Our Insight, Your Advantage.
Very Low
Very Low
Very Low
CRT-3
Low
Moderate
High
Low
Moderate
High
Moderate
Low High
Very High
Very High
Very High
August 18, 2015
• The Country Risk Tier (CRT) reflects A.M. Best’s assessment of three categories of risk: Economic, Political and Financial
System Risk.
• Brazil, a CRT-3 country, is the largest economy in Latin
America and home to the largest insurance market in the region. The country has moderate levels of economic and
Iceland
Finland
Sweden
Guatemala
El Salvador
Belize
Cayman Islands
Jamaica
Honduras
Nicaragua
Costa Rica
Cuba
Panama
Haiti
Dominican
Republic
Virgin
Islands
Anguilla
St. Maarten
Antigua & Barbuda
St Kitts & Nevis
Dominica
St Vincent & the Grenadines
Curacao
Grenada
St Lucia
Barbados
Trinidad & Tobago
Venezuela
Colombia
Guyana
Suriname
French
Guiana
Norway
• Gross domestic product (GDP) is expected to contract -1.0% in 2015 before returning to growth of 1.0% in 2016. Corruption, political uncertainty, lower commodity prices and the rationing
• Regional growth will rely, in part, upon U.S. and European growth rates as well as domestic demand growth and improved differently, the economic expansion process will not be homogenous within the group.
Mexico
Ecuador
Peru
Bahamas
Isle of Man
Ireland
Guernsey
Jersey
Estonia
Russia
Denmark
Latvia
Lithuania
Belarus
Netherlands
Germany
Belgium
Luxembourg
Liechtenstein
France
Andorra
Switzerland
San Marino
Monaco
Poland
Ukraine
Slovakia
Austria
Slovenia
Croatia
Hungary
Bosnia &
Herzegovina
Serbia
Romania
Republic of
Moldova
Bulgaria
Italy
Montenegro
Macedonia
Albania
Greece Turkey
Kazakhstan
Azores
Portugal
Spain
Russia
Georgia
Armenia
Azerbaijan
Uzbekistan
Turkmenistan
Tajikistan
Kyrgyzstan
Canary
Islands
Gibraltar
Morocco
Western Sahara
(Occupied by Morocco)
Algeria
Tunisia
Malta
Libya
Cyprus
Lebanon
Israel
Jordan
Syria
Egypt
Iraq
Iran
Bahrain
Kuwait
Saudi Arabia Qatar
U.A.E.
Oman
Afghanistan
Pakistan
Cape Verde
Mauritania
Mali
Niger Chad
Central Africa Republic
Eritrea
Gambia
Guinea-Bissau
Senegal
Guinea
Sierra
Leone
Burkina Faso
Cote d'Ivoire
Ghana
Togo
Liberia
Benin Nigeria
Sudan
Ethiopia
Cameroon
Equatorial Guinea
Sao Tome & Principe
Gabon
Congo
Uganda
Kenya
Dem. Republic
Rwanda of Congo
Burundi
Tanzania
Yemen
Dijbouti
Somalia
Seychelles
India
Brazil
Angola
Chile
Bolivia
Paraguay
Namibia
Malawi
Zambia
Botswana
Zimbabwe
Mozambique
Comoros
Madagascar
Mauritius
Reunion
Nepal
Sri Lanka
Mongolia
China
Russia
Malaysia
Singapore
Brunei
Borneo
Sumatra
Indonesia
North Korea
Bhutan
Bangladesh
Myanmar
Laos
Thailand
Cambodia
Taiwan
Macau
Vietnam
Hong Kong
Philippines
Palau
East Timor
Japan
Federated States of Micronesia
New Guinea
Australia
Guam
Sakhalin
Kuril Islands
Northern Mariana Islands
Papua
New Guinea
Coral Sea
Islands
New Caledonia
Wake Island
Nauru
Solomon Islands
Marshall Islands
Vanuatu
Tuvalu
Fiji
Tonga
Somoa
Tokelau
American
Samoa
Niue
Kiribati
South Africa
Swaziland
Lesotho
Norfolk Island
Argentina
Uruguay
Cook
Islands
New Zealand
French Polynesia
Pitcairn Islands
For information on companies followed
Market Outlooks
Falkland Islands
Tierra Del Fuego
South Georgia
CRT  1  2  3  4  5
Copyright © 2015 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
1

AMB Country Risk Report
Regional Summary: Latin America
• Economic growth in Latin America is expected to decline in 2015, before staging a moderate recovery in 2016.
