Brazil: Financial Sector Assessment Program-Technical Note on Insurance Sector Regulation and Supervision

IMF Staff Country Reports, November 30, 2018

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The insurance sector has significant potential for expansion and to contribute to economic growth as an important part of the financial sector.
The insurance sector has grown at 10 percent annually over the last 5 years, on average.
The sector remains profitable with high solvency ratios.
Insurance penetration and density are lower than other emerging markets, though the industry has the potential to reach much higher levels of insurance penetration.
A few large conglomerate groups—composed of banks, insurers and investments funds—dominate the insurance sector.

Conglomerate groups account for more than 75 percent of the market share.
The market is concentrated in a small number of large groups combining banking, insurance, and investment activities.

Regulations imposed by the Banco Central do Brasil (BCB) and the Superintendency of Private Insurance (SUSEP) are described as very conservative.
Reflecting these conservative regulations, interlinkages between banks and insurers are limited.
Despite limited interlinkages, material contagion may occur through a reputational channel, adversely impacting the profitability of the linked business.

Low insurance penetration and density relative to other emerging markets represent a growth opportunity for the industry.
Dominance by a few conglomerates suggests potential concentration risks and the importance of robust group-level supervision.
Conservative regulatory stance reduces direct financial linkages but does not eliminate indirect channels of contagion (reputational risk).