Conjuntura CNseg Nº4 | Year 2 | February 2019 | English version

YEAR 2 | No. 4 | FEBRUARY/2019

1

YEAR 2 | No. 4 | FEBRUARY/2019

Contents Introduction ……………………..…………………………... 3 Editorial …..…………………………………………………… 4 Brazilian Economy .………………….………………….... 6 Insurance Market …………………………………………... 13 Revenue Forecast ………………………………….…….…. 2 2

Statistical Section …………………………………………… 29 Regulatory Section ………………………….……………… 33 Legal Section ……………………………….………………… 35 Academic Output on Insurance …………………….. 3 8 Statistical Summary ……………….………………………. 41 Glossary ………………………………………………………… 46

INTRODUCTION

YEAR 2 | No. 4 | FEBRUARY/2019

Introduction CNseg

national and international organizations in the insurance market.

CNseg - National Confederation of General Insurance, Private Pension and Life, Supplementary Health and Capitalization Companies – is a an association that operates nationwide and its members are the Federations that represent the companies operating in the segments of General Insurance, Private Pension and Life Insurance, Supplementary Health Insurance and Capitalization Securities.

Conjuntura CNseg is a monthly analysis of the status of the segments (Property and Casualty Insurance, Personal Insurance, Supplementary Health Insurance and Capitalization Securities), whose goal is to look into economic, political and social aspects that may affect the Brazilian insurance market. In quarter-end months, this publication also brings Highlights per Segment, updated

CNseg’s mission is to bring together the leaders of its members, draw up strategic plans for the sector, cooperate for the enhancement of governmental

Revenue Forecasts, Statistical, Legal and Regulatory Sections, and un update of the Academic Output on Insurance.

regulations, coordinate sector-wide efforts including

debates, promotion and insurance education, and represent its members before public authorities and

National Confederation of General Insurance, Private Pension and Life, Supplementary Health and Capitalization Companies

National Federation of General Insurance Companies

National Federation of Private Pension and Life Insurance Companies

National Federation of Supplementary Health Insurance Companies

National Federation of Capitalization Securities Companies

3

Editorial

YEAR 2 | No. 4 | FEBRUARY/2019

Editorial The statistics for the sector in 2018, with

The average market performance – from a

revenues that reached R$ 245.6 billion, are

more distant perspective – was hindered by

out, and clearly show an insurance market

the performance of Private Pension Plans,

whose segments are quickly differentiating.

which dropped 8.1% because of the high asset volatility last year. Despite that, this segment

The average revenue, excluding

DPVAT1

insurance, dropped 0.2% - remaining virtually

accounts for R$ 108.2 billion revenue in the insurance market.

unchanged – and no longer reflects the

Marcio Serôa de Araujo Coriolano, President of CNseg.

dynamics of the demand for protection, nor

The Capitalization Securities segment – plans

the insurance companies’ strategic

that combine capital accumulation with prize

repositioning shifts.

draws – regained its position throughout the year, ending the year with a 1.2% growth.

The year of 2018 ended, and there is what to celebrate in the performance of a mature Insurance Sector. Year-overyear, the growth was superlative in Personal Insurance Risk-based Coverage (9.4%) – translated in coverage for death and total and permanent disability.

The Property e Casualty Insurance segment, excluding DPVAT insurance, grew expressive 8.1%. The technical provisions reached nearly R$ 1 trillion.

We’ll see it next.

The insurance sector goes on demonstrating its In the segment of Property e Casualty

solvency, a particular and important attribute

Insurance, with R$ 70.1 billion revenues, the

that rewards consumers' trust. The reserves, or

highlights with growth exceeding two digits

technical provisions, that underwrite insurance

are the Transports (16.1%), Rural (11.4%),

policies, reached an annual increase of 9.9%, to

Credit and Guarantees (10.6%), Civil Liability

a record-breaking figure of R$ 995.3 billion.

(10.3%) and Property (10%) lines. These are

That corresponds to approximately 19% of the

the new objects of the search for protection

Brazilian public debt.

by society.

With the expected recovery of the Brazilian The sector’s historic powerhouse, the Auto

economy, resulting from the reforms

segment, recovered the performance

announced by the newly-inaugurated

recorded in 2017, increasing 6%.

government, the outlook is for an even better performance in 2019 – whether in response to

With R$ 41.5 billion revenues, Risk-based

tax reductions or to people’s and companies’

Coverage in the Personal Insurance Segment

preference for the protection against risks of

grew by 9.4%, with strong contribution by the

all natures. The intersegment differentiation in

Credit Life Insurance, in the wake of the

the market should continue, in a mature and

increase in personal and business credit

competitive environment.

facilities.

1DPVAT

– Mandatory Personal Injury caused by Motor Vehicle

4

EDITORIAL

YEAR 2 | No. 4 | FEBRUARY/2019

The graph below shows that the performance

It also shows the recovery of the capitalization

of the growth-leading segments in the

securities segment, which then leveled off.

insurance market (property and casualty and

The data set covers a series of 12 rolling

personal insurance – risk-based coverage) was

months, at the end of the four quarters in the

consistent throughout the year of 2018.

last fiscal year.

NOMINAL REVENUE CHANGE - 12 ROLLING MONTHS 11.1%

10.1% 8.0%

7.7%

7.0%

8.8%

8.1%

3.4%

2.8%

1.9%

0.9% -0.2% -2.1%

9.4%

1.2% -0.2%

-0.8%

-4.9% -8.8%

up to Mar-18 / up to Mar-17

up to Jun-18 / up to Jun-17

up to Sep-18 / up to Sep-17

-8.1%

up to Dec-18 / up to Dec-17

Insurance Sector (ex- DPVAT and Health) Property e Casualty (ex- DPVAT) Personal Insurance – Risk-based Coverage Personal Insurance – Private Pension Plans Capitalization Securities

5

BRAZILIAN ECONOMY

YEAR 2 | No. 4 | FEBRUARY/2019

Brazilian Economy Country Situation Analysis

perception of the current conditions.

An analysis of the latest indicators of the economic

In other words, the confidence may have reached a level

activity and the confidence indexes in the Brazilian

that will only be exceeded if the economy recovers more

economy depicts the particular moment in the Country’s

consistently, which, in turn, seems to be directly related

economic and political scenario. Following months of high

to the good progression of the agenda of economic

instability and volatility caused by the uncertainty related

reforms. The latest indications – amongst which the

to the presidential elections in 2018, there prevailed a

election of the presidents of the National Congress Upper

period in which businesses and consumers quickly

and Lower Houses stand out – are mostly positive,

regained confidence in the Brazilian economy.

indicating there is great chance the government will

approve a vigorous reform within a reasonable timeline, As shown in the graph below, the confidence indexes

which will inspire confidence in the sustainability of the

have remained high, yet, over the past few months, have

public finances and the recovery of the economic growth.

given some signs of stability that reflect, from the side of companies and the financial market, the standstill caused by the wait for the determining event for the Brazilian economy in 2019: the Social Security reform. On consumers’ side, such stability is reflection of an economy that grows at a still slow pace, not enough to boost the labor market, which has weighed down on the

ECONOMIC CONFIDENCE INDEXES

Consumer

Jan-19

Dec-18

Nov-18

Oct-18

Sep-18

Aug-18

Jul-18

Jun-18

May-18

Apr-18

Mar-18

Feb-18

Jan-18

Dec-17

40 Nov-17

80 Oct-17

45

Sep-17

90

Aug-17

50

Jul-17

100

Jun-17

55

May-17

110

Apr-17

60

Mar-17

120

Feb-17

65 Manufacturer

70

130

Jan-17

Consumer

140

Manufacturer

Sources: Fecomercio-SP and CNI

6

BRAZILIAN ECONOMY

YEAR 2 | No. 4 | FEBRUARY/2019

So far, the activity indicators from the end of last year,

highlighted in the analysis of last month’s situation, the

which have been disclosed over the past few weeks,

data have been highly influenced by the effects of the

show that the economy was growing just moderately,

growing popularity of Black Friday on the retail

even if the period of electoral uncertainty had already

indicators, which calls for care when analyzing that

been overcome.

sector in the last months of the year, as there might be a transfer to November of consumption that would

Industrial production, as measured by IBGE’s PIM-PF,

typically occur in other months. According to data from

recorded a 0.2% growth from November to December

IBGE’s PMC (Monthly Retail Survey), retail sales grew

2018, in the series free from seasonal effects.

2.9% in November 2018, after two consecutive months

Nonetheless, the change compared to the same month

of decline. The result is the highest figure for the month

in the previous year was -3.6% and, in the aggregate of

since 2012, indicating the shopping holiday was strongly

the last quarter, there was a 1.3% decline. In 2018, the

taken up by Brazilian consumers. Compared to the same

production of Brazilian secondary and primary industries

month the previous hear, the growth in sales was 4.4%.

recorded a 1.1% increase, the second consecutive

In turn, over the same period, the PMS (Monthly Service

growth year, but representing a slowdown compared to

Survey) also carried out by IBGE, showed a more modest

the 2.5% achieved in 2017. Data of corrugated paper

performance: stability in the margin and a 0.9% growth

shipments, a consistent preceding indicator1 of industrial

against November 2017.

performance, corroborate the downturn over the past few months and cast doubts about the performance of the sector in the coming months: since August, the aggregate change in 12 months has slowed down. This indicator was 3.1% lower in December 2018 when compared to December 2017.

Retail sales, in turn, performed slightly better, yet, as

105

ECONOMIC ACTIVITY INDICATORS (Seasonally adjusted; Index: jan-2015 = 100)

100 95 90 85

Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18

80

Industrial Production

Retail Sales

Services Volume

Source: IBGE

¹ A preceding indicator is an indicator that, because it can be ascertained faster or owing to inherent characteristics, statistically predicts, in time, the behavior of another indicator.

7

BRAZILIAN ECONOMY

YEAR 2 | No. 4 | FEBRUARY/2019

Meanwhile, inflation remained low. IPCA ended 2018 at

Over this year, the unemployment rate may continue to

3.75%, considerably below the target set for the year,

drop slowly, even if the expected recovery comes

4.50%. If it were not for the change in 'monitored prices’

through, because of to the encouragement effect –

– those whose changes are not free, but set by

people who had given up looking for a job notice the

agreements, such as fuels, electricity and public transport

improvement in employability and decide to resume their

– which all ended 2018 with a 6.18% increase, the official

efforts –, which initially increases the number of job-

inflation would have been even lower, since the free

seekers and thus pressures the unemployment rate.

prices – those set, to a large extent, by the conditions of supply and demand – ended the year recording an

There are still questions concerning the formal

increase of only 2.91%.

employment indicators and, consequently, concerning the analyses that may be drawn on the quality of

It is worth noting that inflation remained exceptionally

employment. The clear divergence between the data on

low all through last year even with two significant shocks

regular employment (with records in the work permit)

on prices: the truck drivers’ strike and the currency

from IBGE’s PNAD Contínua and from CAGED (General

devaluation (there was a 15% depreciation in the R$/US$

Register of Employed and Unemployed Workers), that

exchange rate in 2018 compared to the 2017 average).

used to be managed by the Ministry of Labor but is now

The IGP-M, in turn, which had picked up in 2018 and

under the management of the Ministry of the Economy,

ended the year at 7.55% owing to the strong influence

remains without a conclusive explanation. Despite the

that the exchange rate to the dollar bears on that index,

methodological disparities between the administrative

already presents signs of a slowdown, recording a change

record and the sample-based survey, their findings

of only 0.01% in January, and 6.75% in the 12-month

concerning regular employment usually converge, which

aggregate. Such inflation rates, in the absence of

has not happened since at least early 2017. While PNAD

significant external supply shocks, indicate demand is still

Contínua indicates a drop of approximately 350 thousand

weak.

people formally employed in 2018, CAGED points out the

net creation of nearly 530 thousand formal jobs in the The labor market conditions – fundamental to boost the

same period.

increase in consumers' trust – are still challenging, with the unemployment rate dropping at a slow pace, based,

In spite of the slow pace of the recovery of the economy,

mostly, on the increase of informal employment, which

the indications for the coming months are mostly

has less impact on the increase of households’ income

positive. Recently, there has been some improvement in

and tax revenues, which would be important given the

the expectations for the global economy, following the

hardship of public finances. In the rolling quarter ended

strong deterioration in the past months, although the

December 2018, the unemployment rate recorded by the

risks remain and are clear, as pointed out in the latest

PNAD Contínua (Ongoing National Household Sample

update of the World Economic Outlook, published by the

Research) was 11.6%, a decrease of only 0.2 p.p.

IMF (International Monetary Fund) at the end of January.

compared to the same period year-ago. The number of

Firstly, the approach of the Federal Reserve (Fed, the US

discouraged unemployed workers – people who would

Central Banking System) became more dovish – i.e., more

like to work, but gave up looking for a job – reached the

prone to lowering interest rates and withdrawing

highest level in the historical series, at 4.8 million

monetary stimuli –, what is good news for emerging

individuals.

countries such as Brazil, as it indicates better global liquidity conditions.