Weakness in the region is largely concentrated within commodity exporters where falling oil prices have compounded country specific challenges.
• Macroeconomic challenges affecting the region include exchange rate volatility, currency depreciation, the potential consequences from the normalization of U.S. monetary policy and the need to address structural problems in order to raise investment and job growth.
• Access to capital markets and cost of financing vary widely across the region.
• While governments vary widely across the region, they all deal with a moderate amount of corruption and the need for improved transparency. Increased and improved government regulation and enforcement in recent years has attempted to combat these issues.
Nominal GDP
Population
GDP Per Capita
Real GDP Growth
Inflation Rate
Vital Statistics 2014
USD bn mil
USD
%
%
Premiums Written (Life)
Premiums Written (Non-Life)
USD mil
USD mil
Premiums Growth (2013 - 2014) %
Regional Comparison
Country Risk Tier
Brazil
Argentina
Chile
Colombia
Mexico
Venezuela
Source: IMF, Axco, Swiss Re and A.M. Best
CRT-3
CRT-5
CRT-2
CRT-4
CRT-3
CRT-5
Brazil
2353.03
202.8
11,604
0.1
6.3
44,980
40,464
3.3
Economic Risk: Moderate
• Brazil is the world’s seventh largest economy that derives benefit from its large natural resources.
• Brazil’s economy is facing several challenges including a decline in business and consumer sentiment, falling investment levels, a depreciating currency, increasing unemployment, volatile financial markets, slow credit growth, potential spillover of the Petrobras scandal to the wider economy and the potential of utility rationing.
• In spite of lower commodity prices, inflation remains above the central bank’s target range of 2.5 - 6.5% at over 8%. In response, the central bank has tightened monetary policy.
9
8
7
6
5
Real GDP CPI Inflation
%
4
3
2
1
0
2006
-1
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
-2
Source: IMF World Economic Outlook and A.M. Best
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AMB Country Risk Report
Brazil
Score 1 (best) to 5 (worst)
World Average
Regional Stability
Legal System
International Transactions
Policy
5
4
3
2
1
0
Monetary Policy
Fiscal Policy
Social Stability
Source: A.M. Best
Government Stability Labor Flexibility
Business Environment
Brazil
Political Risk: High
• President Rousseff narrowly won her second presidential term in October of
2014 in a heavily contested election, with
51% of the popular vote. In her second term, she will have to contend with a less cooperative congress and a polarized political environment. Issues including poor economic performance, corruption charges and cuts to social spending have put her approval ratings at the lowest level of any Brazilian president.
• Social unrest has increased, with protests across major cities gathering more than one million people. Unpopular fiscal consolidation efforts that include tax increases and budget cuts, along with a lower tolerance of corruption, have been the main drivers of civil discontent.
• Petrobras, the state owned energy company, has been under investigation for corruption.
The scandal has been far reaching with high level government and business officials implicated in the investigation.
16,000
GDP Per Capita Population
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Brazil Argentina
Source: IMF and A.M. Best
Chile Colombia Mexico Venezuela
0
250
200
150
100
50
Financial System Risk: Moderate
• The insurance industry is subject to supervision and regulation by the National
Council for Private Insurance (CNSP), and its executive arm, the Superintendency of
Private Insurance (SUSEP).
• Brazil has the largest insurance market in Latin America and has more than twice as many premiums written as the next largest market, Mexico.
• The banking system’s soundness indicators remain favorable, but sustained low growth and the transition to a low credit growth environment could put bank balance sheets under pressure.
• Banks are broadly in line with Basel-III regulations. Banks are well provisioned and liquidity risk for the system as a whole is low.
