Re/insurance losses from Brazil floods expected to be contained: AM Best

With losses due to floods in Rio Grande do Sul, Brazil, estimated at BRL 7.5 billion ($1.45 billion), AM Best has noted that the impact on most re/insurers will be contained as they retain smaller exposures and have exited volatile business lines.

Heavy rains started in Rio Grande do Sul, Brazil’s fifth-largest economic state, on April 28, and amounted to 400 millimetres in just the first five days of May, according to the Instituto Nacional de Meteorologia (INMET).

The ensuing floods reportedly caused major dislocations in the state, which is an industrial and agricultural centre, taking the lives of around 100 people and displacing more than 200,000.

As of May 9, losses due to the floods were estimated at BRL 7.5 billion. Of this figure, the Confedereção Nacional de Municipios observed BRL 2 billion in public sector losses and BRL 1.1 billion in private sector losses, with the bulk of the losses -BRL 4.4 billion- in personal property damages.

Meanwhile, AM Best explained that total damages won’t be known until the waters subside, as companies are still evaluating the impact of the flood.

Ricardo Rodriguez Perez, financial analyst, AM Best, commented, “Agribusiness is of high importance for the Brazilian economy, and Rio Grande do Sul is an agricultural centre that supplies approximately 60% of the country’s rice, but insurance and reinsurance companies have learned from experience to cope with climate-related events by retaining a smaller share of exposures and developing more accurate probable maximum loss models.

“That said, the flooding is likely to cause a spike in inflation because of the increase in the price of rice, and consequently, affect GDP.”

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