8

BRAZILIAN ECONOMY

YEAR 2 | No. 4 | FEBRUARY/2019

2.500

CHANGE IN REGULAR EMPLOYMENT

2.000

(In 12 months)

1.500 1.000

(Ks)

500 0 -500 -1.000 -1.500 -2.000

PNADc

Nov-18

Jul-18

Sep-18

Mar-18

May-18

Jan-18

Nov-17

Jul-17

Sep-17

Mar-17

May-17

Jan-17

Nov-16

Jul-16

Sep-16

Mar-16

May-16

Jan-16

Nov-15

Jul-15

Sep-15

Mar-15

May-15

Jan-15

Nov-14

Jul-14

Sep-14

Mar-14

May-14

Jan-14

Nov-13

Jul-13

Sep-13

May-13

Mar-13

-2.500

CAGED

Sources: Ministry of the Economy and IBGE

The Chinese economy continues giving signs of a

magnitude of Brazil’s fiscal challenge. A study by the

slowdown; nonetheless, the country's authorities also

National Treasury shows that when the Central

have seemed more willing to adopt measures to

Government’s primary result is divided between the

stimulate economic activity, if they so deem necessary. A

National Treasury and the Central Bank’s result and the

setback to this slightly less adverse global scenario may

Social Security’s result (RGPS), at December 2018 prices,

come from Argentina, an important trade partner for

the first recorded a surplus of R$ 196.5 billion in 2011,

Brazil, which remains in a very frail economic situation.

while the Social Security had a deficit of R$ 54.8 billion, resulting in a R$ 141.7 billion surplus. Nonetheless, last

Positive signs have also come from the progress of the

year the R$ 77.0 billion surplus from the Treasury and the

Social Security reform. It seems increasingly clear that the

Central Bank countered the Social Security’s R$ 198.0

reform will be wide-reaching and will include various

billion deficit, resulting in a R$ 121.1 billion deficit for the

spheres of society, such as politicians, civil servants and

Central Government.

the military, a group that raises many debates and has 200

and, consequently, the Congress, thus increasing the

150

chance of approval. The presidents of both Houses in clear. That is also reflected, already, in the long-term

167.4

50 -54.8

-50

-59.8

-68.8

-73.1

-36.6

-162.6

-200

-191.9

-121.1

-101.3

-150

-130.5

-100

77.0

61.4

-11.1

43.8

0

-173.7

decreasing.

183.6

-137.9

interest rates2 in the Brazilian economy, which have been

100

-29.3

Congress have already made their support to the reform

196.5

98.6

easier to find support to the reform with the population

123.8

250

141.7

strong presence in the government. As such, it will be

-198.0

-250 2011

The public finance figures for last year demonstrate the

2012

2013

National Treasury and CB

2014

2015

2016

Social Welfare (RGPS)

2017

2018

Central Government

Source: National Treasury

2

Interest rates with longer convexity vortices in the rate’s term structure (ETTJ) estimated for the Brazilian economy and, therefore, affecting investment decisions more directly.

9

BRAZILIAN ECONOMY

YEAR 2 | No. 4 | FEBRUARY/2019

Economic Expectation Follow-up (cutoff: Feb/04/2019)

Forecast for 2019 Scores

Variable

2018 Actuals

12-month Actuals

Current

Previous

4 weeks

13 weeks

Start of the year

Feb/01/19

Jan/25/19

Jan/04/19

Nov/01/18

Jan/04/19

3

GDP

1.13%

1.39%

2.50%

2.50%

2.53%

2.50%

2.53%

2

Industrial Production (quantum)

1.15%

1.15%

3.04%

3.04%

3.04%

3.24%

3.04%

3

Industry GDP

0.93%

1.32%

2.89%

2.89%

2.80%

2.64%

2.80%

3

Service GDP

1.35%

1.52%

2.30%

2.20%

2.20%

2.09%

2.20%

3

Farming and Livestock GDP

-0.34%

0.42%

2.59%

2.59%

2.57%

2.63%

2.57%

2

IPCA

3.75%

3.75%

3.94%

4.00%

4.01%

4.22%

4.01%

1

IGP-M*

0.01%

6.75%

3.92%

4.18%

4.30%

4.51%

4.30%

1

SELIC*

6.40%

6.40%

6.50%

7.00%

7.00%

8.00%

7.00%

1

Exchange Rate*

3.65

3.65

3.70

3.75

3.80

3.80

3.80

2

Public Sector's Net Debt (% of GDP)

53.76%

53.76%

56.35%

56.00%

56.70%

56.40%

56.70%

-12.93

-12.93

-25.00

-26.80

-26.00

-30.00

-26.00

53.59

53.59

51.00

52.00

52.00

49.00

52.00

86.73

86.73

79.50

80.00

79.50

70.00

79.50

6.18%

6.18%

4.89%

4.80%

4.79%

4.80%

4.79%

2 2

2 2

Current Account (US$ bi) Trade Balance (US$ bi) Direct Investment in the Country (US$ bi) Administered Prices

Sources: SGS (BCB) and SIDRA (IBGE) Scores: 1- data as of January; 2- data as of December; 3- data as of September; *2019 actuals

10

BRAZILIAN ECONOMY

YEAR 2 | No. 4 | FEBRUARY/2019

Forecast for 2020 Scores

Variable

2018 Actuals

12-month Actuals

Current

Previous

4 weeks

13 weeks

Start of the year

Feb/01/19

Jan/25/19

Jan/04/19

Nov/01/18

Jan/04/19

3

GDP

1.13%

1.39%

2.50%

2.50%

2.50%

2.50%

2.50%

2

Industrial Production (quantum)

1.15%

1.15%

3.00%

3.00%

3.00%

3.00%

3.00%

3

Industry GDP

0.93%

1.32%

3.00%

3.10%

3.08%

2.60%

3.08%

3

Service GDP

1.35%

1.52%

2.50%

2.50%

2.55%

2.50%

2.55%

3

Farming and Livestock GDP

-0.34%

0.42%

3.00%

3.00%

3.00%

2.85%

3.00%

2

IPCA

3.75%

3.75%

4.00%

4.00%

4.00%

4.00%

4.00%

1

IGP-M*

0.01%

6.75%

4.00%

4.00%

4.00%

4.00%

4.00%

1

SELIC*

6.40%

6.40%

8.00%

8.00%

8.00%

8.00%

8.00%

1

Exchange Rate*

3.65

3.65

3.75

3.78

3.80

3.78

3.80

2

Public Sector's Net Debt (% of GDP)

53.76%

53.76%

58.30%

58.16%

58.65%

58.55%

58.65%

-12.93

-12.93

-37.00

-37.35

-38.00

-39.25

-38.00

53.59

53.59

47.65

49.00

47.25

46.50

47.25

86.73

86.73

80.00

82.44

84.44

76.00

84.44

6.18%

6.18%

4.30%

4.20%

4.00%

4.20%

4.00%

2 2 2 2

Current Account (US$ bi) Trade Balance (US$ bi) Direct Investment in the Country (US$ bi) Administered Prices

Sources: SGS (BCB) and SIDRA (IBGE) Scores: 1- data as of January; 2- data as of December; 3- data as of September; *2019 actuals

The expectations of financial analysts reflect the situation

The median GDP growth forecast for 2019 has recorded

described in the previous section, as summarized in the

slight drops for a few weeks and is at 2.50%, as well as

forecast for the Brazilian economy compiled in the Focus

the forecast for 2020, also at 2.50%. In turn, the median

report, published by Central Bank of Brazil. The optimism

IPCA forecast for the end of this year has been

with the new government, on the one hand, fuels the

systematically lowered and is now (3.94%) below the

expectations of stronger growth in 2019. On the other

4.25% of the middle of the target set by the CMN

hand, the clear signs that the economy remains

(National Monetary Council) for 2019. Projections for the

depressed have been discouraging, at least until the good

future official inflation rates demonstrate that analysts

progression of the reform agenda, especially the Social

still believe they will be on target in 2020 (4.00%) and

Security system, has been ensured.

2021 (3.75%).

11

BRAZILIAN ECONOMY

YEAR 2 | No. 4 | FEBRUARY/2019

The forecast for the exchange rate at the end of this year,

financial market already work with scenarios of further

on the wake of greater optimism towards the economy,

reductions in the Selic rate, mostly in a context of

has also been lowered and came to R$/US$ 3.70. For

approval of the Social Security reform. Such perception

2020, the median forecast has also been dropping and

gains strength when the still great idle capacity of the

was, on the reference date in this analysis, at R$/US$

economy is factored in (the utilization of the industry’s

3.75.

installed capacity, at 72.7%, is considerably below the historical average of 80.7%), as well as the downtrend of

With increasingly lower inflation forecasts for the current

in the core inflation measures3, key variables in Copom’s

year, based on the targets throughout the projected

analyses, as the graph below shows.

horizon, something that had been anticipated in this section in the last publication has happened: the median

The low inflation is the result both of a still weak current

forecast for the basic interest rate, Selic, unchanged at

demand and the adroit control of the monetary policy

7.00% for several weeks, was reduced to 6.50%,

under the Central Bank’s current management, which

indicating the market, today, believes the Central Bank

should – despite the change in the organization’s

will not increase the basic interest rate this year, since at

presidency – be continued, given the profile of the new

its latest meeting, which should be the last before the

chair and the permanence of important directors.

change of presidency of the Central Bank, Copom (Monetary Policy Committee) sustained, for the seventh consecutive time, the basic interest rate at 6.50%.

Nonetheless, several important companies in the

IPCA: AVERAGE OF 7 CORE INFLATION MEASURES (12 Rolling Months)

9% 8% 7% 6% 5% 4% 3% 2% 1% Oct-18

May-18

Dec-17

Jul-17

Feb-17

Sep-16

Apr-16

Nov-15

Jun-15

Jan-15

Aug-14

Mar-14

Oct-13

May-13

Dec-12

Jul-12

Feb-12

Sep-11

Apr-11

Nov-10

Jun-10

Jan-10

Aug-09

Mar-09

Oct-08

May-08

Dec-07

0%

Source: BCB and IBGE

3

See the Glossary section of this publication for a definition of core inflation measure.

12

INSURANCE MARKET

YEAR 2 | No. 4 | FEBRUARY/2019

Insurance Market Performance Evaluation

In the Personal Insurance segment, which ended the year with R$ 149.7 billion revenues, the Risk-based Coverage

In December, according to Susep data, the insurance

(excluding Traditional Plans) recorded yet another month

sector (ex- Health) achieved revenues of R$ 24.1 billion in

of revenue growth (8.0% versus December year-ago) and,

direct insurance premiums, private pension and

with that, the aggregate growth in the year was 10.0%,

capitalization security deposits, which represent a 1.1%

very influenced by the change in credit life insurance

drop compared to the same month in the previous year.

(19.3% in the year), which grew on the wake of the

With that result for the last month of the year, the

recovery of personal and business credit – according to

sector’s revenues in 2018 were R$ 245.6 billion, thus

Central Bank data, after two consecutive years of decline,

recording a 0.7% decline versus the previous year, in

bank loans rose 5.5% in 2018.

nominal terms. Nonetheless, for a sounder comparison, it is befitting to subtract the DPVAT¹ insurance from this

However, revenues of Private Pension Plans in this

figure. After that adjustment , the drop in last year’s

segment continue recording drops in the year-over-year

revenues is 0.2%, indicating stability in the overall

comparisons (-2.7%), thus affecting the sector’s

conditions of the sector.

aggregate results, given their high representativeness.

Products in the Redeemable Life Insurance/VGBL family The full-year

data2

for 2018 confirm the trends in the

were 3.8% lower in comparison to December 2017,

analyses made throughout the year, namely, that the

accumulating a 8.5% decline in the year. Products in the

sector has responded heterogeneously to the economic

Private Pension Plans/PGBL family, however, recovered in

cycle. Part of the sector, influenced by the gradual

part from the slump recorded in November and grew by

recovery of the activity level, has been resilient, with

3.4% in December versus the same month year-ago. Such

strong growth rates, while another part was affected by

result, nonetheless, was insufficient to reverse the results

the greater asset volatility, the extreme uncertainty that

accumulated throughout the year and, as such, the

prevailed in the pre-electoral period, the still high

product ended 2018 at a 4.1% drop. Still, it is expected

unemployment – which reduces the population’s

that the greater stability of the economic conditions and

capability of saving money – and by the all-time low

the debates surrounding the Social Security reform –

interest rates, which directs resources to riskier

which, historically, have worked as an external driver –

investments, in pursuit of higher returns.

will stimulate the demand for Private Pension products throughout this year.

¹ According to Resolution CNSP no. 351/2017, the DPVAT insurance decreased 35% in fiscal year 2018 in all categories (except for category “motorcycles, scooters, cyclomotor vehicles and the like”).

2 December data are subject to later amendments, as the companies supervised by Susep have an extended deadline until delivering the data for January the following year for any resubmissions.

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INSURANCE MARKET

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Revenues from the Property and Casualty (Basic Lines) segment, ex- DPVAT, ended 2018 at R$ 70.1 billion,

The Auto insurance, the most important group in the

increasing 8.1% compared to the previous year. In the

segment, sustained the good results recorded throughout

comparison to December 2017, the growth was more

the year, ending 2018 with a 6.0% growth in the year,

modest, at 2.6%. The highlights are the groups of

influenced by the good performance of automobile sales

Transports (16.1%), Rural (11.4%), Property (10.0%),

in the domestic market.

