Brazilian reinsurance regulations still need improving says IFIRMA

The International Federation of Risk and Insurance Management Associations has welcomed the flexibility of the Brazilian government in responding to the world-wide concern about its new reinsurance regulations, but believes more needs to be done to limit the negative impact on insurance capacity and cost.

By replacing Resolution 224 with Resolution 232, the Brazil government is permitting insurance companies to cede up to 20% of each reinsurance treaty to companies based abroad that are linked with or belong to the same financial group, instead of prohibiting intra-group transfers.

It is a common opinion among insurance and reinsurance players, in addition to the buyers of insurance represented by IFRIMA, that Resolution 232 is an important step in maintaining the development of the Brazilian market since liberalisation began in 2007.

Unfortunately, IFIRMA believes it is still not enough. The restrictions that remain, plus a second Resolution that mandates placement of business with local reinsurers, still create the danger of reduced capacity, especially for large risks, and higher costs for industry.

IFRIMA said without further changes many business opportunities could be lost to Brazil, and that even businesses which were starting to grow as a result of big investment from various multinationals after the end of the reinsurance monopoly could think again about their future.

It added: "We trust that the current position is an intermediate situation for the sector and that an equitable situation can be reached for all the parties involved in this promising market."