Insurance Industries in Mexico and Brazil and Opportunities for Global Asset Managers

Insurance companies traditionally make up a significant component of a given institutional investor base. This important market segment warrants a targeted coverage approach based upon a thorough understanding of key markets, players, regulations and opportunities. The Capstone team selected the two largest economies in the region, Brazil and Mexico, for a first in-depth market assessment.

The team's findings show strong opportunities for outreach primarily in Mexico, with regulatory obstacles impeding chances in the Brazil market. Mexico’s insurance industry has untapped room for growth, as premiums stand at just 2% of GDP. With the passage of the Ley de Instituciones de Seguros y Fianzas (2013), foreign investment is expected to increase in the sector and capital requirements will yield mergers and acquisitions potentially bringing about more sophisticated investment regimes. Furthermore, the team's analysis shows that some Mexican insurance companies are already investing in foreign government bonds and taking foreign currency exposure, indicators of interest for foreign asset managers.

Brazil has a much stricter paradigm for allowing insurance companies to invest abroad, only permitting exposure for global asset managers via funds registered locally in the Brazilian market. Additionally, Brazilian insurance companies were largely invested in long-term government securities. This was not surprising given the attractive rate of return on long-term Brazilian debt. As such, the Brazilian insurance market appeared less lucrative than Mexico’s and until regulatory dynamics allow for greater investment freedom, we advise a cautious approach towards marketing in Brazil.