Credit and Guarantees (10.6%) and Civil Liability (10.3%), all with two-digit growth rates in the year. The

In the Capitalization Securities segment, December

performance of the Transports group was influenced by

revenues reached R$ 1.8 billion, which is a sharp 15.2%

the enactment of the Electronic Bill of Lading (CT-e),

drop compared to the same month in the previous year.

which requires annotation of the Shipment Registration,

With that result, revenues in 2018 were 1.2% higher than

thus ensuring insurance coverage is in place, in addition

2017, performance that may still be considered positive,

to the recovery of the economic growth in itself that,

mostly when compared to the performance of products

albeit modest, prompts services to engage that type of

that may also be used to accumulate reserves.

protection. In the case of the Rural group, there are signs this year’s crops may exceed the “super harvest” of 2017,

Last month, ANS (National Regulatory Agency for Private

which, combined to the dissemination of an insurance

Health Insurance and Plans) published the Q3 2018

culture in the rural milieu, may be behind the increased

financial statements of the companies in the segment.

demand for protection in farming and livestock activities

The net considerations recorded a 10.5% growth versus

already observed last year, given each crop’s production

the same period year-ago, a result that is in line with

cycles and their asynchronies. The prospects for the

those in the first half of last year, and made the full-year

product remain optimistic, despite the increase in the

results change a little: from 10.3% in the aggregate up to

number of claims, which increased 47.1% last year as a

Q2 to 10.4% up to Q3, by the same measure. In the same

result of extreme weather events, such as droughts,

period, expenses on reimbursable events increased by

frosts and floods. Another marked increased in claims

8.6%. It is expected that a stronger recovery of formal

was recorded in the D&O (Directors and Officers)

employment this year – which has already started to

insurance, at 56.9%, which might be associated to the

show in the data from CAGED, as analyzed in the Brazilian

increasing number of cases of officers held liable for acts

Economy section in this publication – will increase the

practiced while exercising their roles.

number of health insurance beneficiaries, especially under medical/hospital coverage.

The contrast in the segment was the performance of the Large Asset Risks group, with an aggregate drop in

The number of health insurance beneficiaries, according

revenues of 2.7% in the year, and the Mortgage

to the latest data from ANS’s Situation Room, was 71.6

Insurance group, which experienced a slump in the

million in December 2018, 2.3% higher than in the same

month of December, plunging the full-year result from

month in the previous year, resulting from changes of

6.2% to -1.7%. Concerning the first, it is a type of

0.4% in the number of medical insurance beneficiaries

insurance with volatile revenues, related to the

and 6.2% for dental-only coverage.

investment in infrastructure, which should benefit, in the medium term, from a more consistent recovery of the economic growth and the implementation of investment projects.

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INSURANCE MARKET

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INSURANCE SECTOR REVENUES (EX-HEALTH) IN 2018, PER SEGMENT (Percent change versus the same period year-ago) 25% 20% 15% 10% 5% 0% -5% -10% -15%

Property and Casualty

Personal Insurance

Dec-18

Nov-18

Oct-18

Sep-18

Aug-18

Jul-18

Jun-18

May-18

Apr-18

Mar-18

Feb-18

Jan-18

-20%

Capitalization Securities

Source: SES (Susep)

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INSURANCE MARKET

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Highlights per Segment Property and Casualty

Following registration of the cargo insurance, in the cases the issuance of an MDF-e is required for interstate

The wheel that spins Transport Insurance

shipments, the insured must deliver the complete file for

that document, also in numerical sequence and prior to the commencement of the trip. The effective inspection

The indicators are striking and indicate a fast-growing segment. The Merchandise Transport

Insurance1

performed by ANTT must be added to that, which came to contribute as freight companies try to conform to the

recorded a 16.1% growth in 2018 and ended the year

new norm, enabling the engagement of the RCTR-C (Land

with a total of R$ 3.2 billion in direct premiums written,

Freighter Civil Liability – Cargo) compulsory insurance.

according to Susep. Several factors influenced that positive performance.

Firstly, it is necessary to highlight the recovery of the Brazilian economy, mostly in the second half of 2018. As per the preview released by the Central Bank, the Gross

Domestic Product (GDP) increased 1.15% last year. If that result is confirmed, it will be the second consecutive increase in the economic activity level.

Transport Insurance also started being sought by companies that did not use to. This improvement in demand is supported, to a great extent, by the recovery of the economic stability, that drives retail and industry sales. This year, even better results than in 2018 may be expected. After all, the increase in sales of durables and goods, which involves from the manufacturer to the end consumer, moves the wheel that spins transport insurance.

Thirdly, the Transports Insurance portfolio must benefit from new regulations passed by Susep and the National Land Transportation Agency (ANTT). The new version of the MDF-e (Electronic Tax Document Manifesto) now requires the insurance policy and registration numbers upon clearing the shipment for transportation. Those documents must be issued in numerical sequence, upon transmission of file containing the Electronic Bill of Lading (CTe).

š The Transport group, in CNseg's definition, includes lines 0523 and 0544 and does not include lines 0623, 0628 and 0644.

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INSURANCE MARKET

YEAR 2 | No. 4 | FEBRUARY/2019

Highlights per Segment Capitalization Securities

proposed.

On the trail of new business opportunities

Performance A trend perceived since the start of 2018, the drop in the

In Q4 2018, the Capitalization Securities market

volume of surrenders of Capitalization Security deposits

mobilized around discussions of the new Regulatory

was one of the sector’s highlights last year. At the end of

Framework introduced by Susep in May. One of the

the last quarter, the decrease recorded was 3.3%, which

initiatives that stood out in the period was the creation of

represented net revenues (revenues minus surrenders) of

program Trilhas FenaCap, launched with a meeting that

R$ 3.6 billion. In tandem with the main economic

discussed the business opportunities created with the

indicators, this result reflected the signs of an improved

regulation of the Awardable Philanthropy (Filantropia

scenario, with the end of the recessive period. The

Premiável) category. With significant attendance by

revenue in the period improved 1.2% and the

market professionals and representatives of charitable

Capitalization Securities reserves increased 0.9%

organizations, the event, held in Rio de Janeiro on

compared to 2017, bringing optimism to the market.

October

31st,

was also attended by Susep experts,

starting a new stage in the relationship between the

More dialog with society

market, the regulatory agency and remaining partners.

In December, at the end of its first institutional campaign On November

26th,

it was the turn of the Warranty Bond

promoted on social media, FenaCap reaped extremely

(Instrumento de Garantia) category to draw all

positive results: 5 million people were impacted on

attentions, at a debate held in the same format as the

Facebook and on high-audience portals by the campaign,

previous meeting. Both were streamed live on the

whose goal was to further awareness of Capitalization

Internet, extending the reach of program Trilhas FenaCap

Securities plans and the dialog with consumers and the

and raising awareness and knowledge of both new

remaining audiences of interest for the market. The

categories.

campaign started in Brazil in July, right after the FIFA World Cup, and focused on the cities of Rio de Janeiro,

At the same time, the works developed by the

São Paulo, Porto Alegre and Distrito Federal. By

Federation’s Technical Committees intensified in the

communicating more often, in a clear and transparent

period. Under the coordination of the Executive

manner, FenaCap has contributed to increasing the value

Management, representatives of all members pored over

perception of the products the market offers, and for

aspects of the regulation considered not very clear – and

that reason it will intensify social media communications

amenable to different interpretations – and there was

in 2019.

permanent information-sharing with Susep. As a result of these activities, the regulatory agency issued in December a circular letter amending important points of the regulation, clarified other points with guidelines and agreed to extend to late April 2019 the deadline to conform products to the new rules, as the market had 17

INSURANCE MARKET

YEAR 2 | No. 4 | FEBRUARY/2019

Highlights per Segment Supplementary Health Insurance

The most important theme within the regulatory quality control process is the Regulatory Impact Analysis (AIR).

ANS commences public consultation on AIR

AIR may be defined as a checklist of procedures that must

be followed during the regulatory process in order to improve the quality of the regulation. The Organization

Public Consultation no. 72 is underway on the website of

for Economic Co-operation and Development (OCDE) is

the National Regulatory Agency for Private Health

the primary methodological reference to perform the AIR

Insurance and Plans (ANS) to collect suggestions from

analysis. In 2018, the Office of the Chief of Staff published

society for the draft of the norm that will set the Agency’s

an AIR Elaboration Manual, fully based on OCDE’s

new regulatory process model. The regulatory process

methodology, which will serve as parameter to establish

encompasses all steps required for market regulation,

and expand AIR in the Brazilian regulatory environment.

from the identification of the problem to be solved by regulation, to the evaluation of a norm’s results.

According to the Manual, AIR must contain: • Identification of the regulatory problem;

Brazil is lagging behind in the debate about the

• Identification of the groups or players affected

regulatory process. The concern about the quality of this

by the problem (stakeholders);

process has been on the agenda of the leading

• Identification of the legal base for operation of

economies in the world since the late 1970s. With

the regulatory agency;

privatizations and concessions, and the ensuing onset of

• Definition of the goals intended to achieve;

the regulation model through regulatory agencies in the

• Description of the possible alternatives of

mid-1990s, the theme also started concerning the

action, including none (the outcome of the AIR

Brazilian society. Yet, only in the 2000s did Brazil adopt a

may be to have no action);

regulatory quality control strategy, with the advent of the

• Possible impacts and comparison of the

Program to Strengthen Corporate Capability for

alternative actions;

Regulation Management – PRO-REG, carried out by the

• Implementation, monitoring and inspection

Chief of Staff of the Presidency of the Republic.

strategy; • Social participation (public consultation or

The Brazilian government is seeking to expand usage of

hearing);

this tool in the country. In addition to Decree no.

• Survey of the international experience on the

9.203/2017, which addresses governance in public

subject, if any.

administration, Draft Bill no. 6616/2016 is moving through the National Congress – the so-called Agency

ANS has performed AIR studies for some years now, but

Law, which seeks to standardize regulatory governance.

with little practical results. The lack of standardization of

The regulatory agencies themselves are actively working

the studies and absence of criteria to measure impacts on

to improve the sharing of information and experiences

stakeholders are recurring problems in the analyses

related to governance and have an articulation network

performed by the Agency. Nonetheless, since 2016, ANS

in place (Radar), aiming at institutionalizing that sharing

has been discussing the

of experiences about the regulatory process.

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INSURANCE MARKET

YEAR 2 | No. 4 | FEBRUARY/2019

standardization of those rules. This process culminates

The effectiveness of the adoption of AIR as a regulatory

with the Public Consultation underway and identifies

enhancement tool does not depend exclusively on the

several practices that would improve the current

compliance with the methodology, but the regulator

methodology. Amongst them, the establishment of two

must actively strive to ensure the AIR will not become yet

levels of AIR, one simpler and one more advanced, and

another bureaucratic formality. The international

the introduction of the so-called Regulatory Result

experience demonstrates there has been difficulty

Analysis (ARR) that, as the name implies, performs an ex-

obtaining data and training to perform accurate cost-

post analysis of the effectiveness of the adopted

benefit analyses in the implementation of AIR. The Public

regulatory measures, as well as of the value of such

Consultation will be open for input until March 19th.

measures.

The draft of the Normative Resolution (RN) undergoing

Public Consultation, as FenaSaĂşde sees it, is an important step towards the best practices recommended by OCDE. Nonetheless, there are adjustments that could improve the proposal, such as the including in every analysis a study of the international experience, as long as there are similar experiences to be considered.

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INSURANCE MARKET

YEAR 2 | No. 4 | FEBRUARY/2019

Highlights per Segment Personal Insurance

The New Social Security Regime shall adopt, according to the proposal submitted by the Government, the following

A new social security regime

guidelines (amongst others):

• assurance of a minimum payment, not below It is worth highlighting the Proposed Amendment to the

the minimum salary, for benefits that replace

Constitution (PEC) no. 06 submitted by the Government

the base salary or income from work, through a

on February

20th,

2019, to the National Congress, as it

solidarity fund, organized and funded as

tackles the social security challenge, which compromises

provided for in the supplementary law that will

the government budget and drains, for the payment of

govern the new regime;

retirement pensions and benefits, funds that might

• Funding based on a defined contribution

otherwise be allocated to health, education, law

regime, once the notional accounts system is

enforcement, social programs, infrastructure, etc.

accepted; • management of reserves by public and private

Amongst the proposals submitted, it is particularly worth

pension companies, authorized by a regulatory

noting Article 201-A, as it provides that the

agency, and ensuring ample transparency of the

complementary law initiated by the Federal Executive

funds, tracking by the insureds, beneficiaries and

Power will establish a New Social Security Regime, of a

assisted persons of the deposited amounts and

compulsory nature and organized based on a Fully

reserves, and information on profitability and

Funded system, in the category of defined contribution

administrative charges;

plans, providing for individual accounts for each worker

• free choice, by workers, of the reserve-

and the accumulation of an individual reserve to pay for

management company or category, and assured

the benefit.

portability; • prohibition against levying, except for payment

Said Law shall define the individuals who will be required

of alimony obligations;

to adhere to the New Social Security Regime (those who

• impossibility of any form of compulsory use of

are not enrolled in the current systems), in replacement

the resources by a federal entity; and

of the General Social Security Regime and Special Social

• possibility of deposits by the employer and the

Security Regime.

worker, federal entity and the servant, with

prohibition of transfer of public resources.

