Country Profile Venezuela www.lloyds.com/VenezuelaMI
May 2014 chris.brown@lloyds.com
KEY FACTS FULL NAME / CAPITAL CITY: Bolivarian Republic of Venezuela / Caracas
GDP (PPP):
US$ 421bn (Global Rank #33)
LANGUAGE:
POPULATION:
31m (Global Rank #40)
IMF CATEGORISATION:
“Emerging / Developing”
Spanish
MAIN EXPORT PARTNERS:
Brazil 39%, China 14%, India 12% (2012)
MAIN IMPORT PARTNERS:
Brazil 27%, US 16%, China 12% (2012)
MAIN EXPORTS:
petroleum and petroleum products, bauxite and aluminium, minerals
MAIN IMPORTS:
agricultural products, livestock, raw materials, machinery and equipment 2012 Rank
2013 Rank
Change in Rank
EASE OF DOING BUSINESS:
177
180
-3
COMPETITIVENESS:
124
126
-2
FREEDOM FROM CORRUPTION:
166
172
-6
DISASTER
YEAR
ECONOMIC COST (US$ x 1000)
Flood
1999
3,160,000
Earthquake
1997
81,000
Flood
2005
50,000
Earthquake
1981
5,000
Storm
1993
4,500
Source: Disaster Statistics based on: Prevention Web (2013); Export Statistics based on CIA World Factbook; Doing Business Indicators based on Doing Business (2013), World Economic Forum (2013), Index of Economic Freedom (2013); Key Facts based on CIA World Factbook (2014), IMF (2014) © Lloyd’s
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KEY STATISTICS SIZE OF ECONOMY
WEALTH PER CAPITA
Purchasing Power Parity (PPP) basis in International $ bn
Purchasing Power Parity (PPP) basis in International $
Venezuela
Chile
Brazil
Government Effectiveness
13
87
50
Political Stability and Absence of Violence/Terrorism
18
59
48
Control of Corruption
7
91
56
Regulatory Quality
5
93
55
Rule of Law
1
88
52
3,500
30,000
3,000
25,000
2,500
20,000
2,000
15,000 1,500
299
500
398
1,000
22
80
10,000 5,000 0
0 2006
Voice and Accountability
13,480
BR
11,145
CL
503
2012
VE
15,516
GOVERNANCE INDICATORS Percentile Rank (1-100) 2012
2012
2018f
2006
BR
VE
2012
2018f
61 VE
CL
CL
BR
TOTAL NON-LIFE DIRECT INSURANCE MARKET*
NON-LIFE DIRECT INSURANCE MARKET
LLOYD’S GROSS SIGNED PREMIUMS
Premiums in US$ m
Premiums in US$ m; by OECD Class
Gross Signed Premiums in US$ m; by country of origin 400
35,000 984
Property Liability
Venezuela 2012 US$ 13.5bn
300 250 200
150 100
5,000
MAT
0 2011 VE
2012 CL
2013 BR
Miscellaneous
101
4,034 717
99
15,664
13,474
10,135
20,000
10,000
650
PA & Health
25,000
15,000
350
405
30,000
134
Motor
50 6,684
0 2011
2012
2013
VE
CL
BR
All data, sources & data limitations are available for download at www.lloyds.com/comparecountries;* 2013 total non-life based on CAGR projection
LLOYD’S TRADING POSITION Venezuela www.lloyds.com/crystal
Insurance: Reinsurance:
Coverholders:
No (However, Peruvian citizens are free to approach foreign insurers) Lloyd’s is a registered reinsurer in Venezuela. Lloyd’s underwriters therefore may write Venezuelan reinsurance business. Contracts should include a choice of law clause. Underwriters are free to agree with the insured what country's law should be specified in the choice of law clause. No © Lloyd’s
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BUSINESS ENVIRONMENT Expropriation risks will be lower in 2014 than in prior years but key sectors are still likely targets. Expropriation risks will remain high in the one-year outlook but slightly lower than in previous years, especially as 2014 is not an electoral year. Expropriation risks will increase in 2015 as parliamentary elections are due to be held that year: these will test the popularity of President Nicolás Maduro and his ruling (United Socialist Party of Venezuela (Spanish: Partido Socialista Unido de Venezuela: PSUV). The food, basic goods, and services sectors will remain vulnerable, as will urban and rural land plots linked to social housing construction projects. Empresas Polar, the largest food producer in Venezuela, will remain a likely target, as will companies in areas that the government considers strategic. Oil services firms that jeopardise production by stopping work in response to late payments from the government or state oil company PDVSA will remain at risk. Nevertheless, energy majors and companies involved in exploration and production, particularly in the oil-rich Orinoco Belt, are unlikely to be targeted as the government is keen to increase oil production to fund public spending. Arbitration rulings against Venezuela will be issued in the one-year outlook. Venezuela's withdrawal from the International Centre for Settlement of Investment Disputes (ICSID) will not affect the government's liability with regards to more than 20 pending cases. Venezuela's renunciation of the