ABIR Urges Brazil To Lift Restrictions
The Association of Bermuda Insurers & Reinsurers [ABIR] has joined with other global insurance groups to urge Brazil to lift reinsurance restrictions in one of the world’s leading emerging markets.
ABIR — the public policy branch of Bermuda’s off-shore re/insurance industry — is part of a coalition of 18 international insurance associations from Europe, Asia and the Americas have drafted a letter to the Brazilian government, petitioning them to reconsider two recently enacted reinsurance regulations that could threaten the market and severely reduce the availability of insurance in Brazil, including coverage for the upcoming 2016 Olympics and 2014 FIFA World Cup being held in the country.
The letter follows joint calls made by both the Federation of European Risk Management Associations [FERMA] and International Federation of Risk Management Associations [IFRIMA] on Brazil’s CNSP ([ational Board of Private Insurance] to revoke Resolution 225 and 232 and the checks now placed on the Brazilian reinsurance business.
Brazil’s insurance industry has undergone significant evolution in recent years and has been experiencing healthy growth as a result of improving economic conditions and the loosening of market regulations in the country.
The background of the dispute between the CNSP and private insurers springs from 2007 reforms the Brazilian government implemented to update and restructure its laws governing the insurance sector in the country, namely Complementary Law 126/07 which eliminated the previously existing state monopoly on the reinsurance trade.
The goal of these reforms has been to open the local markets to increased competition and improve the availability of insurance coverage and lower the costs to Brazilian citizens.
Multinational insurance associations were pleased with these initial developments, as IFIRMA notes in a recent statement: “With the opening of the national market to other Brazilian and foreign reinsurance players, within less than three years, insurers could offer very good products to meet the needs of society and companies of all sizes. The result of that appropriate and necessary opening was the reshaping of the insurance sector, with companies focused on various fields of activity to offer products of high quality, substance and reliance to all buyers.”
However, two new resolutions that came into force this year are seen as undermining these previous reforms and attempting to rollback the liberalisation of the Brazil’s reinsurance market by means of an unexpected executive order from the CNSP.
Resolution 225 and 232 will require 40 percent of all reinsurance business to be allocated to Brazilian companies, rather than the current ruling granting them the right of first refusal. The legislation would further prohibit local insurers from ceding more than 20 percent of premium, related to coverage provided, to affiliated intracompany reinsurers located abroad.
Dave Snyder, general counsel for the American Insurance Association [AIA], told the National Underwriter industry news service today [Nov.23] there is a “significant sense of urgency here.”
He adds, “Insurers have invested significant resources in Brazil’s insurance market only to have the clock turned back on market access. The two previously adopted resolutions will virtually cut off Brazil from the foreign-reinsurance market and the globalisation of risk that characterizes it and should be reversed.”
Colletta Kemper, vice president of industry affairs for the Council of Insurance Agents and Brokers, says, “We are further troubled that the process for accessing the non-admitted market is inefficient, burdensome, could result in higher prices, worse terms and conditions for insurance buyers and capacity problems for the larger risky commercial accounts.”
