Fitch Publishes Brazilian Surety and Trade Credit Dashboard
Key items covered in this report include premium growth trends, segment concentrations and recent claim data. Fitch notes that the surety segment has so far withstood the ongoing macroeconomic challenges better than the trade credit segment. Surety premiums grew 27% on a year-on-year (YOY) basis as of June 2016, and 28% on average in 2013-2015. This contrasts with a 5% YOY reduction in trade credit premiums in first-half 2016 and 14% average growth in 2013-2015.
Likewise, gross loss ratios in the surety segment have so far remained broadly stable (23% as of June 2016, 25% in 2015 and 19% in 2014), in contrast to a sharp rise in the trade credit segment (126% as of June 2016, 113% in 2015 and 71% in 2014), which, in turn, reflects this segment's high correlation with the macroeconomic environment and the sharp increase in bankruptcy protection filings since 2015.
Both surety and trade credit remain very underpenetrated markets in Brazil, which Fitch believes will drive the future growth of these segments, macroeconomic conditions permitting. Further, growth in surety would receive a significant boost in the short term if the proposal to increase the mandatory surety coverage of public sector projects from 5%-10% of the total value of the contract to 30% is signed into law.
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