ICSID convention comes against a backdrop of imminent decisions against it, including those of ExxonMobil and ConocoPhillips, expected to be issued this year or in early 2015. Energy sector risks will continue. The country is suffering from an electricity crisis that needs urgent attention. Despite the government's assurances on solid investment in the power sector, it is clear that neither late president Hugo Chávez nor Maduro have been able to tackle structural problems within the sector, including the lack of funding. The investments made in the sector since 2010 will not be able to fully alleviate the problems, so the risk of shortages and power outages throughout 2014 and onwards remains high. Evidence from economic policy decisions shows that President Nicolás Maduro is following the policy template established by Hugo Chávez. Since Maduro lacks the popularity that Chávez enjoyed, IHS expects his administration to allocate public-sector resources in the areas that will endear him most with the Venezuelan people and allow him to consolidate power during his first two years in power.
GROSS DOMESTIC PRODUCT (GDP)
TOP-10 SECTORS (BY VALUE ADDED)
BUSINESS ENVIRONMENT INFORMATION
(nominal GDP levels in billion US$; Real GDP change)
(value added in billion US$ & 2013Change in real %)
(provided by IHS Global Insight, May 2014)
800 6%
5.6%
700
TOP SECTORS
5% 4.2%
600
4.2%
4%
2.6%
500
2.7%
3.0%
2.9%
3% 2%
400
1% 0%
300
-1%
200
-1.5% -2%
100
-3%
-3.2% 0
-4% 2009
2010
2011
2012
2013
2014
2015
2016
2017
2012 Value Added
2013 Percentage Change
1. Oil and Gas Mining 2. Construction 3. Retail Trade - Total 4. Agriculture 5. Wholesale Trade 6. Education 7. Hotels and Restaurants 8. Public Admin. and Defence 9. Refined Petroleum and Coke Prod. 10. Health and Social Services
71.1
-2.2
36.3
3.8
22.8
5.7
18.3
2.4
16.7
5.9
16.6
5.1
16.3
5.5
15.6
4.2
12.5
4.0
11.8
5.4
Top-10 Total
238
For daily updates visit: > www.ihsglobalinsight.com © Lloyd’s
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INSURANCE ENVIRONMENT Quick Links / useful sources
2012 MAJOR DIRECT INSURERS
2012 DIRECT PREMIUMS
Top-10 Market Players by GWP (Gross Written Premiums in US$ m)
(Premiums in US$ m; by OECD Class)
Caracas Liberty
1,483
Insurance Market Profiles > www.iii.org/international/profiles
Motor
984 405
Mercantil
1,217
Horizonte
Property 798
Previsora
743
Occidental
686
Multinacional
470
Constitución
464
Banesco Altamira
4,034 717
880
Mapfre
650
PA & Health
Liability
Venezuela 2012 US$ 13.5bn
6,684
415
BUSINESS CULTURE GUIDE
380
Source: Association: > www.iii.org/international/profiles
Lloyd’s Agency Network > www.lloyds.com/agency Lloyd’s Claims Team > www.lloyds.com/claims
MAT Miscellaneous
Superintendencia de la actividad aseguradora > http://www.sudeseg.gob.ve
> http://www.kwintessential.co.uk
Source: Regulator: > www.sudeseg.gob.ve
(View Resources > Culture Guide)
Total insurance market was worth US$ 13.5bn in 2012: Venezuela has a sizeable insurance market by regional standards. Motor and health products represent the bulk of premiums written in Venezuela, which makes this market among the least diversified insurance markets in Latin America. Growing competition & likely further consolidation: As insurers are facing stronger competition and high levels of government intervention, many small and midsize insurers are likely to be tested, leading ultimately to further consolidation. Outlook: Premium growth performance in the Venezuelan insurance market may point towards further good growth prospects. As foreign companies navigate the existing and developing hurdles to success in Venezuela, foreign insurers and reinsurers are likely to continue looking into developing their business in the country. © Lloyd’s
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LLOYD’S BUSINESS 2009-2013 LLOYD’S TOTAL PREMIUMS
2013 LLOYD’S HIGH LEVEL CLASSES
Gross Signed Premiums; Direct versus Reinsurance; in US$ m
Gross Signed Premiums; high level classes; in US$ m
2013 GROSS SIGNED PREMIUMS*
160 140
Total
US$ 101m
Reinsurance Direct
US$ 96m US$ 5m
120
80
0.0
128
*COUNTRY OF ORIGIN PREMIUMS 93
84
93
96
20 3
9
5
6
5
2009
2010
2011
2012
2013
Direct
7.8
Property (D&F)
33.6
Marine
60
0
0.0
Property Treaty
100
40
UK Motor Overseas Motor
Reinsurance
Policyholders are based or headquartered in this territory;
Premiums may be written outside this territory;
X X
Not necessarily where risks are located May differ to what is reported to local regulator (dependent on local requirements).