The New Social Security Regime will provide for, as set forth in the above-mentioned supplementary law and as

The rollout of the Capitalization Security regime in the

provided in Article 115 of the Temporary Constitutional

New Social Security Regime is important progress, as the

Provisions Act:

simple sharing scheme, as adopted in the current Social

• unscheduled benefits, ensuring minimum

Security regimes, is unsustainable from a demographic

coverages for maternity leave, temporary or

perspective: an increasingly older population, living

permanent disability and death of the insured;

longer.

• scheduled age-related benefit; and • beneficiary’s longevity risk.

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INSURANCE MARKET

YEAR 2 | No. 4 | FEBRUARY/2019

According to the rationale of PEC 06, “currently, the estimated ratio is two payers for each beneficiary of retirement and death-related pensions. Forecasts of this ratio in the future point to the reduction of this ratio to 1, by around the 2040s, and, as of the 2050s, to below 1, in other words, there will be more beneficiaries than payers in the Social Security system.”

There is no question the simple sharing regime, as currently practiced, will be an unsustainable burden for future generations, compromising the payment of benefits.

The New Social Security Regime – including the fully funded system – in addition to tackling such problem, will also allow, along with the amendments to the current regimes, for future balance in government budget, strengthening domestic savings and allowing funds to be allocated to investments in sectors that are essential to the well-being of the population and to the economic growth.

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REVENUE FORECAST

YEAR 2 | No. 4 | FEBRUARY/2019

Revenue Forecast Macroeconomic Environment

the external variables that are the basis for the revenue forecasting models of the various fields and lines of

Based on the market forecasts compiled by Central Bank

insurance activity.

of Brazil’s Focus Report and univariate statistical models estimated with the data available up until the cutoff¹,

The result of the analysis of those variables, their

every quarter, CNseg's Study and Project

interrelations and the internal coherence of each

Superintendence, assisted by economists Lauro Faria,

scenario are all shown in the table² below, which contains

from Escola Nacional de Seguros (National Insurance

the scenarios elaborated for the main macroeconomic

School), and Luiz Roberto Cunha, from PUC-Rio,

variables used in calculating the forecasts.

elaborates the macroeconomic scenarios according to Proposed values - Scenarios 2019

2020

Pessimistic Scenario

Optimistic Scenario

Pessimistic Scenario

Optimistic Scenario

Actual GDP (change)

2.19%

2.91%

2.45%

3.50%

Actual industry GDP (change)

2.19%

2.91%

2.45%

3.50%

SELIC

8.25%

5.75%

9.25%

5.50%

IGP-M (change)

4.86%

2.00%

6.38%

2.00%

IPCA (change)

4.18%

3.10%

5.94%

3.10%

Industrial production (change)

0.58%

4.92%

1.61%

4.26%

4.00

3.30

4.20

3.40

Exchange Rate (R$/US$)

Source: Intervals elaborated based on Central Bank of Brazil’s Focus Report dated Feb/08/2019.

On this round of forecasts, with the availability of data for

public finances and in the recovery of economic growth.

full-year 2018, the first revenue forecast for the year of

The pessimistic scenario, on the other hand, represents

2020 was drawn. The pessimistic and optimistic scenarios

the opposite: the government is unable to pass the

were shaped around the Social Security reform, which is

reform, or only manages to pass a weak version, which

the major political and economic event of the year. In the

would have little effect on the solvency of public finances.

optimistic scenario, a strong reform is passed within a reasonable timeline, inspiring trust in the sustainability of 1

Feb/08/2019 The set of external variables used in the various revenue forecast models is a lot broader than what is reproduced here, currently counting with approximately 50 time series, all drawn from public databases.

2

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REVENUE FORECAST

YEAR 2 | No. 4 | FEBRUARY/2019

Despite the increase in confidence indexes over the

It is very unlikely that some stimulus to the growth of

past few months, the scenario that we adopt for the

the GDP will come from the government spend

growth of the economy, at least this year, remains

component, given the fiscal crisis the Country is

practically unchanged: the interval of GDP growth,

experiencing and the clear guidance by the current

which last round had been between 2.14% and

administration to fight it – becoming, therefore,

2.89%, is now from 2.19% to 2.91%, practically

incompatible with a scenario of a significant increase

unchanged. It is valid, therefore, to try to understand

in public spend.

the reasons for such stability even with the greater optimism towards the economy both by companies

Exports and imports will probably not drive the GDP

and consumers.

this year, either. The higher exchange rate represents a disincentive to exports (which positively impact

Despite the increase in confidence over the past few months, the economic growth scenario we adopt for 2019 remains practically unchanged

GDP) and an incentive to imports (which, in turn, are

subtracted from the GDP). Also, while the recovering national economy tends to boost imports, the prospect of a declining global economy – as it has been since the middle of last year – sets limitations to the expected growth in exports.

The greatest question, therefore, lies in the behavior of investments. The recovery of companies’ confidence in the economy – which should increase further, if the progression of the Social Security reform proves satisfactory – unquestionably is a stimulus to investing in increasing production.

Better understanding may be gained when we

Nonetheless, the high idle capacity of the economy,

analyze the individual drivers of GDP growth, in each

reflected in the usage of the installed capacity that is

of their components. From the perspective of

still below the average, sets a limit – at least in the

expenditure, the GDP is split between household

shorter term – to the need to build additional

consumption, public administration spend,

capacity.

investments, and balance between exports and imports.

The aforementioned idle capacity, the still slow growth of the economy and the current inflation,

Concerning household consumption, which accounts

considerably lower than expected, all support

for over 60% of the GDP, it is expected to grow still

scenarios with inflation rates generally lower than on

moderately this year, as the labor market –

the previous round of forecasts. Such scenario would

employment and income – is still recovering at a slow

only change significantly in the pessimistic

pace and, to a great extent, through informal jobs,

alternative, in which there would be the prospect of

that not only produce lower incomes, on average, but

substantial currency devaluation, with impacts on

are also prone to being less steady, thus hindering the

inflation through exchange-rate pass-throughs,

planning of household spend and, consequently,

mostly in the case of the inflation measured by the

discouraging consumption.

IGP-M index.

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REVENUE FORECAST

YEAR 2 | No. 4 | FEBRUARY/2019

The scenarios for the basic interest rate reflect the

on the projected horizon is that of the aggregate

previously-described prospects for the inflation rate

GDP, which, in fact, has occurred in the past few

and activity level. Compared to the last round of

quarters. Industrial production, in turn, measured by

forecasts, generally speaking, a lower level is

IBGE’s monthly PIM-PF indicator, as expected, will

expected for the Selic rate. If on the last round of

behave similarly to the Industry GDP throughout the

forecasts the optimistic scenario considered the

year. Nonetheless, it is more volatile than its

possibility that interest rates would increase less than

corresponding aggregate in the GDP. For that reason,

the levels indicated by the market median, or even

in our scenarios, we expect a slightly higher growth

remain at their then-current level, on this round this

for the monthly indicator than for the aggregate of

scenario considers reductions to the Selic rate along

National Accounts in the optimistic scenario, and

this year and the next. Nonetheless, in the pessimistic

slightly lower in the pessimistic scenario.

scenario, the absence of an adequate reform would

generalize the lack of confidence in the economy,

Given the high probability a robust Social Security

would affect risk premiums and devaluate the

reform is approved, we also find it is more likely the

currency, thus deteriorating the prospects for the

actual scenario will be closer to the optimistic than

inflation rate and forcing the Central Bank, in

the pessimistic. If that happens, the economic policy

response, to increase again the basic interest rate.

formulators will also have to deal with the inflow of foreign capital that may occur, trying to direct such

There are some interesting considerations to be

resources to the expansion of the country’s

made about the scenarios for the Industry GDP, an

production capacity.

important variable in the forecast of some groups of products. There are positive and negative forces that

Even in the pessimistic scenario, moderate growth is

will probably affect the industrial activity this year

forecast for the GDP owing to the economy’s high idle

and the coming few years: on the one hand, the

capacity, which would still have reasonable room for

greater growth of the economy should drive up

a merely cyclic recovery. We conclude the risks for

production, mostly in the sectors that supply the

the growth of the GDP, especially in 2020, are

domestic market. On the other hand, the

positive, which should influence favorably the

appreciation of the currency (which boosts imports)

revenues of the products in the Insurance Sector,

and the possible withdrawal of subsidies will probably

which have high correlation with the activity level in

limit the growth of this sector. Therefore, we believe

the economy.

the best scenario for the growth of the Industry GDP

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REVENUE FORECAST

YEAR 2 | No. 4 | FEBRUARY/2019

Forecast Results The table below shows the results of the forecast based on data up to Q3 2018 for ANS and December 2018 for Susep. It is also possible to compare the current results with those from the last round of forecasts, in the next table.

Revenue Forecast for the Insurance Sector - nominal change PROPERTY AND CASUALTY Auto Property Insurance Mass Large Risks Engineering Risks Mortgage Transports National Transport International Transport Carrier Credit and Guarantees Extended Guarantee Civil Liability Rural Maritime and Aircraft Other PERSONAL INSURANCE Risk-based Coverage Group Insurance Individual Insurance Traditional Plans Private Pension Plans VGBL family PGBL family Traditional Plans Capitalization Securities HEALTH* SECTOR (ex- DPVAT) DPVAT SECTOR

Current Forecast (2019/2018)

(2020/2019)

2018 Revenue (billion R$) 70.13 35.89 11.97 9.02 2.65 0.30 3.71 3.15 0.92 0.54 1.69 4.22 2.97 1.77 4.59 0.72 1.13 149.73 41.49 29.04 8.94 3.51 108.24 97.63 9.78 0.83 21.01 199.99 440.85

Pessimistic Scenario 4.5% 5.4% 4.8% 3.9% 9.5% -8.5% 4.9% 3.4% 5.9% 6.7% 1.0% -1.5% 0.7% 3.5% 7.7% -3.9% -1.2% 5.9% 6.9% 8.6% 3.1% 2.0% 5.5% 5.2% 8.9% 0.3% 0.1% 5.6% 5.2%

Optimistic Scenario 8.3% 7.0% 9.0% 8.3% 12.2% 2.0% 10.4% 7.2% 10.8% 12.6% 3.5% 6.0% 14.2% 6.1% 14.7% 4.9% 8.0% 7.0% 9.4% 9.3% 10.7% 7.6% 6.0% 5.7% 9.8% 0.3% 2.8% 8.9% 7.8%

Pessimistic Scenario 6.4% 7.1% 7.7% 8.9% 5.0% -7.5% 4.1% 1.6% 0.6% 8.1% -0.1% 7.0% 0.3% 8.0% 8.3% -2.8% 0.2% 2.5% 7.4% 7.4% 8.5% 4.8% 0.6% 0.3% 4.3% -7.5% 2.1% 8.0% 5.6%

Optimistic Scenario 11.1% 9.6% 11.8% 13.6% 6.2% 6.2% 11.9% 6.9% 8.2% 21.9% 1.1% 18.6% 15.0% 10.7% 13.9% 7.0% 15.1% 8.4% 12.2% 11.2% 16.6% 9.5% 6.9% 6.2% 14.1% 1.3% 5.3% 11.4% 10.1%

4.69 445.55

-62.8% 4.5%

-61.3% 7.1%

0.5% 5.6%

4.5% 10.0%

Note: DIOPS (ANS) - Data as of Q3 2018 SES (SUSEP) - Data as of December 2018 Account 311 (Net Considerations / Withheld Premiums) is used for the revenues from the Health segment.

Because of methodological differences in the treatment of the raw database, data from ANS may be presented here differently and not considering specific adjustments performed by FenaSaĂşde.

Updated in February 2019. * Value forecast for 2018.

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REVENUE FORECAST

YEAR 2 | No. 4 | FEBRUARY/2019

Revenue Forecast for the Insurance Sector nominal change PROPERTY AND CASUALTY Auto Property Insurance Mass Large Risks Engineering Risks Mortgage Transports National Transport International Transport Carrier Credit and Guarantees Extended Guarantee Civil Liability Rural Maritime and Aircraft Outros PERSONAL INSURANCE Risk-based Coverage Group Insurance Individual Insurance Traditional Plans Private Pension Plans VGBL family PGBL family Traditional Plans Capitalization Securities HEALTH* SECTOR (ex- DPVAT) DPVAT SECTOR

Previous Forecast (2019/2018)

(2020/2019)

2018 Revenue (billion R$) 70.13 35.89 11.97 9.02 2.65 0.30 3.71 3.15 0.92 0.54 1.69 4.22 2.97 1.77 4.59 0.72 1.13 149.73 41.49 29.04 8.94 3.51 108.24 97.63 9.78 0.83 21.01 199.99 440.85

Pessimistic Scenario 6.6% 8.3% 4.7% 4.7% 6.3% -11.4% 8.7% 5.1% 4.2% 5.0% 5.6% 1.0% 7.4% 7.7% 5.4% -2.1% -7.1% 4.2% 6.1% 7.5% 1.2% 6.6% 3.4% 3.8% 0.1% -2.7% -0.5% 8.6% 6.3%

Optimistic Scenario 8.1% 8.9% 5.8% 5.8% 7.2% -7.1% 10.1% 8.6% 9.0% 7.8% 8.6% 2.1% 15.7% 8.3% 9.1% 2.6% -2.6% 5.5% 8.4% 9.2% 5.7% 8.8% 4.4% 4.6% 2.6% 0.6% 8.6% 10.6% 8.4%

Pessimistic Scenario -----------------------------------------------------------

Optimistic Scenario -----------------------------------------------------------

5.94 428.95

-----

-----

-----

-----

Note: DIOPS (ANS) - Data as of Q3 2018 SES (SUSEP) - Data as of December 2018 Account 311 (Net Considerations / Withheld Premiums) is used for the revenues from the Health segment.

