Seminario Regional de Expertos Seminario Regional de Expertos OCDE-ASSAL:OCDE-ASSAL:

MEJORAMIENTO EN LA MEJORAMIENTO EN LA TRANSPARENCIA Y MONITOREO DE TRANSPARENCIA Y MONITOREO DE

LOS MERCADOS DE SEGUROS - LOS MERCADOS DE SEGUROS - BRASILBRASIL

Septiembre/2013

Susep structure

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

Susep structure

CGSOA structure

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

Market

Market supervisioned by Susep (Dec/2012)

118 insurance companies25 private pension funds entities19 capitalization companies12 local reinsurers29 admitted reinsurers61 eventual reinsurersBrokers (insurance and reinsurance)

Statistics

Total assets (R$ billions)

Dec/2011: 453,04Dec/2012: 548,80

Premium income (R$ billions)

2008: 88,92009: 100,32010: 112,92011: 132,72012: 159,8

Current Premium/GDP (June 2013): 3,62%

Complete statistics are available at:http://www2.susep.gov.br/menuestatistica/SES/principal.aspx

Statistics

2.00%

2.20%

2.40%

2.60%

2.80%

3.00%

3.20%

3.40%

3.60%

3.80%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Participação

Percentual Participation of the Total Supervisory Market in GPD from 2003 to 2012

Data processing

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

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

UnderwritingMarketCreditOperational

Attention => There are other classifications!

Main Risks (in order of relevance)

Capital Adequacy

Legal => valued with the operational risk

Liquidity => mitigated through actions of internal controls and risk management

Other Risks

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.

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.

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.

Capital Adequacy

Credit

Splitted in two portions:

(1)credit risk associated with receivables from reinsurers, insurers, EAPC's (pensions companies) and capitalization companies; and

(2) credit risk of other receivables.

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.

Capital Adequacy

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

Solvency Monitoring – Microprudential

TOTAL BALANCE SHEET APPROACH

Solvency Monitoring – Microprudential

DISTRIBUTION OF MCR

Total MCR = R$ 22,5 billion (without risk correlations) Market risk is optional during 2013, being mandatory from 2014

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.

Rating

Companies prioritization system analysis

AssetsAccountin

g indicators

Analyst avaliation

Technical Provisions

Capital adequacy

A, B, C, D, E

A, B, C, D, E

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)

Solvency Monitoring

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.

Capital Inadequacy

Corrective plan of solvencyRecovery 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

Solvency monitoring actions

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)

Solvency Monitoring – Financial Stability

Solvency Monitoring – Financial Stability

Thanks!

ditec.rj@susep.gov.br