Foreign insurers see expansion opportunities in Brazil

A Brazilian saying holds that “Brazil is the country of the future, and always will be.”

That sardonic comment, which twists Austrian writer Stefan Zweig's praise for the nation as “the country of the future,” may have held true once, but insurance industry observers now view it as a land of opportunity for foreign insurers.

Like China, Brazil is experiencing economic growth that is creating a growing middle class, according to observers. That creates a demand for insurance products of many kinds, personal and commercial. Added to that general economic dynamic is the fact that the country will play host to two of the world's biggest sporting events within the next four years.

The country's population is growing and was estimated to reach nearly 206 million this year, according to the CIA.

According to the CIA, Brazil's estimated gross domestic product as measured in purchasing power equity grew 2.8% in 2011 to $2.284 trillion. The U.S. Department of Commerce ranked Brazil eighth on the list of the United States' biggest trading partners, with 2011 Brazilian exports to the United States amounting to $31.37 billion and imports from the United States totaling $42.94 billion.

The growth doesn't appear likely to slow, according to observers.

“In Brazil, huge infrastructure projects, offshore oil exploration and major new mining operations are coming online,” said Stephen Fuller, vp-international external affairs for Warren, N.J.-based Chubb Corp. “These projects will generate large demand for various types of insurance and reinsurance.”

“In Brazil, the country's economy is expanding across a range of industries in both manufacturing and services,” said Mr. Fuller. “Demand for our insurance products is thus becoming as diverse as it is in Europe or the U.S.”

“The Brazilian insurance market is paying special attention to two key industries—energy and construction,” said Luis Maurette, CEO of Willis Latin America, “With regards to energy, Petrobras—a huge state-run organization—is involved in petroleum exploration.” Construction is “prospering and creating new opportunities for insurance companies,” he said, adding that agribusiness is a “massively untapped market” that has the potential to “generate significant insurance premiums.”

Two international sporting events also should spur future growth and demand for insurance in Brazil, said David Snyder, vp and associate general counsel of the American Insurance Assn. in Washington.

“Brazil is a major large and rapidly growing economy in Latin America,” said Mr. Snyder. “In that region is clearly a market for significant opportunities for insurers. Brazil has two major infrastructure challenges in the next few years—the World Cup and the Olympics—in addition to its rapid development of its general economy. It is clearly going to be a major market in Latin America and globally.”

The country is slated to host the FIFA World Cup tournament in 2014, which is almost guaranteed to be a huge event in a country that has won more World Cups—five—than any other. Two years later, Rio de Janeiro will host the summer 2016 Summer Olympics.

“Brazil is in the spotlight,” said Eugenio Paschoal, CEO of Marsh Inc.'s Brazilian operations. “There are opportunities for everybody everywhere.”

Like other observers, he stressed the importance of infrastructure projects and the energy market. He also noted that small and medium-size enterprises are a big market in Brazil, creating demand for insurance and professional administration, which creates opportunities for brokers.

As is the case with China, the greatest growth potential in Brazil stems from a growing middle class and a growth in large domestically headquartered corporations, “many of which will begin to expand globally,” said Jon Hall, executive vp of Johnston, R.I.-based Factory Mutual Insurance Co., which does business as FM Global. “The growth of middle classes means more disposable income for cars and homes, leading to personal lines life and nonlife insurance opportunities,” he said. “The growth in national and global corporations means more insurance opportunities for commercial nonlife insurers.”

Foreign direct investment is increasing, said Corina Monaghan, vp of the political risk practice at Aon Risk Solutions in New York. She noted that sales of U.S. goods and services have increased in the past few years.

“There is a growing interest in trade credit insurance in Brazil because we are exporting more and more to Brazil,” she said. “It's a very useful tool at the end of the day.”

With gross domestic product up, unemployment down and a growing population, Brazil is a market with a lot of opportunities, she said. Foreign companies are interested in industries as varied as oil and gas exploration and hotels.

“It's kind of like the place that everybody believes in at the moment,” said Ms. Monaghan.