Because of methodological differences in the treatment of the raw database, data from ANS may be presented here differently and not considering specific adjustments performed by FenaSaĂşde.

Updated in February 2019. * Value forecast for 2018.

26

REVENUE FORECAST

YEAR 2 | No. 4 | FEBRUARY/2019

The results achieved demonstrate that the revenue

pessimistic scenario, thus widening the forecast interval

growth interval forecasts in 2020 are, generally speaking,

compared to the last round to between 4.5% and 8.3%.

broader than those forecast for 2019, as it would be

As such, the growth forecast for this segment is still

expected, reflecting greater uncertainty associated to the

above the expected inflation rate. Such growth should be

longer forecast horizon. For this year, for the insurance

well-distributed across products, with expected drops

sector, ex- DPVAT, growth between 5.2% (pessimistic

this year only in the pessimistic scenario and for

scenario) to 7.8% (optimistic scenario) is forecast. For

Engineering Risks, in the Asset group, DPVAT, Credit and

next year, the forecast is from 5.6% to 10.1%. Particularly

Guarantees and for the Maritime and Aircraft group. The

for 2019, excluding the DPVAT insurance impacts results

expectations for the Transport group, despite lower than

significantly, since, for more than a year now, CNSP

in the last round of forecasts, is still positively affected by

(National Private Insurance Council) has approved

the introduction of the Electronic Bill of Lading (CT-e),

reductions between 56% and 79% on the premium

which requires indication of the shipment registration,

charged for this insurance line, depending on the

ensuring it will have insurance coverage. It is also worth

automobile category.

noting the increased revenue forecast for Rural Insurance, which has performed favorably over the past

The past few months have been marked by a divergence

few months. It is expected that this product will gain

between the improved expectations and the confidence

more space due to the occurrence of adverse weather

in the economy, caused by the end of the uncertainty

events that will boost the search for protection and

associated to the presidential elections, and the

increase subsidies. On the other hand, the performance

publication of several indicators showing that the current

of the Auto insurance, albeit positive, will probably be

situation of the economy is still fragile and that its

below what was expected on the last round of forecasts

recovery has been very slow, as emphasized in the

due to a less optimistic scenario concerning sales of new

description of the scenarios used for this round of

automobiles.

forecasts. Thus, despite greater optimism, today it is

believed that the economy will start 2019 less thriving

Generally, it is forecast that the trends identified for this

than expected, and this will probably affect the

year will remain or even increase in 2020.

performance of the year as a whole. Therefore, compared to the previous forecast (which did not include

In Personal Insurance, the forecast for the performance

the year of 2020), the revenue growth forecasts for this

of the Risk-based Coverage segment this year remained

year are generally lower and with wider intervals on this

very favorable, with an increase in the forecast growth, in

round. Another factor affecting the results was the

the wake of the good result recorded last year. The

prospect of lower inflation, once the forecasts consider

forecast for 2020 indicates that the trends observed in

nominal growth rates.

the past two years will probably increase, for the expectation of greater dynamism in the economy. For

The revenue forecast for the segment of Property and

Private Pension Plans, after one year of decline and

Casualty (Basic Lines) was amongst the hardest hit by the

adverse results, it is now expected revenues will resume

effects of the dynamics described in the previous

growth, driven by the heated debate surrounding the

paragraph. For 2019, there was an increase in the

Social Security reform – which will probably work as an

forecast for the optimistic scenario and a decrease in the

external driver – and for the recovery, albeit slow, of income and employment.

27

REVENUE FORECAST

YEAR 2 | No. 4 | FEBRUARY/2019

The below-expectations results for the Capitalization

loss ratio on the forecast expenses with assistance, the

Securities segment throughout last year, mostly in the

revenue growth forecast for this segment was lowered,

last month, significantly lowered the revenue growth

influenced both by the lower inflation rate expected –

forecasts for 2019 in the optimistic scenario, given the

that would put less pressure on costs – and by the less

inertia revenue series typically present. On the other

optimistic scenario for the labor market, since the

hand, the forecast in the pessimistic scenario had some

performance of the Supplementary Health Insurance

improvement, as the regulation of the Awardable

segment – particularly the number of beneficiaries in

Philanthropy (Filantropia Premiável) and Warranty Bond

medical insurance plans – is related to the dynamics of

(Instrumento de Garantia) categories is expected to

income and employment, which have recorded below-

create new business opportunities in the segment, as

expectations results, especially concerning the creation

discussed in section “Highlights per Segments -

of formal jobs, as analyzed in the Brazilian Economy

Capitalization Securities”. To those new opportunities,

section in this publication. For 2020, the forecast of

add the expectation for a more booming economy,

stronger growth is explained mostly by the more robust

resulting in more optimistic forecasts for next year.

recovery expected for the formal labor market.

There were changes in the revenue forecast for Supplementary Health Insurance compared to the last round. Resulting from the application of the expected

28

STATISTICAL SECTION

YEAR 2 | No. 4 | FEBRUARY/2019

Statistical Section Effects of using the national calendar in the seasonal adjustment of revenue series for insurance products1 Rationale

other words, it may take place in different months –

February or March). On the other hand, in the US, a The effect of seasonal factors on time

series2 makes

their

holiday that does not exist in Brazil, the Thanksgiving Day,

analysis more complex. Seasonality is the result of

has great influence on the local economy. Thus,

oscillating movements of identical periodicity that

performing the adjustment of Brazilian time series

happen in the same period every year, such as, for

automatically using those packages may lead to deficient

instance, regular changes in weather or school holidays.

adjustments, since calendars may exert effects of two

Failing to consider the seasonality effects on a variable in

types a the moment we try to estimate the effect of

an analysis may lead to inaccurate – or even

seasonality on a time series: 1) the number of business

inappropriate and incorrect – conclusions.

days in each month, and 2) the effect associated to the impact in itself that a certain holiday has on the series –

The presence of seasonality is very common in

in other words, not the effect caused by fewer business

macroeconomic time series and in several sectors of the

days, but rather the specific effects caused by a holiday,

economy. The insurance sector – at least a better part of

such as, for instance, Easter on chocolate sales or

its branches and groups – is no exception. The revenues

Carnival, in Brazil, on the sales of feathers, paillettes and

of many products are known to be seasonal, i.e., tend to

streamers.

be higher or lower in given months or quarters, with weak dependence on the general economic conditions and all other factors that may affect a product’s revenues over time.

Most statistical packages used to perform the deseasonalization of time series take the North American calendar as reference for the adjustment – which differs significantly from the Brazilian calendar. For instance: in Brazil, Carnival is an important and moving holiday (in

1

We thank the contributions made by Lauro Faria (Escola Nacional de Seguros) and Tabi Santos (FenaSaúde) in the elaboration of this Section.

A time series is a series of dada points indexed in time order. Formally, a sequence of random variables indexed in time is called stochastic process.

A time series, thus, is the execution of a stochastic process (WOOLDRIDGE, 2006).

2

29

STATISTICAL SECTION

YEAR 2 | No. 4 | FEBRUARY/2019

Objective Ten products were selected from the revenue series In this exercise, acknowledging the existence of

generated by CNseg based on Susep data. Therefore, the

seasonality in the sector’s revenues, we attempted to

study includes part of the insurance sector without

estimate, for a selected group of products, whether

health. The sample is monthly and started in January

changes in the number of business days in a month have

2008, ending in December 2018. It has, therefore, 132

significant impacts on the revenues through the inclusion

points for each revenue series. We chose not to include

of the Brazilian calendar in a statistical seasonal

Supplementary Health Insurance in this segment, owing

adjustment application originally developed with a

to its different periodicity (quarterly) and smaller sample.

foreign calendar. Also, we attempted to estimate whether important moving holidays in the national

The chosen products and groups were the following:

calendar exert some effect, in order to correctly isolate and estimate the influence of each of those components,

•

Auto

in addition to the seasonality per se, on the revenues of

•

Homeowners

insurance products .

•

Commercial Multiple Peril

•

Transports

•

Credit and Guarantees

•

Extended Guarantee

There are countless methodologies to perform seasonal

•

Credit Life Insurance

adjustments, all with specific advantages and limitations.

•

Travel

As an example of the available methodologies that might

•

Redeemable Life Insurance/VGBL

be applied, we mention Seasonal Dummies, Holt-Winters,

•

Capitalization Securities

Methodology

Structural Models, Dainties, TRAMO/SEATS and the methods in the X-ARIMA family that, in its X12-ARIMA version, are amongst the most used by several

Results

institutions and official statistics agencies, such as IBGE (Brazil), U.S. Census Bureau (US), Eurostat (EU), The

The results obtained demonstrated the importance of

Office for National Statistics (UK) and Statistics Canada

taking the national calendar into consideration when

(Canada) (FERREIRA, GONDIN and MATTOS, 2015).

performing seasonal adjustments through statistical software packages. The table on the next page

In this study we will use the X13-ARIMA-SEATS

summarizes the results obtained, comparing the findings

methodology, developed by the U.S. Census Bureau in

of quality tests of an adjustment performed automatically

partnership with Banco de España and made available to

compared to those of an adjustment that adopts the

the public through the R statistical package software. It is

Brazilian calendar.

a combination of the X12-ARIMA and the TRAMO/SEATS methods, added of improvements such as series of new diagnostic tools that help users detect and correct discrepancies in the adjustment.

30

STATISTICAL SECTION

Seasonality in original series

Seasonality in adjusted series

Influence of business days

Influence of moving holiday (Easter)

Influence of at least one outlier

Auto

***

---

***

**

---

Homeowners

***

---

***

*

***

Commercial Multiple Peril

***

---

***

---

---

Transports

***

---

---

---

---

Credit and Guarantees

**

---

---

---

***

Extended Guarantee

**

---

---

---

***

Credit Life

***

---

---

---

***

Travel

---

---

***

---

***

VGBL

***

---

***

---

---

Capitalization

***

---

***

---

***

Seasonality in original series

Seasonality in adjusted series

Influence of business days

Influence of moving holiday (Carnival, Easter or Corpus Christi)

Influence of at least one outlier

Auto

***

---

***

***

---

Homeowners

***

---

***

*

---

Commercial Multiple Peril

***

---

***

*

---

Transports

***

---

---

*

---

Credit and Guarantees

***

---

---

---

***

Extended Guarantee

***

---

*

---

***

Credit Life

***

---

---

---

***

Travel

---

---

**

*

***

VGBL

***

---

***

---

---

Capitalization

***

---

***

*

***

Automatic adjustment

Products

Products

Adjustment with the Brazilian calendar

YEAR 2 | No. 4 | FEBRUARY/2019

Source: Susep – Elaboration: SUESP Note 1: “***” significant at 0.1%; “**” significant at 1%; “*” significant at 5%; “---” not significant.

Nota 2: The nil hypothesis for the test of the first two columns is that there is no seasonality. For the remainder, the nil hypothesis is that there is no influence.

31

STATISTICAL SECTION

YEAR 2 | No. 4 | FEBRUARY/2019

The results show that both the automatic adjustment, performed in a great part of the deseasonalization exercises with many different purposes, as the adjustment performed considering the Brazilian calendar

References

make it possible to obtain series that are statistically free from seasonal effects. Nonetheless, when the remaining

FERREIRA, P. C., GONDIN, J. L., MATTOS, D. M. Métodos

tests are analyzed, it can be noticed that using the

de ajuste sazonal para séries de Business Tendency: um

Brazilian calendar and moving holidays improves the

estudo de caso para a Sondagem da Indústria utilizando o

general quality of the adjustment.

método X13-ARIMA-SEATS. Technical Note NMEC/SUEP|IBRE - FGV. Feb/2015. available at:

For some products (such as in the case of Homeowners

http://portalibre.fgv.br/lumis/portal/file/fileDownload.js

insurance), the adjustment with the national calendar

p?fileId=8A7C82C54ADE6252014B4A888AC846D9

seemed to be capable of correctly capturing what, in the

automatic adjustment, was classified as an outlier, in

WOOLDRIDGE, J. M. Introdução à Econometria: uma

other words, a divergent figure. In the case of Extended

abordagem moderna. Editora Thompson, 2006.

Guarantee, not only did the corrected adjustment capture the most important seasonality, but it also

R Core Team. The R Project for Statistical Computing.

identified the influence of business days, which was not

Source: https://www.r-project.org/

seen in the automatic adjustment. In Travel insurance, the only one for which no evidence of a seasonal

Sax, C. (2015). Github: https://github.com/christophsax

standard was found – the hypothesis for so is that both business and pleasure trips encourage acquisition of that

United States Census Bureau. (2015). Historical Papers

type of protection –, as well as in the Commercial

Concerning X-11 and Seasonal Adjustment. Source: X-

Multiple Peril, Transport, Credit Life and Capitalization

13ARIMA-SEATS Seasonal Adjustment Program:

segments, evidence was found of the influence of at least

https://www.census.gov/srd/www/sapaper/historicpape

one moving holiday on the revenues, a fact that would

rs.html

have been disregarded in the automatic adjustment.

