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Septiembre/2013

Explore the regulatory structure, market statistics, technical provisions, capital adequacy, and risk assessment in the Brazilian insurance market.

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Septiembre/2013

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  1. Seminario Regional de Expertos OCDE-ASSAL:Mejoramiento en la transparencia y monitoreo de los mercados de Seguros - Brasil Septiembre/2013

  2. Susep structure Susep is the regulatory organ for insurance, private pension funds, capitalization and reinsurance markets, having the following structure:

  3. Susep structure

  4. CGSOA structure CGSOA is the General Coordination for the off-site Solvency Monitoring, linked to DITEC, having the following structure:

  5. Market Market supervisioned by Susep (Dec/2012) 118 insurance companies 25 private pension funds entities 19 capitalization companies 12 local reinsurers 29 admitted reinsurers 61 eventual reinsurers Brokers (insurance and reinsurance)

  6. Statistics Total assets (R$ billions) Dec/2011: 453,04 Dec/2012: 548,80 Premium income (R$ billions) 2008: 88,9 2009: 100,3 2010: 112,9 2011: 132,7 2012: 159,8 Current Premium/GDP (June 2013): 3,62% Complete statistics are available at: http://www2.susep.gov.br/menuestatistica/SES/principal.aspx

  7. Statistics PercentualParticipation of the Total SupervisoryMarket in GPD from 2003 to 2012

  8. Data processing

  9. FIPSUSEP FIPSUSEP is a system used by the companies to send monthly data to Susep Developed by Susep, contains more than one hundred groups of reports/data and provide general, financial and actuarial information, in many levels of details (by company, by lines of business, by policy, by losses) Data sent remotely in MDB/text format and stored in SQL Servers in Susep Data from a month are sent until 20th of the next month Hundreds of checkings are done automatically before sending to Susep The system can be downloaded at: http://www.susep.gov.br/menu/informacoes-ao-mercado/envio-de-dados-a-susep/fipsusep

  10. Technical Provisions • The provisions are monitored monthly using FIPSUSEP data. Some statistical provisions are calculated using the companies data, and are compared to the values shown in their financial report • Anually Susep analyses actuarial avaliations sent by the companies (Susep is now implementing Actuarial audit) • LAT is semestrally monitored • The assets that guarantee the provisions can be monitored daily • Susep can block the control of these assets according to solvency analysis results

  11. Capital Adequacy Main Risks (in order of relevance) Underwriting Market Credit Operational Attention => There are other classifications!

  12. Capital Adequacy Other Risks Legal => valued with the operational risk Liquidity => mitigated through actions of internal controls and risk management

  13. Capital Adequacy Underwriting Risk related to the coverages offered and risk mitigation processes used to manage the insurance business or the obligations of a pension plan. Sources:underwriting, processes, pricing, provisioning, product design, retention policy and policyholder behavior.

  14. Capital Adequacy Market Risk related to the Company's exposure to movements in the level of financial variables. Sources: proportional to the degree of mismatch between assets and liabilities.

  15. Capital Adequacy Credit Risk of losses associated with the failure of the borrower or counterparty of their respective financial obligations under the agreed terms, and / or devaluation of receivables arising from the deterioration in the risk rating of the borrower or counterparty.

  16. Capital Adequacy Credit • Splitted in twoportions: • credit risk associated with receivables from reinsurers, insurers, EAPC's (pensions companies) and capitalization companies; and • (2) credit risk of other receivables.

  17. Capital Adequacy Operational Operational Risk is the possibility of losses resulting from failure, deficiency or inadequacy of internal processes, people and systems or from external events. Includes legal risk on the inadequacy / deficiency of contracts, sanctions for noncompliance with laws and compensation for damages to third parties arising from activities of the institution.

  18. Capital requirement Minimum Capital Required (MCR) The highest value between the sum of the main risks and the base capital The MCR is compared to the available capital

  19. Solvency Monitoring – Microprudential Total Balance Sheet Approach

  20. Solvency Monitoring – Microprudential distributionof MCR • Total MCR = R$ 22,5 billion (without risk correlations) • Market risk is optional during 2013, being mandatory from 2014

  21. Solvency Monitoring – Macroprudential The previously displayed classification is established from the microprudential point of view (insurance companies). When we consider the impact on the financial system as a whole, the importance of risk changes. Thus, in a macroprudential perspective, the underwriting risk would be in a lower level of importance in relation to market risk and credit risk, operational risk remaining with the same relevance.

  22. Rating Companies prioritization system analysis Assets TechnicalProvisions Capital adequacy Accountingindicators Analyst avaliation A, B, C, D, E

  23. Solvency Monitoring

  24. Solvency Monitoring Pillar 1: large compliance: capital, provisions and assets rules implementated Pillar 2: retention limit, actuarial avaliation, risk questionnaires, auditing, internal control, licensing procedures Pillar 3: large compliance: accounting plan, financial reports and data disclosure (SES)

  25. Solvency Monitoring Accounting and Actuarial comissions with the market Agreements with other regulatory organs such as ANS (Health Insurance), PREVIC (other pension funds), BACEN (banks and other financial inssitutions), CVM (secutities) Licensing procedures (analisys on capital, products, board of directors, business plan, etc) On-site inspections (internal controls, data quality, products comercialization, money laundering, accounting procedures, etc) Group supervision along with BACEN. Recently a new area in CGSOA was created to develop group supervision.

  26. Solvency monitoring actions Capital Inadequacy Corrective plan of solvency Recovery plan of solvency Provisions/Assets insufficiency and other problems Special monitoring regime,operation restrictions, intervention, liquidation Other actions Meeting, fines, blocking of certificate of regularity

  27. Challenges Market Risk impact Implementing risk margin Improving capital market Improving quality of the assets Reinsurer monitoring (data bases, accounting standards, etc) Implementing ORSA (Own Risk and Solvency Assessment)

  28. Solvency Monitoring – Financial Stability

  29. Solvency Monitoring – Financial Stability

  30. Thanks! ditec.rj@susep.gov.br

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