country profiles latin america ve mi 2014 05 21 country profile

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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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