17.7
Energy
2.5
Casualty
9.9
Casualty Treaty
0.0
Aviation
25.6
Accident & Health
3.7
0
10
20
30
40
Source: Market Intelligence based on *Gross Signed premiums; Xchanging (2014); unaudited figures based on country of origin and processing by calendar year; see Appendix for details
© Lloyd’s
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APPENDIX MACRO-ECONOMIC & BUSINESS ENVIRONMENT DATA Source: IMF (www.imf.org/external/data.htm), World Bank (http://data.worldbank.org/), IHS Global Insight. Notes: GDP data on size and wealth of the economy is reported in Purchasing Power Parity (PPP) terms; this is the most accurate indicator of the true standard of living in each country and therefore potential demand. To calculate this, GDP is converted from local currency to an international $ currency using PPP exchange rates rather than the market exchange rate. The PPP local currency-to-international $ exchange rates are determined such that a standard basket of goods has the same price in international $ terms in each country. This adjusts for the differing costs of goods across countries, when converted at market exchange rates. INSURANCE MARKET DATA
Source: Reported data derived by Lloyd’s Market Intelligence team; original source is regulatory bodies, associations, third party information providers. Notes: Data is reported in US$. For more information, see www.lloyds.com/comparecountries. Exchange Rates Note: Where required, data has been converted to US$ using annual average exchange rates as per www.oanda.com. LLOYD’S PREMIUM DATA Source: Reported data derived by Lloyd’s; original source is Xchanging (data therefore contains only premiums processed by Xchanging). Notes: Data is reported is US$, on a calendar year basis and is signed gross premiums. This differs from the data published in the Lloyd’s Annual Report, which is also on a calendar year basis, but is written gross premiums and sourced directly from Syndicates. Differences are therefore (1) timing inconsistencies between signed and written gross premiums; (2) inconsistent use of exchange rates by Syndicates and Xchanging; & (3) incompleteness of Xchanging data set for certain classes of business (a substantial amount of premium is not processed by Xchanging and missing from the REG 258 data set; this comprises, for example, UK Motor). Exchange Rates Note: Data has been converted to US$ using monthly exchange rates provided by Xchanging. Definitions: Gross Signed Premiums: Original and additional inward premiums, plus any amount in respect of administration fees or policy expenses remitted with a premium but before the deduction of outward reinsurance premiums. Calendar Year: Relates to the calendar year in which the premium, additional or return, is processed by Xchanging. This is irrespective of the actual underwriting year of account, which is determined by the inception date of each risk. Country of Origin: Denotes the domicile of the insured party (i.e. the coverholder or policyholder). This is the country from which demand for the insurance / reinsurance emanates, & is irrespective of the country to which the risk is classified for regulatory reporting purposes.
Example: A policy holder in the UK insuring a holiday home in France would be classified as a UK risk by “Country Of Origin”, but “French” for regulatory reporting purposes. Similarly a risk incepting on 1st December 2007 would be classified at 2007 “Underwriting Year of Account” but may not be processed by Xchanging until 2008 and so be allocated to the 2008 “processing year”. ACCESSING THE DATA: to access the raw data in this document, and equivalent data for other countries, see www.lloyds.com/comparecountries.
DISCLAIMER: This document is intended for general information purposes only. Whilst all care has been taken to ensure the accuracy of the information, Lloyd's does not accept any responsibility for any errors or omissions. Lloyd's does not accept any responsibility or liability for any loss to any person acting or refraining from action as a result of, but not limited to, any statement, fact, figure, expression of opinion or belief contained in this document. © Lloyd’s
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