United States Census Bureau. (2015). X-13ARIMA-SEATS In addition to identifying the products that are influenced

Reference Manual Accessible HTML Output. United

by seasonality, the number of business days and moving

States Census Bureau. Source:

holidays, we conclude that adopting the national

https://www.census.gov/ts/x13as/docX13AS.pdf

calendar in deseasonalization exercises of Brazilian time series is important and may significantly change their results and the analyses based on them.

32

REGULATORY SECTION

YEAR 2 | No. 4 | FEBRUARY/2019

Regulatory Section The role of the insurance sector in the prevention of money laundering and terrorism financing In Brazil, measures to prevent money laundering took

It is also worth noting, however, that, generally, the risk a

shape after the enactment of Law 9.613 of 1998,

product offered by the insurance sector is the target of

amended by Law 12.683 of 2012, whose explicit goal was

operations intending to “launder” money is lower than

to “increase the efficiency of the prosecution of money

the risk associated to products marketed by other

laundering crimes”. The law defines the crime of

financial institutions, since in most situations there must

“laundering” or concealing of goods, rights or values,

be a claim for the client or beneficiary to receive

provides for the prevention of the use of the national

payments. Although it may happen with any type of

financial system for money laundering; establishes the

insurance, there are products that are more prone to be

persons and activities subject to the control mechanisms

engaged for such purpose for having a resource-

provided for in the law, the identification of clients and

accumulation nature, such as, redeemable life insurance,

recording of operations, the administrative liability of

or those that build longer-term reserves, intended to

subject persons, sanctions and fines for non-compliance;

retirement benefits, such as private pension plans/PGBL.

and also creates the Financial Activity Council (COAF), which on January 2nd, 2019 became part of the Ministry

The regulated markets, by force of law, need to perform

of Justice and Public Security and whose mission is to

adjustments to their policies and, mostly, to their

produce financial intelligence and promote the

procedures. Insurance companies, public supplementary

protection of the economy’s sectors against money

pension companies, domestic and international

laundering and terrorism financing.

reinsurance companies operating locally, and brokers must all comply with the provisions in Susep Circular

The insurance sector has an important role to play in

Letter 445 of 2012, which requires the development of

enforcing the law. As a segment that raises premiums

internal controls to monitor the risks that the company

and considerations equivalent to 6.5% of the Brazilian

may be involved in money-laundering or terrorism-

GDP, it must be mindful of the origin of the financial

financing situations. In the case of brokers, only those

resources flowing through its companies. And more than

with annual revenues exceeding R$ 12 million are subject

compliance with regulatory requirements, there are

to the adoption of those controls. Susep Circular Letter

programs to prevent money-laundering and fight

445 also provides for: the obligation of subject companies

terrorism-financing that aim at mitigating the risk that

to identify whether a client, beneficiary, third party or

wrongdoers use the insurance market as a link in their

other related parties are politically-exposed persons;

illicit chain, keeping in mind that ethics and good-faith

rules for registration;

are the foundations of this market, and the solidness of the financial system as a whole, which also depends on it.

33

REGULATORY SECTION

YEAR 2 | No. 4 | FEBRUARY/2019

monitoring of operations (which must be strengthened

resolutions of the United Nations Security Council,

and ongoing in case a politically-exposed person is

including the unavailability of assets of natural or legal

involved or if, owing to their characteristics, are deemed

persons and entities, and the national naming of persons

high-risk); and the reporting of the operations to COAF.

investigated or accused of terrorism, its financing or acts correlated to it; and revokes Law no. 13.170, of October

Nonetheless, in order to increase the efficiency and

16th, 2015.

effectiveness of subject companies’ internal procedures and controls, Susep published on December 26th, 2018,

The creation of tools so that countries “freeze

Susep Public Consultation Edict no. 08 of 2018, which

immediately the resources or other assets” that are

suggests amendments to Susep Circular Letter 445. The

owned or benefit any person or entity named by the

agency submitted a draft which proposes: adjustments to

United Nations Security Council, respectively for the

the registration and document retention criteria; new

prevention and suppression of terrorism and financing is

annual report that will remain at Susep’s disposal;

a recommendation of the Financial Action Task Force for

stronger requirement of monitoring politically-exposed

Combating of Money Laundering and the Financing of

persons; limitation of automatic communications;

Terrorism (Gafi/FATF), an inter-governmental body

improved quality of the communications made directly to

whose purpose is to develop and promote policies to

COAF; incorporation of the regulation in Law

combat money laundering and terrorism financing. Brazil

13.170/2015 (so far, present only in the Circular Letter).

is a member, along with 38 other countries.

It is worth noting Central Bank of Brazil published Public Consultation edict no. 70, with deadline for input by March

18th,

2019, for a proposed circular letter on the

Finally, it has become undeniable that, in relation to the susceptibility to the occurrence of such criminal practices

same subject. The draft also brings more comprehensive

in the insurance sector, the implementation of policies

improvements compared to the regulation in force.

and actions to prevent money-laundering and combat terrorism-financing, whether or not regulatory, mitigates

In turn, the rules that health insurance companies

real risks and repels reputational impacts arising from

(including insurance companies specialized in health)

the use of the sector as a means to launder money and

must comply with are provided for in Normative

finance terrorism.

Resolution 117 of 2005, enacted by ANS, which provides

for the identification of clients, record-keeping, and includes a list of operations and situations that may indicate the occurrence of the crimes established in Law no. 9.613/98. The companies subject to the Agency must report the operation directly to ANS, through a standardized form. Nonetheless, it is important to mention said requirement does not prevent them from reporting directly to COAF, if deemed necessary.

Alongside Susep’s public consultation, the Federal Senate is evaluating the Draft Bill (PL 10431/2018) that provides for the enforcement of the sanctions imposed by

34

LEGAL SECTION

YEAR 2 | No. 4 | FEBRUARY/2019

Legal Section Irregular Exercise of the Insurance Activity Over the past 05 (five) years, with the growth of the

general to their products, misconfigure their nature as an

private insurance sector, there has been a staggering

association or cooperative, making consumers believe

increase in the number of associations and cooperatives

they are buying from insurance companies.

operating in the market as if they were insurance companies, offering to consumers products that are

In addition to misleading consumers, there is no

similar to insurance policies, typically for auto protection.

guarantee to the persons who become members of the association or cooperative that they will receive in future

The operations of the private insurance sector are

any payments should there be a claim, given the absence

regulated by Decree-Law no. 73/1966, which establishes

of constituted minimum guarantees concerning technical

that the insurance activity may be exercised solely by

provisions and solvency, which are required, we repeat,

limited liability companies whose operation has been

from insurance companies.

authorized by Susep, and the insurance companies are required to constitute technical provisions in sufficient

It must also be explained that an individual who becomes

amount to cover for all underwritten risks and perform

a member of an association or cooperative, by joining a

investments in financial assets that meet certain security

limited group of mutual assistance is also accepting, in

and liquidity standards. The aforementioned Decree-Law

the case of a claim related to a vehicle belonging to any

also assigns to the Private Insurance Superintendence -

other member, solidary liability for the payment of the

Susep, as enforcer of the policy elaborated by the

compensation in the so-called pro-rata plan.

National Private Insurance Council - CNSP, the inspection of the incorporation, organization, setup and operation of

As such, the main difference between an insurance policy

insurance companies.

and an auto protection agreement lies in the fact that in the former the protection and coverages are provided to

Differently from an insurance policy, the so-called “auto

the consumer, who does not have any participation in

protection� is constituted under the guise of associations

any operating losses and whose rights are provided for in

and cooperatives, as a means to self-manage and

the Consumer Protection Law – CDC. With the auto

regulate, without any inspection, technical specificity or

protection, in turn, the individual is not a consumer, but

responsibility for the solvency and liquidity of the activity.

rather a member of the association or cooperative, which

Also, unlike insurance companies, associations and

means they are liable for the operating losses and do not

cooperatives do not pay any taxes.

have the benefits established in the CDC, such as the reversal of the onus of proof and guaranteed treatment

Although they are associations and cooperatives, such

to disadvantaged or vulnerable parties.

entities, by making the public offer of adherence proposals to any person, searching for consumers in 35

LEGAL SECTION

YEAR 2 | No. 4 | FEBRUARY/2019

Susep, as the authority responsible for the control and inspection of the insurance market, has already filed

Also, in the legislative field, the regulation of the activity

several lawsuits with Regional Federal Courts and the

performed by auto protection entities is under

Superior Court of Justice – STJ, claiming those auto-

discussion, especially within the scope of Complementary

protection associations and cooperatives are exercising

Draft Bill (PLP) no. 519/2018, which amends the wording

the insurance activity illegally. In 2018, the STJ made its

of the introduction to Article 24, adding paragraphs 1st,

1st pronouncement on the matter, within the scope of

2nd, 3rd, 4th and 5th, and amends Article 36, inserting item

the Ruling1 proffered by its Second Panel in Special

“m”, both from Decree-Law no. 73, dated November 21st,

Appeal no. 1616359 published on Jun/27/2018, who

1966. A substitute to the aforementioned Bill was

understood, unanimously, the operation of Associação

submitted, which provides that: (i) cooperatives and self-

Mineira de Proteção e Assistência Automotiva - AMPLA in

managed entities will be subject to the regulation and

the insurance market was illicit, ruling the cessation of its

inspection by CNSP and Susep, respectively; (ii) the sale

activities related to the insurance sector.

will be limited to those persons previously registered as members; (iii) cooperatives and self-managed entities

According to the fundamentals produced by the presiding

will be subject to the inspection fee, as well as to the

judge, Justice Og Fernandes, the product offered by the

assessment of taxes as per the legislation applicable to

association in question presents itself as a typical

the IPRJ and to the CSLL; (iv) the insurance broker will be

insurance contract, charging an excess and offering

the agent of insurance contracts, as well as of equivalent

coverage for damages caused by third-parties and by acts

arrangements; (v) insurance cooperatives and self-

of God, and, for that reason, the association cannot be

managed entities will be subject to the Consumer

characterized as a limited mutual assistance group, as it

Protection Law; (vi) the sale of life insurance by self-

markets its service called “automotive protection” openly

managed entities and cooperatives will be forbidden; (vii)

to any interested individuals, characterizing it as a typical

insurance cooperatives and self-managed entities will be

insurance company.

allowed to buy reinsurance, and (viii) submission of an actuarial technical note, signed by an actuary, will be

Still in the scope of the Judiciary, in January 2019 the Third Panel of the Regional Federal Court of the

required.

4th

Region – TRF4 proffered the Ruling of lawsuit no.

The aforementioned substitute law is awaiting evaluation

5009030-62.2014.4.04.7104/RS2, acknowledging,

by the Plenary of the House of Representatives. If the

unanimously, that Associação Astra B, by ensuring

Draft Bill is enacted, it will be a new paradigm in the way

interest to its associates concerning the risk of accidents

the subject is treated, and the regulator will be

involving their cargo vehicles, was offering insurance

responsible for performing the appropriate regulatory

illegally. The decision prohibited the aforementioned

harmonization.

association from offering and/or marketing any type of insurance coverage or any insurance category, in the whole country, and also decreed the delivery of a communication of the terms of the ruling, by mail, to all consumers with existing agreements.

¹ The ruling has not been enforced yet: awaiting trial of the motions for clarification filed by the Association – AMPLA. 2 The ruling has not been enforced yet: awaiting trial of the motions for clarification filed by the Association – ASTRA B.

36

LEGAL SECTION

YEAR 2 | No. 4 | FEBRUARY/2019

General Data Protection Law – Part II On Dec/28/2018, Provisional Measure (MPV) no.

commissioner, the person appointed by the controller to

869/2018 was published, amending Law no. 13.709, of

act as a communication channel between the controller,

August

14th,

2018, to provide for the protection of

data subjects and ANPD; (iii) in the adaptation of existing

personal data and to create the National Data Protection

databases, (iv) in the approval of codes of conduct, and

Authority, among other provisions.

(v) in the application of sanctions.

As listed in its summary, the aforementioned MPV, in

MPV no. 869/2018 addresses other important points in

addition to other updates, establishes the National Data

addition to the establishment of ANPD, such as (i)

Protection Authority – ANPD. In turn, MPV no. 870/2019

amendment of the wording in item II, § 4th, in Article 11

provides for the basic organization of the Presidency of

of the LGPD, which now allows communication or shared

the Republic and Ministerial agencies, once the National

use across controllers of sensitive health-related personal

Authority has been included in the new government

data for the need for communication for the appropriate

structure.

provision of supplementary health services; (ii)

amendment of the wording in the introduction to Article The aforementioned National Authority is part of the

20 of the law, suppressing the obligation of a review of

direct public administration and of the Presidency of the

the automated treatment by a natural person; (iii)

Republic and is not, therefore, an independent agency.

amendment to § 1st of Article 26 in Law no. 13.709/2018,

MPV no. 869/2018 gives ANPD only technical autonomy,

allowing for the public and private sectors to share data,

and there is no reference to its administrative or financial

when the transfer is supported by contracts, agreements

autonomy. Nonetheless, the proposition sets its officers’

or similar documents and (iv) amendment to the time the

term of office and defines the conditions under which

LGPD will enter into force, so that the provisions

positions are lost, similarly to the regulatory agencies in

concerning the ANPD will be effective on the date the

several sectors of the economy.

