Commercial insurance buyers have an interest in open and competitive reinsurance markets, because they realise that reinsurers play an important role in determining what coverage is available to cover their largest risks and how much it costs.

They remember what happened to terrorism insurance when there was an abrupt withdrawal of reinsurance after 11 September 2001, and they see how capacity for energy facilities in the Gulf of Mexico has shrunk because of reinsurers' windstorm losses.

As a result, the Federation of European Risk Management Associations decided to act when it discovered that an executive branch of the Brazilian government was clawing back the liberalisation of the country's reinsurance market that was mandated by the Brazilian Parliament and began in 2007.

Rescind resolutions
We have called on the Brazilian government to rescind two resolutions, due to take effect on 31 March 2011, that we believe would reduce insurance capacity for large commercial risks and drive up prices, because they would make it more difficult and expensive for Brazilian insurers to access foreign reinsurers.

Many European companies have significant investments in Brazil, so this sort of measure interests them directly. Those which operate captives are concerned that the regulations are likely to mean that arranging reinsurance for the captive will mean more players, more transactions and so more cost. We also wanted to add our weight to the protests of our colleagues in Brazil and the Latin American region.

An open and competitive insurance markethelps create a favourable environment.

Favourable environment
When European companies they are investing in new territories, an open and competitive insurance market with access to the expertise and capital of experienced reinsurers helps create a favourable environment. With the greater uncertainty of operating in new or distant markets, companies are inclined to rely more heavily on insurance to manage their risks than they may do on more familiar ground.

Closer to home, European commercial insurance buyers would like to see reinsurers, which are tremendous repositories of knowledge about risk, support insurers in identifying future risks and providing support for new and emerging risks, particularly those which are currently ‘uninsurable'. We hope that a measure designed for the protection of buyers, Solvency II, will not discourage this innovation.

Jorge Luzzi is vice president of the Federation of European Risk Management Associations and chairman of the International Federation of Risk and Insurance Management Associations