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Member, Beacon International Group, Ltd.
BRUSSELS—The Federation of European Risk Management Assns. has welcomed the Brazilian government’s decision to rescind a ban on intracompany reinsurance cessions but says further changes to Brazil’s reinsurance rules are needed to ensure that insurance in Brazil remains affordable and that major projects can be insured.
The Brazilian government has revoked a rule imposed by the country’s National Board of Private Insurance that came into effect March 31 and prevented insurers from ceding reinsurance to intragroup reinsurers.
Instead, the government will allow insurers to transfer up to 20% of each reinsurance treaty to overseas companies that are linked with or belong to the same financial group.
Wants other law revoked
In a statement Tuesday, FERMA said the concession would be useful for risk managers but said it did not go far enough.
FERMA, and the International Federation of Insurance and Risk Management Assns., among others, have called upon the Brazilian government to revoke the law that states that 40% of reinsurance business must be placed with local reinsurers.
Instead, FERMA contends, local reinsurers should be given the right of first refusal before the business is ceded elsewhere.
Worries about pricing
FERMA said it believed that under the current rules, there could be an increase in price and reduction in capacity for insurance and reinsurance coverage.
The current rules, FERMA said, could jeopardize the coverage or capacity for large projects and important risks in the country such as the upcoming FIFA World Cup in 2014 and Olympic Games in 2016.
“We are still open to dialogue with government entities in Brazil, in order to give as many explanations and clarifications as may be necessary to reach a consensus that is reasonable for all the involved parties,” said Peter den Dekker, president of FERMA, in the statement.
The Brazilian reinsurance industry was opened to competition in 2007 after more than 70 years of monopoly.
BRUSSELS—The Federation of European Risk Management Assns. on Friday called for the withdrawal of new reinsurance regulations in Brazil that FERMA says will reduce capacity, drive up insurance costs and potentially threaten coverage of major infrastructure projects for the 2014 FIFA World Cup and 2016 Summer Olympic Games.