Brazil Insurance, Insurance In Brazil

Brazil Insurance, Insurance In Brazil

The insurance industry in Brazil has been growing for the last seven years at rates higher than that of the GNP. In fact, it has doubled since 1994. In 2003, according to industry sector professionals, insurance sales should increase 51%, led by growth in the life insurance segment. In addition to life insurance, car, health, and retirement insurance were respectively the fastest growing sectors.

The market potential is attracting foreign companies. In 1994, 95% of the sector was controlled by Brazilian groups, compared to 65% now held by Brazilian firms. U.S companies' share of the total insurance market is 21%.

The interest of foreign insurers has been driven not only by the stabilization of the economy, but also by the market's size and growth potential. Almost 50% of the South American continent's insurance activity is accounted for by Brazil while the average rate of growth of the local insurance industry since 1993 has been almost 100% in dollar terms.Insurers made pre-tax profits of R$1.5bn during the first half of 2000 (equivalent to $0.8bn at current exchange rates). 

Though operational profits from insurance activities were negligible still investment profits were very healthy. This has been a very familiar pattern in Brazil. Prior to 1994, insurers relied on inflation to provide profits but today the focus is on high investment yields. However, with increasing competition, present few years has shown a greater emphasis on improving operating results with much pressure on improving risk selection as well as on cutting administrative and distribution costs.

High Inflation and Insurance Industry In Brazil

Brazil had a lower rate of insurance penetration relative to developed countries. Insurance represented just 1% of GDP in 1993. By the end of 2001 it represented 2.3% of GDP - still below average levels of 7% in developed countries.

Falling inflation has improved income distribution rapidly, and this has provided a large new customers base for insurers in the recent years. Traditionally, insurance has been aimed at the wealthiest 5% of the population but in the continuing years, insurers have focused on capturing the next 30% of the market, which is equivalent to some 8 million households.