MPV was published (Dec/28/2018) and the remaining provisions shall be in force for 24 (twenty for) months

It is also worth noting that the National Data Protection

following the date of its publication.

Authority will have an advisory National Data Protection and Privacy Council, formed by 23 (twenty three)

Concerning the evaluation of MPV no. 869/2018, 176

persons, including representatives of the government,

(one hundred seventy six) amendments to its original

the civil society, scientific institutions and the business

wording have already been proposed, which will be

sector.

evaluated until Apr/04/2019, by a Mixed Committee to be formed at the National Congress, and the

ANPD is vital for the enforcement of the General Data

aforementioned deadline may be extended for further 60

Protection Law - LGPD, as it will have an important role,

(sixty) days. Therefore, the wording of MPV no. 869/2018

amongst other aspects, (i) for the interpretation of the

may be amended and, consequently, so may the wording

law; (ii) in the definition of the attributions of the

of Law no. 13.709/2018.

37

ACADEMIC OUTPUT ON INSURANCE

YEAR 2 | No. 4 | FEBRUARY/2019

Academic Output on Insurance The publications selected for inclusion in the section that tracks the academic production on insurance in this issue of Conjuntura CNseg address several themes related to the insurance activity, in the form of papers for discussion, books

and academic articles, in addition to master’s and Ph.D. theses and dissertations in various areas of knowledge.

Send your suggestion of Academic Output on Insurance to estudos@cnseg.org.br.

Article Aposentadoria e Mercado de Trabalho: Uma Análise Usando Regressão Descontínua (Retirement and Labor Market: An Analysis Using RegressionDiscontinuity Design), published by Insper’s Public Policy Center, analyzes the current situation of the Social Security Regime (RGPS and RPPS) and its effects on the Brazilian labor market. The core issue addressed here is the impact that receiving retirement benefits has on the decisions of individuals in the labor market. For such, it uses the discontinuity caused by the current rules on age-related retirement.

2

1

In the paper, FinTech in Sub-Saharan African Countries: A Game Changer?, by the International Monetary Fund, the authors discuss the new technologies that are being developed and deployed in Sub-Saharan Africa, with the potential to change the competitiveness in the financial sector. The FinTechs are emerging as technological facilitators in the region, improving financial inclusion and serving as catalysts of innovation in other sectors, such as insurance, agriculture, and infrastructure.

In article Substituição de Pessoas por Máquinas e o Uso de Inteligência Artificial pelo Mercado Segurador (Replacement of People by Machines and the Use of Artificial Intelligence by the Insurance Market), published by Revista Brasileira de Risco e Seguros, the authors relate the expansion of technological resources in society to the insurance market, introducing some of the technological advances used in that sector and presenting studies that defend the idea that the great technological development may allow for the robotization or computerization of several professions. Nonetheless, the expansion of technology should not be seen as a threat, but rather as an ally to increase productivity.

3

38

ACADEMIC OUTPUT ON INSURANCE

4

YEAR 2 | No. 4 | FEBRUARY/2019

An issue that has been at the core of many discussions is the population’s age-group distribution, as discussed in article The Future of Saving: The Role of Pension System Design in an Aging World, in which researchers from the International Monetary Fund investigate how impending demographic changes and the design of pension systems might influence national savings in future. The paper focuses on the interaction between public and private savings, and the role of the attributes of the pension system in shaping savings profiles in several countries in the next decades.

Pension systems are facing several difficulties due to a set of demographic and economic factors. In order to solve those problems, several reforms have been proposed; nonetheless, in many cases, they fail to take into account how the pension system relates to other economic variables. In this sense, the goal of paper A Previdência Social Brasileira em um modelo de consistência entre estoques e fluxos (The Brazilian Social Security in a model of consistency between stocks and flows) is to analyze how the reduction of informalization and increase in productivity may affect the fiscal results of Social Security in Brazil and the economic growth. Some conclusions indicate that increased formalization and productivity lead to a slightly higher economic growth rate, and may also reduce the pension system deficit, but do not give the system a surplus.

5

See below the selected publications:

1

Title: Aposentadoria e Mercado de Trabalho: Uma Análise Usando Regressão Descontínua Type of Publication: Policy Paper Institution/Publication: Insper Period: Jan/2019 Author(s): Gustavo Marcos Szniter Mentlik, Naercio Menezes-Filho and Bruno Kawaoka Komatsu Link: https://www.insper.edu.br/wp-content/uploads/2019/01/Aposentadoria-MercadoTrabalho-Regressao-Descontinua.pdf

2

Title: FinTech in Sub-Saharan African Countries: A Game Changer?

Type of Publication: Publication Institution/Publication: International Monetary Fund Period: Feb/2019 Author(s): Amadou N. R. Sy, Rodolfo Maino, Alexander Massara, Hector Perez-Saiz and Preya Sharma Link: https://www.imf.org/en/Publications/Departmental-Papers-PolicyPapers/Issues/2019/02/13/FinTech-in-Sub-Saharan-African-Countries-A-Game-Changer46376

39

ACADEMIC OUTPUT ON INSURANCE

YEAR 2 | No. 4 | FEBRUARY/2019

3

Title: Substituição de Pessoas por Máquinas e o Uso de Inteligência Artificial pelo Mercado Segurador Type of Publication: Article Institution/Publication: Revista Brasileira de Risco e Seguro Period: Jan/2019 Author(s): Valdemiro Cequinel Belli, Lucas de Medeiros and Tarcis do Prado Junior Link: http://www.rbrs.com.br/arquivos/rbrs_24_3.pdf

4

Title: The Future of Saving: The Role of Pension System Design in an Aging World Type of Publication: Discussion Note Institution/Publication: International Monetary Fund Period: Jan/2019 Author(s): David Amaglobeli, Hua Chai, Era Dabla-Norris, Kamil Dybczak, Mauricio Soto and Alexander F. Tieman Link: https://www.imf.org/en/Publications/Staff-Discussion-Notes/Issues/2019/01/09/TheFuture-of-Saving-The-Role-of-Pension-System-Design-in-an-Aging-World-45138

5

Title: A Previdência Social Brasileira em um modelo de consistência entre estoques e fluxos Type of Publication: Conference Paper Institution/Publication: ResearchGate Period: Aug/2018 Author(s): Sylvio Kappes Link: https://www.researchgate.net/publication/327059897_A_Previdencia_Social_Brasileira_ em_um_modelo_de_consistencia_entre_estoques_e_fluxos

40

STATISTICAL SUMMARY

YEAR 2 | No. 4 | FEBRUARY/2019

Statistical Summary Insurance Sector (Cutoff: Feb/05/19) (R$ b illion )

52 50 48 46 44 42 40 38

25 20 15 10

5

Insurance Sector (ex- Health)

Dec-18

Nov-18

Oct-18

Sep-18

Aug-18

Jul-18

Jun-18

May-18

Apr-18

Mar-18

Feb-18

Jan-18

Dec-17

Nov-17

Oct-17

Sep-17

Aug-17

Jul-17

Jun-17

May-17

Apr-17

Mar-17

Feb-17

-

Supplementary Health

30

Jan-17

Insurance Sector (ex- Health)

REVENUES

Supplementary Health

45 40 35 30 25 20 15 10 5 -

12 10 8 6 4 2

Insurance Sector (ex- Health)

Dec-18

Nov-18

Oct-18

Sep-18

Aug-18

Jul-18

Jun-18

May-18

Apr-18

Mar-18

Feb-18

Jan-18

Dec-17

Nov-17

Oct-17

Sep-17

Aug-17

Jul-17

Jun-17

May-17

Apr-17

Mar-17

Feb-17

-

Supplementary Health

(R$ b illion )

14

Jan-17

Insurance Sector (ex- Health)

CLAIMS, COMPENSATIONS, PRIZE DRAWS, SURRENDERS AND BENEFITS

Supplementary Health

NOMINAL REVENUE CHANGE 1 2 rollin g m on th s – I n s u ra n ce S ector (ex - DP V A T a n d S u p p lem en ta ry H ea lth I n s u ra n ce) 1%

0,8%

1% 0% -1% -1% -2%

-0,2% -0,8%

-2%

-1,7%

-3% up to Ago-18 / up to up to Sep-18 / up to Sep Ago-17

-2,0% up to Oct-18 / up to Oct-17

up to Nov-18 / up to Nov-17

up to Dec-18 / up to Dec-17

Scores: 1) ANS data were allocated to the last month in each quarter, as they are published quarterly. SUSEP data are monthly. 2) In Supplementary Health Insurance, for methodological issues, the values presented may differ from those informed by ANS and FenaSaúde.

41 Source: DIOPS (ANS); Sala de Situation (ANS); SES (SUSEP); SGS (BCB)

STATISTICAL SUMMARY

Insurance Sector (ex- Supplementary Health)

YEAR 2 | No. 4 | FEBRUARY/2019 Revenues (R$ million) Up to December 2017 2018

% Change

December 2017

December 2018

% Change

1

Property and Casualty (ex- DPVAT)

64,889.95

70,126.67

8.07%

5,997.60

6,150.38

2.55%

1.1

Auto

33,864.78

35,889.63

5.98%

3,196.24

3,232.51

1.13%

1.1.1

Private Passengers Auto

606.52

603.70

-0.46%

57.82

57.16

-1.15%

1.1.2

Body

23,734.13

24,809.43

4.53%

2,226.67

2,227.26

0.03%

1.1.3

Auto Civil Liability - Facultative

7,236.23

7,847.14

8.44%

689.90

699.13

1.34%

1.1.4

Others

2,287.91

2,629.36

14.92%

221.84

248.96

12.23%

1.3

Property

10,882.75

11,969.01

9.98%

970.00

1,148.37

18.39%

1.3.1

Mass

7,910.42

9,015.24

13.97%

749.82

822.34

9.67%

1.3.1.1

Homeowners

2,657.59

2,997.02

12.77%

253.94

253.09

-0.33%

1.3.1.2

Condominium Multiple Peril

407.45

448.81

10.15%

37.47

36.00

-3.92%

1.3.1.3

Commercial Multiple Peril

2,116.13

2,435.29

15.08%

204.23

223.51

9.44%

1.3.1.4

Others

2,729.25

3,134.12

14.83%

254.18

309.73

21.86%

1.3.2

Large Risks

2,725.30

2,651.70

-2.70%

254.43

303.99

19.48%

1.3.3

Engineering Risks

247.03

302.06

22.28%

-34.25

22.05

-164.37%

1.4

Mortgage

3,776.92

3,713.65

-1.68%

319.86

41.52

-87.02%

1.5

Transports

2,714.54

3,150.63

16.07%

284.89

334.00

17.24%

1.5.1

National Transport

842.16

921.20

9.38%

86.82

100.37

15.60%

1.5.2

International Transport

423.05

541.04

27.89%

44.22

63.16

42.85%

1.5.3

Carrier

1,449.32

1,688.40

16.50%

153.85

170.47

10.80%

1.6

Credit and Guarantees

3,810.63

4,216.27

10.65%

354.46

418.07

17.94%

1.7

Extended Guarantee

2,731.59

2,973.54

8.86%

268.15

310.64

15.85%

1.8

Civil Liability

1,606.66

1,772.60

10.33%

198.80

197.01

-0.90%

1.8.1

Directors & Officers Civil Liability (D&O)

405.15

442.54

9.23%

90.75

85.02

-6.31%

1.8.2

Others

1,201.51

1,330.07

10.70%

108.05

111.99

3.65%

1.9

Rural

4,124.00

4,594.29

11.40%

295.33

309.86

4.92%

1.10

Maritime and Aircraft

705.38

718.19

1.82%

59.22

62.68

5.85%

1.10.1

Maritime

374.76

356.40

-4.90%

33.08

32.44

-1.92%

1.10.2

Aircraft

330.62

361.79

9.43%

26.14

30.24

15.68%

1.11

Others

672.70

1,128.85

67.81%

50.65

95.73

88.99%

2

Personal Coverage

155,643.03

149,729.78

-3.80%

15,993.79

15,948.54

-0.28%

2.1

Risk-based Coverage

34,524.48

37,978.67

10.01%

3,251.38

3,510.49

7.97%

2.1.1

Life

13,691.50

14,995.97

9.53%

1,416.11

1,501.06

6.00%

2.1.2

Credit Life

9,504.60

11,343.39

19.35%

895.74

1,004.33

12.12%

2.1.3

Travel

514.24

512.60

-0.32%

46.40

51.38

10.73%

2.1.4

Others

10,814.14

11,126.71

2.89%

893.13

953.72

6.78%

2.2

Private Pension Plans

116,848.78

107,411.41

-8.08%

12,354.65

12,026.98

-2.65%

2.2.1

VGBL family

106,653.55

97,631.31

-8.46%

10,426.38

10,033.30

-3.77%

2.2.2

PGBL family

10,195.23

9,780.10

-4.07%

1,928.27

1,993.68

3.39%

2.3

Traditional Plans

4,269.77

4,339.70

1.64%

387.76

411.07

6.01%

3

Capitalization Securities

20,754.78

21,008.72

1.22%

2,120.34

1,797.65

-15.22%

=1+2+3

Insurance Sector (ex- DPVAT)

241,287.75

240,865.17

-0.18%

24,111.72

23,896.57

-0.89%

4

DPVAT

5,935.40

4,691.18

-20.96%

256.24

206.12

-19.56%

=1+2+3+4

Insurance Sector

247,223.16

245,556.35

-0.67%

24,367.96

24,102.70

-1.09%

Values concerning the mixed endowment branch were included in risk-based coverage, although the branch presents mixed characteristics of risk and accumulation.

