Booming Brazil

Insights for foreign investors

The Brazilian insurance market is in a state of permanent evolution. Within some areas, cultural and market maturity issues means penetration has not yet reached its full potential. However, for property and life protection, where cover should be taken without question, there’s room to reach the same penetration level as other countries. Global insurers have recognised this and seized on the new business development potential in Brazil to offer new products and increase their market share.

Pricing is a challenge in Brazil. Factors such as violence and political or economic instability drive up costs. This leads to clients failing to buy insurance or they opt for policies with limited cover. This is where brokers have an essential role; by supplying clear and objective information, they can help clients better understand the wide range of risks they’re exposed to.

Another area where brokers add significant value in the Brazilian market is their ability to tailor products to address the needs of each specific client. Not only do they ensure global products meet the legal and regulatory frameworks of their country but they also help customers choose the most cost‑effective, needs‑orientated protection packages.

For Samuel Martins, international account executive at MDS Brazil and responsible for managing global programmes for Brokerslink partners, the next two years will be intense for the sector as a whole. He comments: "We’re seeing slow signs of an economic recovery which means we are less of a risk to international investors. For this we can breathe a sigh of relief. While the election period and a change in government generate uncertainty, in general, I believe we will see a growth in different sectors as we move forward.”

Global factors
In Brazil, the insurance market is also impacted by global factors; political and economic crises, terrorism, environmental issues, new technologies and cyber risk. MDS Brazil has recognised however that, after the damage caused by the 2014 economic crisis, a new cycle has begun, with confidence returning and foreign investors again taking an interest in the country.

As a result, the insurance market must develop policies that meet the needs of all companies and comply with Brazilian legislation which, in many cases, represents a significant challenge. In some cases, there is no insurance solution in place to reduce the impact of a particular risk on a business so demand is forcing specialists to develop new innovative solutions as quickly as they can. For example, the political scandals that gripped Brazil over the past few years affected global risk management and, asa consequence, exposure to image and reputation now appears in a significant number of policies. 

Demand is highest from the industry and service sectors. Such matters of image and reputation should be key elements within senior executive and professional protection policies. Samuel states: "The demand for D&O insurance, for example, has grown considerably over the last couple of years. I believe this momentum will continue, especially when you consider the level of demand from multinational corporations in the country.”

Renewable energy businesses also create opportunities for MDS to stand out from the competition and offer innovative solutions, particularly as Brazilian bureaucracy and legislation in this sector requires a trained eye to anticipate non‑apparent risk. Local specialists are therefore indispensable, as off‑the‑shelf solutions do not provide the flexibility that’s needed here.

New and disruptive technologies represent another challenge for brokers. For example, offering insurance to a drone company wishing to operate locally requires specialist knowledge; Brazilian legislation does not regulate this specific technology. 

With MDS being part of Brokerslink, it is able to connect and share insights with brokers from different backgrounds. This enables MDS to offer a wider range of protection and services, meeting the specific needs of each customer and ensuring access to international insurance, reinsurance and risk management programmes. All are developed in coordination with national specialists in each country, guaranteeing a local, personal service.

Samuel concludes: "The role played by MDS within Brokerslink allows us to create meaningful international partnerships and consolidate privileged access to highly specialised services. This enhances the solutions we deliver to market and makes us stand out at a challenging time where ever more customised services are in demand. ”

The local market
An important aspect to consider when developing a global insurance programme is local legislation. Brazil, like so many others, is a non‑admitted country which means it is necessary to issue a local policy to cover risk on national territory. The few exceptions are oil and aeronautical risk.

Victor Garibaldi, International Business Partner at MDS, reminds that world programmes must comply with the country’s terms and conditions and so policies must be issued locally: "In some cases, in order to meet the programme’s specific terms and cover needs, MDS provides local insurers and regulators with the solutions.”

Victor also reveals that MDS takes a corporate risk management approach when underwriting insurance: "Our engineering experts give substantial support to customers in assessing their needs and developing policies to reduce, control and transfer risks.”

To Garibaldi, this sort of work is fundamental to ensure policies cover the quantified risk. The insurance policy is then an accurate reflection of the policyholder’s internal risk control mechanisms, giving the client the necessary peace of mind. Victor also points out this particular approach puts the broker ahead of the competition in several areas: "Our methodology, which is embedded across the business, puts MDS at the top of the class when it comes to insuring property, liability, transportation and financial risk etc.”

When discussing reinsurance in Brazil, Victor explains that, since Complementary Law 126 was introduced in 2007 – opening up a reinsurance market, which until then was virtually monopolised by the Brazilian Reinsurance Institute (IRB) – it has undergone significant evolution. Different classes of reinsurer have been identified, along with offer and retention preferences for each class. He says: "This 10‑year evolution is a direct consequence of Law 126. Not only has the reinsurance market become more competitive, but it has introduced more products and cover with new underwriting dynamics. New players coming into the market also extended the product portfolio.”

One of the market’s most important sectors is health insurance. Victor explains that Law 9.656 introduced in 1998, regulated healthcare plans: "The current level of cover provided by healthcare plans in Brazil is governed by the National Health Agency (ANS), which sets out what procedures and examinations etc the plans must include.”

To Victor, the corporate sector is one of the most significant niches within the health insurance market and tailoring services for human resources managers is key to remaining competitive: "MDSBrazil offers consultancy services to companies using a unique tool to help HR develop and deliver flexible benefit programmes with policies suitable for each employee. In addition, features such as our concierge doctor, second opinion and workplace medicine services, among others, ensure we are taking the lead in the management of company benefit programmes.”

He points out that Brazil, much like other countries around the world, now deals with an aging population. While this positively reflects improving standards of living and new healthcare technologies, the impact on increasing claims and plan costs is driving up insurer costs. 

Victor adds that what’s happening in the country poses a major challenge to MDS – there’s a need to use new strategies to develop tailored solutions for each client and reduce costs. He concludes: "There is no such thing as a formula. We have to study each customer, their population profile and plan use, not just the company healthcare plan, but their overall benefits package. Then we can develop the most fitting solution that reduces costs while at the same time, reassures the end user their benefits have improved.”

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