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AMB Country Risk Report Brazil
A.M. Best defines country risk as the risk that country-specific factors could adversely affect the claims-paying ability of an insurer. Country risk is evaluated and factored into all Best’s Credit Ratings. Countries are placed into one of five tiers, ranging from “CRT-1” (Country Risk Tier 1), denoting a stable environment with the least amount of risk, to “CRT-5” (Country Risk Tier 5) for countries that pose the most risk and, therefore, the greatest challenge to an insurer’s financial stability, strength and performance.
A.M. Best’s Country Risk Tiers are not credit ratings and are not directly comparable to a sovereign debt rating, which evaluates the ability and willingness of a government to service its debt obligations.
Country risk Tiers
Country risk Tier
CRT-1
CRT-2
CRT-3
CRT-4
CRT-5
Definition
Predictable and transparent legal environment, legal system and business infrastructure; sophisticated financial system regulation with deep capital markets; mature insurance industry framework.
Predictable and transparent legal environment, legal system and business infrastructure; sufficient financial system regulation; mature insurance industry framework.
Developing legal environment, legal system and business environment with developing capital markets; developing insurance regulatory structure.
Relatively unpredictable and nontransparent political, legal and business environment with underdeveloped capital markets; partially to fully inadequate regulatory structure.
Unpredictable and opaque political, legal and business environment with limited or nonexistent capital markets; low human development and social instability; nascent insurance industry.
Country risk reports
A.M. Best Country Risk Reports are designed to provide a brief, high-level explanation of some of the key factors that determine a country’s Country
Risk Tier assignment. It is not intended to summarize A.M. Best’s opinion on any particular insurance market or the prospects for that market.
Categories of risk
Country Risk Reports provide scores for three categories of risk for each country. These scores are (1) Very Low; (2) Low; (3) Moderate; (4) High and (5) Very High.
Category of risk Definition
Economic Risk
Political Risk
Financial System Risk
The likelihood that fundamental weaknesses in a country’s economy will cause adverse developments for an insurer.
A.M. Best’s assessment of economic risk evaluates the state of the domestic economy, government finances and international transactions, as well as prospects for growth and stability.
The likelihood that government or bureaucratic inefficiencies, societal tensions, inadequate legal system or international tensions will cause adverse developments for an insurer. Political risk comprises the stability of the government and society, the effectiveness of international diplomatic relationships, the reliability and integrity of the legal system and of the business infrastructure, the efficiency of the government bureaucracy, and the appropriateness and effectiveness of the government’s economic policies.
Financial system risk (which includes both insurance and non-insurance financial system risk) is the risk that financial volatility may erupt due to inadequate reporting standards, weak banking system or asset markets, and/or poor regulatory structure. In addition, it includes an evaluation of whether the insurance industry’s level of development and public awareness, transparent and effective regulation and reporting standards, and sophisticated regulatory body will contribute to a volatile financial system and compromise the ability of an insurer to pay claims.
Political risk Summary
To provide additional detail on the political risk in a given domicile the Country Risk Reports include the Political Risk Summary. The Political Risk
Summary is a radar chart that displays scores for nine different aspects of political risk scored on a scale of one to five with one being the least amount of risk and five being the highest amount of risk.
Category
International Transactions
Policy
Definition
Measures the effectiveness of the exchange rate regime and currency management.
Monetary Policy Measures the ability of a country to effectively implement monetary policy.
Fiscal Policy
Business Environment
Labor Flexibility
Government Stability
Social Stability
Regional Stability
Measures the ability of a country to effectively implement fiscal policy.
Measures the overall quality of the business environment and ease of doing business.
Measures the flexibility of the labor market, including the company’s ability to hire and fire employees.
Measures the degree of stability in a government.
Measures the degree of social stability, including human development and political rights.
Measures the degree of stability in the region.
Legal System Measures the transparency and level of corruption in the legal system.
Country risk Tier Disclosure
A Country Risk Tier (CRT) is not a credit rating, rather it represents a component of A.M. Best’s Credit Rating Methodology that is applied to all insurers. A CRT is not a recommendation to purchase, hold or terminate any security, insurance policy, contract or any other financial obligation issued by a government, an insurer or other rated issuer, nor does it address the suitability of any particular policy, contract or other financial obligation for a specific purpose or purchaser.
Copyright © 2015 by A.M. Best Company, Inc. Version 091714
Copyright © 2015 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
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