BRASILIA, Brazil—International risk managers and insurance and reinsurance groups say they hope Brazil's government will overturn recently changed reinsurance rules, which they say could drastically reduce the amount of capacity in the country.

Among the changes enacted at the end of March is a requirement that 40% of reinsurance business be placed with local reinsurers.

International associations representing insurers, reinsurers and brokers late last month jointly wrote the Brazilian government, saying the regulations will “severely limit the development of a competitive Brazilian insurance industry and will undermine the ability of local businesses to use insurance and reinsurance for risk management related to important infrastructure projects planned for the next decade.”

Risk management groups already voiced concern about the changes they argue may even threaten the viability of large projects such as the upcoming 2014 FIFA World Cup Brazil and the 2016 Summer Olympic Games.

The rules were imposed by the Brazil Council of National Private Insurance.

While Brazil in April revoked a rule that had banned insurers from ceding reinsurance to intragroup reinsurers, risk managers and insurers say the change, which now allows 20% of each reinsurance treaty to be ceded to an overseas reinsurer in the same group as the insurer, does not go far enough.

In their letter, the insurers, reinsurers and brokers ask Brazilian authorities to enter into discussions with them to try to “frame regulations that would allow the growth and sustainable development of strong and dynamic Brazilian insurance and reinsurance markets.”

Michaela Koller, director general of the Brussels-based Comité Européen des Assurances, which represents insurers and reinsurers in Europe and was one of 18 signatories on the letter, said the regulations would “severely restrict the ability of international (re)insurers to provide capacity and coverage for Brazilian risks, which will ultimately have a negative effect on both the Brazilian consumer and economy.”

Dave Snyder, vp and associate general counsel at the Washington-based American Insurance Assn.—another signatory on the letter—said the rules risk undermining progress that has been made since Brazil liberalized its reinsurance market in 2007.

Overseas companies have made large investments in Brazil, one of the world's fastest-growing economies, and see major opportunities for growth and demand has increased, Mr. Snyder said.

Insurers are seeking the discussions to try to understand public policy reasons behind the changes and change the regulations that he described as “protectionist.”

The Brussels-based Federation of European Risk Management Assns. and the International Federation of Risk & Insurance Management Assns., of which the New York-based Risk & Insurance Management Society Inc. is a member, also have called on the Brazilian government to change the rules.

In a statement last month, FERMA Chairman Peter den Dekker said the association is open to discussions with Brazilian authorities to try to “reach a consensus that is reasonable for all the involved parties.”

IFRIMA Chairman Jorge Luzzi, who also is group risk management director at Milan-based Pirelli & C. S.p.A., said risk managers are very concerned that the rule changes could severely reduce insurance capacity at a time when overseas companies are making large investments in Brazil.

Companies from Europe and the United States have expanded in Brazil in recent years and need high-quality, secure and available insurance capacity to be able to continue their development there, Mr. Luzzi said.

In addition, he said, the surprising nature of the changes has raised concern among risk managers about the transparency of Brazil's regulation.

The rules were changed without notice or comment period, which runs contrary to international norms and transparency commitments by the Group of 20 countries, of which Brazil is a member, the AIA's Mr. Snyder said.

“This sets a very negative precedent because, for a highly regulated industry like insurance, a proper process needs to be observed,” he said.

Insurers and reinsurers will continue to make their case publicly and privately, he said, and will attempt to persuade the Brazilian authorities that a fully open insurance and reinsurance market is of benefit to the country.

Mr. Luzzi said IFRIMA is confident that the Brazilian authorities would heed international calls to amend the regulations.