Best’s Market Segment Report: AM Best Maintains Negative Outlook on Brazil Reinsurance Market

Business Wire

MEXICO CITY--(BUSINESS WIRE)--
AM Best is maintaining a negative outlook on Brazil’s reinsurance market segment, citing in part political uncertainty and tax reform measures that are pressuring industry profitability.

In addition to the approaching 2026 elections, regulatory restrictions on foreign assets have limited domestic reinsurers’ growth abroad, according to the Best’s Market Segment Report. According to the report, Brazil’s reinsurance market continues to recover, but a favorable trend needs to be sustained. AM Best will consider the outlook to be stable when the volatility of the industry’s technical and bottom-line results narrows, coupled with positive technical income, amid the new tax reforms taking place in the country.

Brazil’s gross domestic product grew by 3.9% in 2024, despite an atmosphere of economic uncertainty. Strong private consumption has driven an increase in demand, while growth in services and agriculture contributed to growth on the supply side. However, the Brazilian real has undergone a significant devaluation, reaching 6.18 BRL/USD, as of 30 December 2024.

Annual growth in Brazil’s reinsurance segment was driven by the property, special risks, aeronautics and financial risk lines of business. This was offset by a decrease in the agricultural and marine business lines at the end of 2024.

“Agricultural reinsurance can be considered a natural catastrophe-like exposure that leaves the sector vulnerable, but this is being mitigated by innovative techniques that now monitor climate risks,” said Ricardo Rodriguez Perez, senior financial analyst, AM Best. “Despite these initiatives, agriculture reinsurance declined by 47%.”

Among the report’s other highlights:

Recent tax changes applied to Brazilian insurers and reinsurers have pressured profitability in 2025. These changes increase the tax applied to foreign exchange transactions, with offshore reinsurers paying more than triple the taxes than in previous years.
A deceleration in reinsurance industry growth shows the improvement in risk selection from local or domestic reinsurers, but also reflects the increase of premium ceded by these insurers to reinsurers offshore.
Brazil’s (re) insurance segment has benefited from higher interest rates paid on its invested reserves. Investment income has contributed significantly to the profitability of Brazil’s reinsurance industry, leading to positive bottom-line results for 2023 and 2024.

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=356749.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.