Recent widespread flooding in Brazil’s Rio Grande southern region has prompted concerns about its impact on (re)insurance companies, particularly those with exposure to volatile sectors like agribusiness. However, a commentary by Best’s suggests that many insurers are well-prepared to weather the storm, thanks to reduced exposure in such high-risk areas.
According to Best’s commentary titled “Low Agribusiness Exposure to Help Brazil’s Reinsurers Address Floods,” most (re)insurers are expected to face challenges primarily in agribusiness, commercial and personal property, and business interruption sectors. The shortage of essential supplies and damage to public infrastructure in the affected region are key factors contributing to these challenges. Additionally, banks and financial institutions will be under pressure to renegotiate terms with affected parties.
Ricardo Rodriguez Perez, a financial analyst at AM Best, highlighted the significance of agribusiness to Brazil’s economy, particularly in Rio Grande do Sul, a major agricultural hub supplying about 60% of the nation’s rice. Despite this, insurers and reinsurers have adapted to climate-related risks by minimizing their exposure and enhancing loss prediction models.
“While floods may lead to inflationary pressures, especially affecting rice prices and GDP, insurers’ proactive risk management strategies should help mitigate potential losses,” Perez noted.”
