Disclosure and pandemic risk : analysis of disclosure about pandemic risk by health insurance companies in Brazil

Abstract

This study focuses on the reality of accounting disclosure by healthcare insurance (HCI) companies in Brazil due to the occurrence of the pandemic and the growing risk of a new pandemic (pandemic risk). The dissertation resulting from this study aimed to relate the pandemic reality with the accounting theory of Disclosure, using mainly the development carried out by Verrecchia (2001), in the category “Disclosure based on efficiency”. The development of this theory suggests the need for greater accounting disclosure to achieve an optimal balance point between the entrepreneur's gain and the investor's gain, reducing information asymmetry in cases of increasing probability of liquidity shocks occurring. We sought to identify whether the pandemic had any type of significant impact on the risk or return of HCI companies located in Brazil. An exploratory research approach with a longitudinal time horizon was used for this, examining a period of five and a half years that incorporated the impact of the COVID- 19 pandemic. The relationship between variations and the pandemic moment was made based on the time horizon of the pandemic occurring in the Brazilian territory, in view of the different pandemic start times in different countries of the world. The analysis revealed that healthcare insurance companies in Brazil in general had their profitability affected by the pandemic and that these observed variations were closely related to the pandemic. The risk measured through Risk-Based Capital (RBC) had no variations explained by the pandemic, rather its variations were explained by the size of the company as well as the business type of these organizations. The variations observed in profitability due to the pandemic moment, cause this event to be characterized as a “liquidity shock”. But these variations were not sufficient to cause HCI companies’ disclosures to be affected, as predicted in accounting theory. No disclosure was observed about the pandemic risk by the companies, except in the only publicly traded company in the segment. However this company did not present a plan to face this risk. The findings show the use of silence in disclosures as a tool to improve the legitimacy of companies, despite the increase of risks for companies. The theoretical use of efficiency-based disclosure shows the necessity of improving disclosures about pandemic risk by healthcare insurance companies in Brazil.