaimer
brazil: INSURANCE MARKET (2 OF 2)
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NON-LIFE AND LIFE MARKET SIZE (IN BN USD) AND PENETRATION (AS % OF GDP)
INSURANCE MARKET PENETRATION
50
47.5
39
40
NON – LIFE
30.4
30
LIFE
23.9
20
18
10
0
Source: SUSEP
2004
2005
2006
2007
2008
2.73%
2.72%
2.79%
2.95%
2.99%
NON-LIFE PENETRATION
1.49%
1.52%
1.53%
1.55%
1.58%
LIFE PENETRATION
Disclaimer
brazil: classes of business
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GWP SIZE (USD BN) & GROWTH
CLASS OVERVIEW
Other Property
13% Liability
7%
1%
Health
MAT
31%
6%
PROPERTY
Key classes in Brazil are health and motor which
account for 73% of the insurance market
Motor
42%
6
4.25
4
3.25
3.54
4.67
3.86
2
5%
2009
2010
0.4
liability
0.3
0.25
0.28
0.31
2011
0.31
SUSEP FORECAST
2012
0.34
20%
15%
0.2
10%
0.1
5%
0.0
TOTAL MARKET
Liability represents 1% of total market premiums
LLOYD’S
Liability premiums account for 5% of Lloyd’s GWP in
Brazil
0%
2008
2009
2010
1.59
1.73
2011
2.5
1.89
2.0
MAT
TOTAL MARKET
Property represents 13% of total market premiums
LLOYD’S
Property premiums account for 60% of Lloyd’s GWP
in Brazil
0%
2008
1.50
1.5
SUSEP FORECAST
2012
2.04
20%
15%
10%
1.0
5%
0.5
0.0
0%
2008
12.0
motor
15%
10%
0
2009
2010
10.50 11.24
11.91
2011
2012
12.74
13.51
10%
4.0
0%
2009
2010
2011
10.79
12.0
SUSEP FORECAST
TOTAL MARKET
Motor represents 42% of total market premiums
LLOYD’S
Motor accounts for 7% of Lloyd’s GWP in Brazil
7.75
8.60
SUSEP FORECAST
2012
11.98
20%
9.63
15%
10%
4.0
TOTAL MARKET
Health represents 31% of total market premiums
LLOYD’S
N/A
5%
0.0
0%
2008
Source: SUSEP
TOTAL MARKET
MAT represents 6% of total market premiums
LLOYD’S
MAT premiums account for 11% of Lloyd’s GWP in
Brazil
5%
2008
8.0
20%
15%
8.0
0.0
health
OVERVIEW
2009
2010
2011
SUSEP FORECAST
2012
Disclaimer
brazil: reinsurance
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LIBERALISATION
Brazil’s reinsurance sector was given a boost in 2007 after the Brazilian authorities liberalised the
reinsurance market and ended the almost 70-year monopoly of the state owned reinsurers IRB Brazil RE.
LOCAL, ADMITTED AND OCCASIONAL REINSURERS
Complimentary Law 126 issued in January 2007 brought to an end the IRB’s monopoly and provided a new
reinsurance framework. Law 126 created three categories of reinsurers- local, admitted and occasional,
with local reinsurers (including the IRB) being given the right of first refusal or ‘preferential offer’ of at least
60% of the cedant’s total reinsurance cessions in the first 3 years up to 2010, to be reduced to 40%
thereafter.
overview
RESOLUTION 168
In December 2007 the CNSP, the Brazilian National Council of Private Insurance, issued implementing
Reinsurance Resolutions 168 to 173. Resolution 168 which came into effect on 17 April 2008 is the main
resolution and sets out the criteria for registration entry and operation of reinsurers in the new open market.
The reinsurance market in Brazil has now been open for competition for nearly two years. At present there
are in excess of 70 foreign reinsurers registered in Brazil.
LINES OF BUSINESS NOVEMBER
2009
MAJOR REINSURANCE PLAYERS AS
PROPORTION OF TOTAL MARKET 2009
XL RE MAPFRE RE
J MALUCELLI RE
3% 3%
Other 17%
ADMITTED AND
EVENTUAL REINSURERS
4%
6%
IRB BRASIL
Motor 7%
Liability
MUNICH RE 8%
5%
MAT 11%
LLOYD’S
challenges
Property
TOTAL MARKETLLOYD'S
RE
USDm 1,990MUNICH
Eventual
MALUCELLI RE
XL RE
MAPFRE RE
10%
60%
66%
IRB
BRAZIL RE
The opening of so many new reinsurers in Brazil indicates that there is a positive opinion about the prospects
of the local industry. However, considering the small size of the market and the dominance of Brazil Re, it
suddenly looks very crowded. In 2008 total reinsurance premiums in the market were (USD) 2.34 bn, and IRB
Brazil Re booked (USD)1.92bn, 82% if the total. The biggest obstacle facing new reinsurers is how to compete
with IRB Brazil Re. It has been the largest market player for several years and had the advantage of knowing
all the local insurers. As a result international players generally tend to ask for more information than local
insurers are used to providing.
Source: Standard and Poor’s. SUSEP, Clyde and Co, ‘Insurance in Emerging Markets 2009-2010’.
