Credit rating agency AM Best has announced it is maintaining a negative outlook on Brazil’s reinsurance market segment, citing political uncertainty and tax reform measures that are pressuring the industry’s profitability.
The report noted that regulatory restrictions on foreign assets have limited domestic reinsurers’ growth abroad, in addition to the approaching 2026 elections.
Despite these challenges, Brazil’s reinsurance market continues to recover, but a favourable trend needs to be sustained, analysts highlight.
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.
Despite an atmosphere of economic uncertainty, Brazil’s gross domestic product has seen positive growth, increasing by 3.9% in 2024.
Demand has increased, driven by strong private consumption, 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%.”
The report also highlighted the recent tax changes applied to Brazilian insurers and reinsurers, which have pressured profitability in 2025. Offshore reinsurers are now paying more than triple the taxes than in previous years.
Other findings include the deceleration in reinsurance industry growth, which shows the improvement in risk selection from local or domestic reinsurers. At the same time, it reflects the increase of premium ceded by these insurers to reinsurers offshore.
Finally, the report revealed that Brazil’s re/insurance segment has benefited from higher interest rates paid on its invested reserves. Investment income has been a significant contributor to the profitability of the country’s reinsurance industry, leading to positive bottom-line results for 2023 and 2024.
