In Southern Brazil one-quarter of cities are in a state of emergency after being hit by a series of droughts and excessive downpours, according to a survey by Folha based on Brazil’s Ministry of National Integration.
1,296 of Southern Brazilian cities have asked the federal government for aid to deal with severe weather-related damages, 71% of requests are from droughts in the Northeast region and north state of Minas Gerais.
In the South, Southeast, and Northern regions some cities suffer from a combination of droughts and heavy showers.
The Ministry of National Integration said in 2017, so far, it’s paid out US$63 million for disaster relief.
As the government investigates each request for aid, it could make payouts using their FGTS (Government Severance Indemnity Fund for Employees) and Bolsa Família (Family Stipend) program.
The ministry said it provided a further US$250 million on Federal Water Truck operations, which amounts to 3.2 million people, in a total of 861 cities affected by droughts.
In January 2016, the European Commission granted Brazil provisional Solvency II equivalence for 10 years, the Superintendência de Seguros Privados (SUSEP) is expected to regulate the Own Risk and Solvency Assessment (ORSA) fully in 2017, making it effective by 2019, EY stated in its 2017 report on Latin America.
This represented a major transformation for how insurers operate in the country, paving the way for the re/insurance industry to evolve in the country.
Edgar Sanchez, Managing Director, Ernst & Young LLP (EY), commented in the report; “We are optimistic about the insurance business in 2017. A pickup in oil prices should help the economy, and firming currencies could drive stronger car sales. And a long-awaited turnaround in Brazil could boost other markets in the region.”
However, climate studies had previously indicated that from 2010 onwards, precipitation may increase in southern Brazil, while lower rainfall was forecast in southern and central Amazônia, west-central Brazil and most of Northeast Brazil, according to a Lloyd’s sponsored report on climate change in Brazil.
“By 2020, while rainfall will tend to increase in western Amazonia and in Southern and Southeastern Brazil, the rest of the regions are likely to record less heavy rains.
“By 2030, the dominant pattern shows a possible reduction in the total amount of rainfall and number of wet days in tropical South America, with a tendency for more heavy rainfall in regions such as western Amazônia, and southern and Southeastern Brazil.
“Some business and companies may suffer directly or indirectly from the consequences of a possible global warming. Directly, without any adaptation, they may experience difficulties in maintaining current levels of production or operational efficiency,” the report warned, demonstrating that the severe weather witnessed this year could be set to increase in coming years, with knock-on effects for the economy.
Brazil has been viewed as having high-growth potential, with economic conditions expected to improve, however, the changes within the U.S. administration have added an additional element of geopolitical uncertainty to these forecasts.
A large proportion of the country now suffering from extreme weather conditions could provide an impetus for transferring the burden of disaster relief to the wider re/insurance industry, however, with the economy undoubtedly suffering simultaneously, the question of how re/insurers will be impacted in future remains to be seen.