Disclaimer
brazil: DISTRIBUTION
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BROKER DOMINANCE
Non-life insurance, together with certain employer-based programmes such as group life and accident, and
complex life insurance products, is concentrated via intermediary-based markets. Independent brokers
serve the personal automobile and small/mid market commercial customer segments in Brazil, and are
highly unionised and politically influential. The exceptionally high number of brokers in the country, together
with laws that effectively mandate the use of intermediaries, also constitutes a strong collective political
influence against direct marketing initiatives.
overview
RI BROKERS
Before the end of the RI monopoly, brokers were not allowed to intermediate business between insurance
companies and IRB Brazil Re. 50% of IRB Brazil’s reinsurance retrocession was, and still is, through
brokers. Now there are major opportunities for RI Brokers, to serve both insurance companies and
reinsurers established in Brazil. RI Brokers are now allowed to intermediate business within the Brazilian
Market as well as abroad. There must be a legal entity, in accordance with the Brazilian Law. RI Brokers
can place both reinsurance and retrocession.
BROKER SUSPENSIONS AND REINSTATEMENTS
As of August 2009, 9 Reinsurance Brokers were temporarily suspended: BSR, Assure International
Corretagem de Resseguros Ltda, Inter Aerospace Corretora de Seguros Ltda, Pecus Corretora de
Resseguros Ltda, GRB, Cormatt Corretora de Resseguros Ltda, LBS. On 18 November 2008, Susep
reinstated Miller do Brasil, UIB Re Brasil, and Securitas Uniao as registered reinsurance brokers after
showing proof of their mandatory USD 10m in civil liability coverage.
Source: http://www.moodys.com.br/brasil
Disclaimer
brazil: LLOYD’S position
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LLOYD’S GWP SIZE (USD M) AND GROWTH
200
CLASS GWP AS % OF TOTAL DWP
100%
100%
LIABILITY
150
50%
100
PROPERTY
MAT
0%
50
MOTOR
MISC
0
-50%
02 03 04 05 06 07 08
80%
60%
40%
20%
0%
01 02 03 04 05 06 07 08
LLOYD’S GWP
overview
Growth rate decreased between 2002 and 2003 to become negative over 2004. Since 2005 however, the GWP
growth rate has been positive and is on the increase. CAGR since 2002 has been approximately 14%.
LLOYD’S CLASSES
The chart on the right illustrates how the different classes have been faring within Lloyd’s, as a percentage of
total GWP written by Lloyd’s. Lloyd’s key class (MAT) has always contributed the majority of Lloyd’s GWP and
has oscillated between 60% and 75% over the last 8 years. Lloyd’s second largest class (property) has instead
oscillated between 25% and 40% over the last 8 years. Misc contributed a small proportion to Lloyd’s GWP until
2002, after which it stopped contributing. Since 2006, liability has started contributing (very little) to Lloyd’s GWP.
MANAGING AGENTS AND BROKERS
Lloyd’s top 10 managing agents accounts for approximately 50% of GWP, whilst Lloyd’s top 10 brokers place
approx 88% of Lloyd’s GWP.
COVERHOLDERS
These are not permitted under the current Brazilian regulation.
LLOYD’S OFFICE
Lloyd’s office officially opened the new office in April 2009 and already has 6 syndicates.
Source: Market Intelligence calculations based on Xchanging figures
Disclaimer
brazil: catastrophes
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Brazil is less vulnerable to natural hazards than other countries. However, some areas of Brazil are prone to
landslides and flash floods and it is among the countries to have recorded the highest number of lightning
strikes per year anywhere in the world.
BRAZIL:
FLOODS AND LANDSLIDES
Catastrophes
The 2009 Brazilian floods and mudslides were a severe natural disaster principally affecting five Northeastern Brazilian states. Heavy rain in Brazil began in early April 2009, affecting 40,000 people.13,000
people were immediately left homeless. As a result of heavy rains, by May, it was being reported that over
300,000 people were homeless and 44 had been killed. Maranhão was the worst affected state. Thirteen of
the state's municipalities had declared state of emergency. The Amazon River Basin suffered its second
heaviest flood in one hundred years during this period. These were the worst floods Brazil had experienced
in over twenty years. Reconstruction from the floods and mudslides are expected to take 3-5 years with
potential costs amounting to USD 550m.
The October- December floods and landslides in Brazil caused 131 deaths and cost USD 750mn. The most
expensive recorded natural catastrophes in Brazil were floods and landslides in 1988 (February) affecting
Rio de Janeiro and Acre. It was estimated to have cost USD1bn.
overview
EARTHQUAKES
There is no history of earthquake in Brazil and, although the risk is considered to be non-existent, there have
been occasional tremors in Rio Grande do Norte measuring up to 4.0 on the Richter scale. The region is
sparsely populated, however, and has minimal insurance coverage. An earthquake measuring 5.2 on the
Richter scale did, however, affect southern Brazil in April 2008, and was widely felt in Sao Paulo, although
its epicentre was 170 miles (272 km) off the southern coast. Probably fewer than 10% of all policies have
earthquake cover.
0%
Affected Country Area
100%
Earthquake
Volcanic Eruption
Tsunami
Tropical Storm
Winterstorm
Storm Surge
Tornado
Hail Storm
Lightning
Flood
Drought
Frost
Exposure
None
Very High
For further information see:
http://www.lloyds.com/Lloyds_Market/Tools_and_reference/Exposure_Management/
Source: http://mrnathan.munichre.com/
Disclaimer
Disclaimer
This document is intended for general information purposes only. Whilst all care has been taken to ensure the
accuracy of the information Lloyd's does not accept any responsibility for any errors or omissions. Lloyd's does not
accept any responsibility or liability for any loss to any person acting or refraining from action as a result of, but not
limited to, any statement, fact, figure, expression of opinion or belief obtained in this document.