Source: SES (SUSEP)

42

STATISTICAL SUMMARY

YEAR 2 | No. 4 | FEBRUARY/2019

REVENUES AS A PROPORTION OF THE GDP 7% 6% 5% 4%

6,1%

6,4%

6,5%

2,6%

2,8%

5,5%

5,7%

2,1%

2,2%

3,4%

3,4%

3,7%

3,8%

3,8%

2013

2014

2015

2016

2017

2,4%

3% 2% 1% 0%

Revenues as proportion of GDP - Insurance Sector (ex- Health)

Revenues as proportion of GDP - Supplementary Health

PROPERTY AND CASUALTY (EX- DPVAT) + DPVAT + RISK-BASED COVERAGE + PRIVATE PENSION PLANS (PPP s) + CAPITALIZATION SECURITIES 300,00

(D is trib u tion of d ifferen ce in reven u es b etw een p eriod s , p er s eg m en t)

247,22

5,24

250,00

3,57

245,56

0,25

- 1.24

- 9.48

R$ billion

200,00 150,00 100,00 117,72 108,24 64,89 70,13

50,00

5,94

4,69

37,92 41,49

20,75 21,01

2017-12

Property & Casualty (exDPVAT)

DPVAT

Personal Personal Insurance - Risk Insurance - PPPs IRAs Coverage

Capitalization Securities

2018-12

BENEFICIARIES IN HEALTH INSURANCE PLANS

47,3

47,3

Nov-18

47,2

47,2 23,0

22,8

22,8 Jan-18

22,9

47,3

24,2

23,9 47,4

47,3 47,2

23,1

47,2

May-18

47,1

23,3

Apr-18

47,1

Dec-17

Dental-only

47,3

Oct-18

23,8

23,0 22,5

24,3

24,1

24,0 23,5

24,2

Sep-18

24,3

24,5

47,1

Dental-only

Dec-18

Aug-18

Jul-18

Jun-18

Mar-18

Feb-18

22,0

47,5 47,4 47,4 47,3 47,3 47,2 47,2 47,1 47,1 47,0 47,0 46,9

Medical

(m illion u s ers )

Medical

Note: in Supplementary Health Insurance, for methodological issues, the values presented may differ from those informed by ANS and FenaSaúde.

Sources: DIOPS (ANS); Situation Room (ANS); SES (SUSEP); SGS (BCB)

43

STATISTICAL SUMMARY

YEAR 2 | No. 4 | FEBRUARY/2019

NOMINAL REVENUE CHANGE 12 ROLLING MONTHS P r o p ert y a n d Ca s u a lt y ( ex - D P V A T ) 8,2%

8,1% 8,0%

8,0% 7,8%

7,7%

0% -1% -2%

7,8%

-2,2%

-3%

7,6%

-4%

7,3%

7,4%

P e r s o na l I n s u r a nc e

-3,8%

-5%

7,2%

-6%

7,0%

-7%

-4,7% -6,3%

-6,2%

up to Ago-18 / up to Sep-18 / up to Oct-18 / up to Nov-18 / up to Dec-18 / up to Ago-17 up to Sep up to Oct-17 up to Nov-17 up to Dec-17

6,8% up to Ago-18 / up to Sep-18 / up to Oct-18 / up to Nov-18 / up to Dec-18 / up to Ago-17 up to Sep up to Oct-17 up to Nov-17 up to Dec-17

P e r s o na l I n s u r a nc e – P r iv a te P e n s io n P la n s

P e r s o na l I n s u r a nc e – R is k - b a s e d Co v e r a ge 0% 9,6% 9,4% 9,2% 9,0% 8,8% 8,6% 8,4% 8,2% 8,0% 7,8% 7,6%

9,4%

9,0%

-4%

9,0%

8,8%

-2%

-6%

8,3%

-5,6%

-8%

-10,8%

-12%

up to Ago-18 / up to Sep-18 / up to Oct-18 / up to Nov-18 / up to Dec-18 / up to Ago-17 up to Sep up to Oct-17 up to Nov-17 up to Dec-17

S u p plementa r y He a lth I n s u r a nc e

12%

2,8%

10%

2,2% 2%

1,9% 1,5%

-10,9%

up to Ago-18 / up to Sep-18 / up to Oct-18 / up to Nov-18 / up to Dec-18 / up to Ago-17 up to Sep up to Oct-17 up to Nov-17 up to Dec-17

Ca p it a liz a t io n S e c u rit ies

3%

-8,1%

-8,8%

-10%

10,7%

10,8% 9,6%

10,4%

10,6%

8%

1,2%

6% 4%

1%

2% 0%

0% up to Ago-18 / up to Sep-18 / up to Oct-18 / up to Nov-18 / up to Dec-18 / up to Ago-17 up to Sep up to Oct-17 up to Nov-17 up to Dec-17

up to 3rd Q-17 up to 4th Q-17 up to 1st Q-18 up to 2nd Q-18 up to 3rd Q-18 / up to 3rd Q- / up to 4th Q- / up to 1st Q- / up to 2nd Q- / up to 3rd Q16 16 17 17 17

Note: In Supplementary Health Insurance, for methodological issues, the values presented may differ from those informed by ANS and FenaSaúde.

Sources: DIOPS (ANS); SES (SUSEP)

44

-10

-15

-20

-25

-30

IPCA

Source: SGS (BCB) and SIDRA (IBGE)

12% 10% 8% 6% 4% 2% 0% -2% -4%

-5

0 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19

-1

-2 -5

-10

INTEREST RATE – EFFECTIVE SELIC RATE

(% p. a. )

4,30 4,10 3,90 3,70 3,50 3,30 3,10 2,90 2,70 2,50

60

50

IGP-M

70

60

50 Services Manufacturing

INFLATION – IPCA AND IGP-M PUBLIC SECTOR'S NET DEBT

(% ch a n g e, 1 2 - mon th a g g rega te) (a s a % of GDP , 1 2 - m on th a g g rega te)

CURRENT TRANSACTION BALANCE

TRADE BALANCE

(U S $ b illion , 1 2 - mon th a g g reg a te)

(U S $ b illion , 1 2 - mon th a g g reg a te)

201809

201806

201803

-3,0

1,2 0,8 2,5

1,1 0,8 0,3

1,8 1,2

2,0 2,5 4,5

1,2 8,8

10

201712

-0,3

-2,2

201706

5 0,1

18,7

14,2

15

201709

-1,3 -1,8

20

201703

-2,0 -3,5 -2,5

0

-1,7 -3,5 -4,5

TOTAL GDP

201612

201609

0,9 1,3

44,0 44,1 46,2 46,4 47,2 47,6 47,5 48,0 48,5 49,8 50,2 50,9 50,7 51,0 51,6 51,8 52,0 52,4 51,8 51,4 51,5 52,3 51,4 52,5 53,6 53,3 53,8

0,6

201809

1,2

201806

1,4

201803

201712

201709

0,1

201706

2

Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18

201612

1

201703

-2,5 -2,3

201609

(Q / Q - 4 , % ) 2,2

42,9 43,3 46,9 45,0 46,9 48,4 51,1 53,2 54,4 57,6 59,3 60,7 62,1 64,9 63,6 64,0 63,9 62,2 61,2 59,9 58,0 56,6 54,4 51,5 51,2 51,7 52,1 53,6

Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19

3

Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18

Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19

16 14 12 10 8 6 4 2 0

-22,8 -21,6 -18,8 -24,0 -24,0 -22,4 -19,7 -18,7 -17,0 -13,4 -12,3 -11,0 -9,8 -7,6 -9,6 -7,2 -7,5 -9,8 -11,9 -12,4 -14,6 -15,5 -16,8 -18,5 -18,3 -17,3 -15,8 -14,5

-3

Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 STATISTICAL SUMMARY YEAR 2 | No. 4 | FEBRUARY/2019

Economic Indicators (cutoff: Feb/05/19) GDP FROM THE PRODUCTION PERSPECTIVE (Q / Q - 4 , % )

0

Farming and livestock

EXCHANGE RATE – R$/US$ (en d - of- p eriod ra te)

40

30

20

10

0

40

30

20

10

0

45

GLOSSARY

YEAR 2 | No. 4 | FEBRUARY/2019

Glossary Insurance Sector Revenues: Includes direct premiums

Amount corresponding to awards from prize draws and

from written insurance, premiums issued on

surrenders paid on capitalization securities.

capitalization security regime, payments to private

Supplementary Health Compensations: Net reimbursable

pension plans, capitalization security deposits and

events/claims withheld from Medical-Hospital and/or

supplementary health payments.

Dental assistance coverage.

Direct Premiums from Written Insurance: Net premiums issued from cancelations and restitutions.

Loss Ratio: Includes insurance and supplementary health

Premiums Issued on Capitalization Security Regime:

loss ratio

Amount corresponding to the premiums paid to fund in-

Insurance Loss Ratio: ratio between paid claims and

built insurance policies in capitalization security regimes.

premiums earned.

Payments to Private Pension Plans: Amount corresponding

Supplementary Health Loss Ratio: ratio between

to each of the payments to fund Private Pension Plans.

supplementary health compensations and payments.

Capitalization Security Deposits: Revenues on net refunds or cancellation of capitalization securities.

Insurance Sector’s Marketing Expenses: Insurance,

Supplementary Health Payments: Net payments/premiums

private pension plans, capitalization securities and

withheld for Medical/Hospital and/or Dental coverages .

supplementary health aggregated marketing expenses and acquisition costs.

Insurance Sector claims/compensations/prize draws/surrenders/benefits: Include insurance claims,

Insurance Sector’s administrative expenses: Insurance,

private pension plans surrenders and benefits,

private pension plans, capitalization securities and

capitalization security prize draws and surrenders, and

supplementary health administrative expenses.

supplementary health compensations.

Insurance claims: Notified claims, insurance-related

Insurance Sector’s Assets: Economic resources in the

expenses, accepted retrocessions, change in the provision

form of assets and rights on insurance, private pension

of claims and assistance services, net of salvage and notified

plans, capitalization securities and supplementary health.

indemnifications and their change in the claims provision (PSL) adjustment. Includes administrative and judicial

Insurance Sector’s Provisions: Reserves accounted by the

portions, buyers clubs, and funds and expenses on benefits

Insurance Market to reflect future liabilities arising out of

in capitalization security regimes and insurance-coverage

agreements celebrated with consumers engaging their

capital-sharing.

operations.

Private pension plans surrenders and benefits: Amounts corresponding to each surrenders and benefits intended to cover Private Pension Plans. capitalization security prize draws and surrenders:

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GLOSSARY

YEAR 2 | No. 4 | FEBRUARY/2019

Redeemable Life Insurance Net Revenues: Difference

information from birth and death records, demographic

between the sum of redeemable life insurance deposits

censuses and inter-census population counts.

and prizes paid, in Redeemable Life Insurance/VGBL regime, and sum of private pension and Redeemable Life

Revenue per capita: Ratio of the Insurance Sector

Insurance/VGBL surrenders. Applicable only to these

revenues to the Brazilian Population.

plans.

IPCA: Consumer Price Index-Broad calculated by IBGE. Capitalization Security Net Revenues: Difference between Capitalization Security total revenues and

IGP-M: General Price Index, calculated by Fundação

surrenders.

Getúlio Vargas (FGV).

Awardable Philanthropy (Filantropia Premiável):

Focus: Weekly report published by the Central Bank of

Intended to subscribers interested in contributing to

Brazil with summarized statistics of market analysts’

social assistance charitable entities, duly authorized in

forecasts for macroeconomic variables.

the terms of the legislation in force, and participating in prize draw(s).

Selic: The basic interest rate of the Brazilian economy, set by the Central Bank of Brazil’s Monetary Policy

Warranty Bonds (Instrumento de Garantia): A title

Committee (Copom).

aimed at ensuring that the mathematical provision for the capital gains of the capitalization securities be used to

Core Inflation Measure: According to the Central Bank of

assure the fulfillment of the obligation celebrated in the

Brazil, a core inflation measure, also called underlying

agreement between the titleholder and a third-party.

inflation, is a measure that tries to detect price trends, disregarding disturbances resulting from temporary

GDP: Gross Domestic Product, the sum of the value of all

shocks.

final products and services produced in the country in a given period.

Outlier: Atypical value. A data point that is very distant from the remaining points in a series, highlighting an

Monthly GDP: Nominal monthly Gross Domestic Product,

inconsistency.

calculated and published by the Central Bank of Brazil (monthly proxy for the official Nominal GDP, calculated

by IBGE).

Insurance Sector Revenues as a Proportion of the GDP: Proportion of the Insurance Sector Revenues in the Gross Domestic Product.

Brazilian Population: The whole number of people or

inhabitants in the country published by IBGE based on

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