Report on the Brazilian Trade Credit Insurance Market

Transcription

1 Report on the Brazilian Trade Credit Insurance Market April 2012 CredRisk Seguros Sociedade de Corretagem de Seguros de Crédito & Garantias Ltda is a specialized Brazilian trade credit insurance brokerage company regulated and authorized to operate in Brazil by the Superintendence of Private Insurances (SUSEP).

2 Index 1) Market Report ( ) 2) 2011 Insurance Company Market Share Analysis 3) Written Premiums between 2003 and ) CredRisk Seguros Contact Details This report does not purport to be comprehensive or to give legal advice. While every effort has been made to ensure accuracy, CredRisk Seguros cannot be held liable for any errors, omissions or inaccuracies contained in this document. Readers should not act upon (or refrain from acting upon) information in this document without first taking further specialist or professional advice. 2

3 Report on the Brazilian Trade Credit Insurance Market ( ) Overview In 2011, the Brazilian Domestic & Export Trade Credit Insurance Market generated approximately R$ 178 million in written premiums. This amount represents a growth of 24% in comparison with the 2010 premium volume, which totaled R$ 143 million, i.e., the market recovered its strength and once more showed a two-digit growth rate, a fact that has been repeating itself since 2004, with the exception of the years of 2009 and 2010, when the market grew at the rate of 2%. In 2011, the Domestic Credit insurance premiums added up to slightly more than R$ 145 million, which represent a 28% increase over the 2010 premiums. Whereas the Export Credit insurance premiums totaled just over R$ 32 million, i.e., a 10% increase over the previous year s total premiums. The strong growth of premiums in the Domestic Credit markets is related to the good performance of the Brazilian economy, especially when compared with other markets in terms of its dynamism and expansion capacity. Although the credit insurance market still accounts for less than 1% of the premiums written in the insurance market, it is becoming increasingly clear that the market is expanding, and that such expansion is driven by the domestic market. The export credit insurance premiums increased by R$ 3 million compared with 2010, when such premiums totaled R$ 29 million. This moderate growth of the export credit insurance market is related to two factors: 1) the appreciation of the Brazilian exchange rate during the course of 2011; and 2) the deepening of the crisis in the Euro zone, as well as the absence of a prospect of reversal of this scenario in the short term, which has been discouraging exports to this market. Trade Credit Insurance Companies The traditional Whole Turnover insurers were the first to set up local operations and the three major global insurers (Coface, Euler Hermes, and Credito y Caucion Atradius Group) are present in the Brazilian market. In 2011, Coface maintained its position as leader of this segment, with a share greater than 52% of the domestic and export credit insurance market. Coface is followed by Euler Hermes and Crédito y Caucíon, where market shares are 14.75% and 11.26%, respectively. The three mentioned insurers represent 78% of the market, whereas the other insurers, namely: Cesce, Chartis, Mapfre and Zurich represent the remaining 22% of the trade credit insurance market. Chartis Trade Credit established its trade credit operations in Brazil in In 2011, it wrote premiums totaling more than R$ 14 million, and showed growth in excess of 45% in comparison to the previous year s premium volume. Chartis was the first insurer to introduce the Excess of Loss type policy in Brazil. Its success is due to new underwriting concepts, such as non-cancelable limits, and high discretionary credit limits. Zurich started its trade credit operations in Brazil in 2009, with Single Risk and Single Buyer type policies, and distinguished itself in that business niche together with Coface. Forecast for the remainder of 2012 It is important to highlight that, even in a tougher economic environment than in 2010, the major trade credit insurers presented solid balance sheets for the 2011 financial year. With regard to the evolution of the loss ratio in the credit insurance market, it can be said that the same is directly linked to the macroeconomic scenario. In 2010, concomitantly with the high GDP growth rate, which was of the order of 7.5%, the Brazilian credit insurance market reported a loss ratio lower than 20%. In 2011, the Brazilian GDP increased by 2.7%, and on account of the deepening of the crisis of the sovereign debt in Europe, and the low growth rates presented by various countries worldwide, the loss ratio of the insurance market started to show an upward trend in the second semester of 2011; but nonetheless it remained within acceptable levels. This rising trend of the loss ratio continued in the first quarter of The anticipated tightening of credit by the banks will increase the default rates in Brazil, because the shrinking of credit will affect the financial strength and liquidity of the companies. Concerning the influence of the global scenario in the Brazilian credit insurance market, it is believed that with the worsening of the crisis in Europe during the second semester of 2011, there was a substantial increase in the loss ratio of that region. Such increased loss ratios are followed by larger disbursements by the insurers for indemnity payments, which eventually might aggravate credit insurance rates in Brazil, from the second semester of 2012 onwards because a considerable amount of reinsurance is placed in Europe. 3

4 The Whole Turnover insurers will contend with stiffer competition from the Excess of Loss insurers. Two global Excess of Loss insurers have been prospecting the Brazilian market during the past few months, and rumor has it that those insurers may be ready to start operations in Concluding, we point out that the forecasts for this year indicate that the growth of the trade credit market could return to a two-digit figure, probably somewhere in the region of 15%, meaning that the written premiums could reach the mark of R$ 205 million Insurance Company Market Share Analysis (Source: SUSEP) Domestic Credit Insurance (R$ thousand) Coface Euler Hermes Crédito y Caucíon Chartis Zurich Mapfre CesceBrasil 24,188 19,854 14,819 7,305 5,458 4,807 Total: R$ 145,302 million 68,871 Export Credit Insurance Market (R$) Coface CesceBrasil Euler Hermes Crédito Y Caucíon Mapfre Total: R$ 32,742 million Total Premiums in 2011 (R$ thousand) Coface Euler Hermes Crédito y Caucíon Chartis CesceBrasil Zurich Mapfre ,243 Total: R$ 178,044 million 4

5 Written Premiums between 2003 and 2011 Brazilian Trade Credit Insurance Market R$ R$ R$ R$ R$ R$ R$ R$ R$ R$ R$ Year Volume of Written Premiums (R$ millions) Growth Rate (previous period) % % % % % % % % 5

6 CredRisk Seguros Sociedade de Corretagem de Seguros de Crédito & Garantias Ltda. CredRisk Seguros is a specialized mono line trade credit insurance brokerage company. The company was founded in At present, CredRisk Seguros has over R$ 15 billion in insured receivables from most industrial and financial sectors of the Brazilian economy. CredRisk Seguros is licensed and authorized to operate in Brazil by the Superintendence of Private Insurances (SUSEP). CredRisk Seguros product offering includes: Domestic Credit Insurance Export Credit Insurance Single Risk Insurance Surety & Bonds Non Recourse Financing with Banks & Capital Markets Credit Consultancy CredRisk Seguros Contact Details: Av. Brigadeiro Faria Lima, 2601, 8th floor, , Jd. Paulistano, São Paulo, Brazil Telephone: Fax: Website: Mr. Phillip Krinker Mr. Flavio Barros Mr. Ricardo Eminente Miss Carolina Rodrigues phillip.krinker@credriskseguros.com flavio.barros@credriskseguros.com ricardo.eminente@credriskseguros.com carolina.rodrigues@credriskseguros.com 6