Flooding aftermath: Brazil’s insurance rates normalize, moderating inflation

We've written repeatedly about the deadly flooding in southern Brazil this year, which disrupted key industries and complicated monetary policy by boosting inflation.

At least one affected component of the consumer price index is returning to normal: car insurance, where premiums soared in the wake of the flooding.

From April to May, total insurance claims relating to damaged or destroyed automobile bodies ("hulls") jumped 36% month-on-month. This segment's loss ratio (claims by policy holders as a share of premiums paid) rose from 60% in April to 79% in May. That was the highest since 2022, when post-pandemic car travel rebounded and auto parts were expensive due to supply-chain restrictions.

Our first chart shows how the car-insurance segment of the CPI took two months to spike in the wake of the floods. The car insurance price subindex (a component of transportation CPI) rose a seasonally adjusted 4.6% month on month in July; it fell 1.3% on that basis in August.

Our second visualization shows how other segments were affected by the flooding. Claims on housing insurance showed the most remarkable surge, rising more than 3,000% month on month. Claims on life insurance increased 43% on that basis, while rural insurance claims nearly doubled.

Despite the disruption, the National Confederation of Insurance Companies has maintained its forecast that the sector's total premiums will grow 11% year-over-year for 2024, up from 9% a year earlier. This is due to rising real incomes, a declining unemployment rate, and the likelihood that the floods will spur consumer interest in purchasing more insurance for their property and vehicles.

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