Reinsurance News

IRB Brasil Re sinks to $125mn loss in Q2

1st September 2020 - Author: Charlie Wood

Brazilian reinsurer IRB Brasil Re recorded a net loss of $124.7 million in the second quarter of 2020, compared to a $72.3 million profit in the prior year quarter.

irb brasil reThe firm’s combined ratio for the quarter stood at 167%, up from 84.7% in the prior year quarter.

Written premium increased 8% year-over-
year and totalled $463.6 million.

Written premium in Brazil decreased by 15.6% year-over-year, totalling $212 million. This was mainly due to the lower written premium in the special risks, agro risks, and other risks segments.

This reduction was partially offset by the higher written premium in the property and life segments, including a 46.4% increase in the written premium in Q2.

IRB Brasil also sank to a $189 million underwriting loss, a result which was strongly impacted by the increase in the loss ratio, due to risks underwritten in previous years, which focused only on volume growth rather than margins; as well as greater speed in the reserve restatement process for some major claims, in addition to exchange rate adjustments for foreign currency claims.

Overall retrocession expense increased by 23.3% to $151.6 million in Q2 year- over-year.

Of that amount, $95.6 million represents the retrocession expense in Brazil, and $56 million abroad. The 23.3% increase reflects a higher retrocession expense abroad.

Overall retained premium totalled $311 million in the quarter, up 1.9% year-over-year, driven by a higher written premium, partially offset by a higher retrocession expense.

Overall earned premium totalled $314.5 million, up 25.6% year-over-year.

Retained claims totalled $425.8 million, up 192.9% compared to 2Q19.

The overall loss ratio rose by 77.3%, from 58.0% in 2Q19 to 135.3% in 2Q20.

“Due mainly to expenses with greater-than-usual claims and the effect of exchange rate devaluation, we ended the second quarter with a loss of R$685.1 million, totalling a loss of R$671.2 million in the first six months of the year,” said Antônio Cássio dos Santos, Chairman of the Board and Interim CEO.

“In the first half of the year, we registered an acceleration in claims reports compared to the same period of 2019, mainly in the Property and Life business lines in Brazil, and Property and Rural lines abroad.

“In full compliance with accounting criteria, we have made timely payment of obligations and have not postponed claims records or payments, among other activities, in a time of uncertainty.”

He added that there is still considerable uncertainty about what the final impact of this pandemic will be on the business environment.

“Many governments, for example, have cut interest rates to the lowest levels ever, with effects on industries that depend on investments, with consequent effect on the profitability of the technical reserves of insurers and reinsurers,” said Santos.

“We expect to experience a rapid post-pandemic economic recovery, hoping that major infrastructure projects in Brazil will give the country’s economic activity a new dynamic, directly benefiting insurance and reinsurance inherent to the construction sector, such as surety bonds, performance bonds, engineering and transportation risks, for example.”

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