Insurance in Brazil

According to Susep’s 10th report on the analysis and monitoring of supervised markets published in May/2022, the Insurance Sector in Brazil has experienced important premium growth. Between January and December 2021, revenues from the players supervised by SUSEP – insurance, reinsurance and private pension entities - reached R$306 billion, while total technical provisions amount for BRL 1.3 trillion in December 2021, an increase of 62% when compared to the last 5 years.

This expansion is also remarked considering the scenario in Latin America, where Brazil accounts for 43,96% of the insurance premium collection, according to data published by the Federación Interamericana de Empresas de Seguros (FIDES).

However, while the insurance penetration in the Brazilian GDP is somewhere around 3,5%, the numbers in developed insurance markets are, at least, double. The USA’s insurance penetration is of 8%, in Japan it is of 10% and in the United Kingdom, the leading country, it is of 12%. 

Despite the fragile insurance penetration and due to the opportunities derived therefrom, the insurance sector in Brazil is undergoing a rapid transformation. On the one hand, a horizontal transformation is notorious, and it can be recognized on the integration involving (i) markets, such as the insurance and the banking sectors, and (ii) new technologies, such as blockchain. On the other hand, a vertical transformation is observed, based on flexibility and incentives granted by the Brazilian Private Insurance Authority – SUSEP (Superintendência de Seguros Privados) and the National Council of Private Insurance – CNSP (Conselho Nacional de Seguros Privados) through recent passed regulations, such as those connected to Open Insurance, Regulatory Sandbox Programs and Insurance Linked Securities, that encourage the insurance market to efficiently interact in the context of a fluid, agile, and challenging world.

Accordingly, integration has arisen as an important trend for the insurance sector in Brazil. Integration with the market, the consumer, the startups (insurtechs), the intermediaries, the technology and the financial sector. 

In this sense, SUSEP and the Brazilian National Bank (“Bacen”), have recently published, jointly, the Resolution No. 05, dated May 20, 2022. This rule establishes the mechanisms for the effective integration between the insurance sector, through Open Insurance, and the banking sector, through Open Banking and thus, establishing the Open Finance (an innovative scenario in which Brazil takes the lead). 

The Open Finance relies on data transfer through Application Programming Interfaces (APIs), that are developed by the regulated companies to connect themselves with the client (ie, the insured) through a private consent path well designed and regulated by SUSEP and Bacen. Expressly, Bacen and SUSEP settled mechanisms for integration between (i) financial sectors, (ii) financial sectors and technology and (iii) financial sectors and the consumer. 

In such context, while CNSP Resolution No. 415/2021 and Circular SUSEP No. 635/2021 establish the open insurance principles, objectives and boundaries, it placed the consumer in the center of the insurance relation and, as such, indicate an important turn around on the insurance sector, which should mostly be guided by the consumer interests. 

Further, when Resolução CNSP nº 415/2021 created the Third-Party Society (Sociedade Iniciadora de Serviços de Seguros), it established the possibility of integration of external entities to the Open Insurance ecosystem to provide services aimed to ameliorate the customer experience. 

For the integration of insurtechs with the insurance sector, CNSP Resolution No. 381/2020 established mechanisms to enable this innovative market to operate temporarily in a simplified regulatory environment, the so-called regulatory sandbox. As a result, 11 startups were selected to integrate this environment in 2020 and, in 2021, the number raised to 21 selected startups. 

Based on the Economic Freedom Act, SUSEP established mechanisms to incentivize product flexibility so that the stakeholders can, although in a regulated environment, differentiate themselves and develop different lines of business. An example is the flexibilization and simplification of P&C insurance rules and, consequently, the extinction of standardized products, both regarding large risks and massive insurance (CNSP Resolution No. 407/2021, SUSEP Circular Letter No. 620/2020 and SUSEP Circular Letter No. 621/2021).

Under such regulatory disruption, the market integration and innovation will bring more efficiency so that the total surplus generated thereby will tend to be greater than the losses naturally incurred by the stakeholders under such new and challenging ecosystem. 

The scenario is optimistic for the coming years. There is room for the private sector to take advantage of the auspicious regulatory moment to integrate and to come up with effective and agile methods to reach the final consumer and face it as the center for the decision making.

‘Integration’ can place Brazil as the leader and pioneer for the insurance sector as it did for Open Finance.

Editor’s note: Mattos Filho maintains a leading insurance department in Brazil. The firm was involved in many of the most significant and regulation-innovative insurance matters, following closely the latest developments of this industry.