Eager reinsurers are beginning to open their doors in Brazil after a 69-year reinsurance monopoly by Instituto de Resseguros do Brasil S.A. came to an end in April.

About 20 reinsurers have been given approval to write reinsurance so far, and the total is expected to double, observers say, noting that the market's liberalization had been anticipated for more than 10 years.

Reinsurers that have been approved or are awaiting approval to do business in Brazil include Munich Re Group, Swiss Reinsurance Co., Lloyd's of London, Chubb Corp., XL Re, PartnerRe Ltd., Transatlantic Reinsurance Co., MAPFRE Re Compania de Reaseguros S.A., Navigators Group Inc., SCOR S.E., Hannover Re Group and Liberty Mutual Group Inc.

Brazil's nonlife reinsurance premiums totaled an estimated $1.9 billion in 2007, according to Swiss Re.

Under Brazilian law, reinsurers must enter the market under at least one of three categories: local, admitted or occasional (see story, page 20). In addition, at least 60% of all reinsurance must initially be offered to a local reinsurer.

Reinsurers are attracted to the Brazilian market because of its relative isolation from the worldwide international market until now, the country's robust economy and the absence of large natural catastrophes, observers say.

Neil Montgomery, a reinsurance attorney with Felsberg Pedretti Mannrich & Aidar Advogados & Consultores Legais in S"o Paulo, said whenever a market that has been monopolistic for many decades opens up, "there's always a lot of opportunity because private competition tends to be much more efficient than state-owned enterprises."

Brazil also is a "significantly larger" insurance market than others in Latin America, said Franklin Santarelli, senior director with Fitch Ratings Ltd. in New York.

Brazil's property/casualty and life insurance premiums totaled about $21 billion in 2007, according to Stamford, Conn.-based Towers Perrin.

In addition, the country has a growing economy with large food, steel and petroleum industries that are attracting foreign investments, observers say.

There are "a lot of infrastructure projects and consumer spending is increasing," which increases expectations for the insurance market's growth, said Rodolfo Nobrega, assistant vp at rating agency Moody's Investors Service in S"o Paulo.

He said the Brazilian insurance market now represents just 3% of the country's gross domestic product, compared with 9% for the United States.

Another major attraction is that Brazil is not prone either to natural catastrophes, including earthquakes and hurricanes, or to major civil upheavals, which makes it "quite a good place to allocate risks in a worldwide portfolio," said Mr. Montgomery.

Although about 20 companies have entered the market to date, more continue to apply, despite rules that mandate that IRB and other local reinsurers initially have the right of refusal on the majority of insurers' business, say observers.

There will be challenges, said a spokesman for Munich Re, which is entering the market as a local reinsurer. "Just because there's lots of opportunity, so to speak, doesn't mean that opportunity will be profitable," he said. Reinsurers will be dealing with an inexperienced insurance market that is accustomed to relying on IRB to set terms and conditions.

"We don't have a market that is loaded with reinsurance experts, so there's going to be growing pains, and there will be a big, upward, learning curve, I would think," the Munich Re spokesman said.

The domestic Brazilian insurers "all assume it's easy, but reinsurance buying is a specialty all its own," said Edward Moss, London-based director of operations for Catlin Group Ltd.

"The big companies will undoubtedly be able to staff up and resource themselves and probably already have the capability of doing that. The smaller ones will inevitably continue to rely on someone like the IRB, who held their hand on that," Mr. Moss said.

Although some business is currently being written, many reinsurers are still getting geared up, observers say.

"We are still in the first moves of this new market," said Carlos Caputo, Rio de Janeiro-based regional managing director for XL Re, a unit of XL Capital Ltd. "People are still handling the more simplistic things, like getting registered and getting the legal requirements in place."

As a result, it may be a "few months or a couple of years before you see all the benefits of all this additional capacity in terms of new products," Mr. Caputo said.

As more reinsurers enter the market, competition is expected to be strong, but not cutthroat, observers say.

Initially, competition will be especially intense, said Mr. Montgomery. As reinsurers try to find their place in the market, they will probably be "more aggressive than in a well-established market."

While there will be some scrambling for market share, it will not be "something that drives price way below cost," said Andrew F. Giffin, a principal with Towers Perrin in New York.

"The last thing you want to do is to build up a book of unprofitable business just to build market share," said the Munich Re spokesman, "and we're not going to play that game."

Mr. Caputo said all three classes of reinsurers permitted under Brazilian law have minimum ratings requirements and all must have a legal representative in the country. Other requirements are designed to encourage entry to companies with a long-term commitment to doing business in the country.

"They want to have a very competitive market, but a very competitive market with people that have long-term plans," Mr. Caputo said. "I don't think this will be a free-for-all. The government is more interested in having stable, and good, solid partners" to help develop the market.

However, to evaluate the level of competition, "we need to wait and see" how many reinsurers ultimately enter the market, Fitch's Mr. Santarelli said.

And observers say the insurance market will continue to grow.

"The market's going to at least double in four, five years in dollar terms," said Paulo Pereira, vp and general manager for Transatlantic Reinsurance Co. in Rio de Janeiro, Brazil.

"I'm not sure" the market is going to double in size in two or three years, said Moody's Mr. Nobrega, "but I think it is feasible that it will grow rather quickly within five years." He noted that the approximately 10% to 15% of the property/casualty premiums that insurers now cede is "the lowest of all the major markets in the region."

"Once the insurance markets understand the possibilities of reinsurance and what it can do...then I think the market is going to grow rapidly," Mr. Nobrega said.