Insurance advances in a challenging scenario at home and abroad
The monthly meeting of the CNseg Market Research Committee (CEM) and the new CNseg Conjuncture nº 75 demonstrate that the advance in the collection of insurance (including Health, Life and Pension and, finally, Capitalization remains firm, despite a of great challenges, in view of the country’s conjuncture, the adverse international scenario and the behavior of domestic or external indicators.
“Externally, higher inflation continues to surprise, and the response of the monetary authorities, added to the difficulties in China, with its ‘Covid Zero’ policy and growth model transition, and the supply restrictions associated with the war, should cause a deceleration of the global economy in the coming months”, informs Conjuntura.
In the domestic scenario, although there is a prospect of growth in the year close to 2%, in recent weeks there has been an increase in uncertainty about the country’s fiscal and economic environment, reflected in risk premiums and exchange rates (which also depreciates with the Fed’s more aggressive stance against inflation).
Variables such as inflation (domestic or global), the exchange rate, the cycle of high interest rates here and abroad (and their burdens, such as higher credit prices, slowdown in sectors, high household indebtedness and default) produce heterogeneous effects between the branches and types of insurance.
This is because insurance portfolios are impacted by the specific situation of the sectors to which the coverage is intended. In car insurance, for example, according to reports presented at the CEM meeting, the price inflation of the car market, still driven by the lack of zero vehicles, the appreciation of used vehicles and the increase in replacement costs, leads to an increase in the rate of Motor insurance claims ratio (close to 75%), impacting the sector in two ways: in the price of insurance and in the amount of claims to be paid.
In addition to Rural Insurance and the upward trend in claims caused by prolonged droughts and frosts, the performance and outlook of other portfolios were evaluated at the meeting. It became clear that high and widespread inflation, interest rates, the prospect of a slowdown in the global economy, among other topics, will need to be monitored “pari passu” by the insurance sector, given the potential to produce deviations in performance projections.