Due to reduced exposures in volatile lines of business such as agribusiness, (re)insurance companies in Brazil should be able to weather any impacts from the recent widespread flooding in Rio Grande do Sul, according to an AM Best commentary.

The Best’s Commentary, “Low Agribusiness Exposure to Help Brazil’s Reinsurers Weather Floods,” states that for most (re)insurers, the biggest impact involves agribusiness, as well as commercial and personal property and business interruption due to shortages of basic supplies and damage to public infrastructure in the country’s southern region. Banks and financial institutions also will be pressured as they will need to renegotiate terms and conditions with affected parties.

“Agribusiness is of high importance for the Brazilian economy, and Rio Grande do Sul is an agricultural center 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,” said Ricardo Rodriguez Perez, financial analyst, AM Best. “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.”

To access the full copy of this commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=342796.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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