Mixed Reaction To Brazil Regulatory Changes
Industry opinion on the likely long-term impact of new Brazilian reinsurance rules lobbied for by the Association of Bermuda Insurers & Reinsurers [ABIR] among other groups remains mixed, a recent survey conducted by “LatAm Insurance Review” has revealed.
ABIR is the public policy branch of Bermuda’s re/insurance industry, with offices in Hamilton and Washington DC. The organisation has publicly branded Brazil’s existing re/insurance regulations as protectionist.
But according to the industry journal, just over a quarter of those polled predicted that the rules will benefit the sector.
With the new regulations due to come into effect for all outstanding treaties on 31 March, more than half of respondents predicted that the resolutions would have a detrimental effect on the local re/insurance market, with expected impacts on pricing, capacity and the ability to deliver new products among the most commonly cited reasons.
However, despite the ongoing controversy surrounding the resolutions, the survey revealed that 25.1% of industry professionals believe that the rules will have a beneficial impact on the Brazilian market, while 6.3% predict a mixed impact and 12.5% expect no impact at all .
“The new rules have a negative impact for some players and positive for others,” said one respondent. “Forcing some foreign players to inject capital on Brazilian subsidiaries and retain premiums locally may not be nice, but [this] may end up being extremely convenient for everybody.”
Originally announced in December 2010, the reinsurance resolutions, which limit intra-group reinsurance cession to 20% and place an obligatory 40% cession to local reinsurers, have been the subject of much criticism within the global insurance industry, with a number of international insurance associations, including ABGR (Brazil), Ferma (Europe), AIA (America) and ABIR (Bermuda), publicly lobbying for changes in the rules.
Brasil is a growing economy but will not stay that way. The Brazilian government lives in a short term view world and rarely looks for the long term effect. Its a cultural aspect. I’ve done tons of research on the Brazilian economy and I have found a constant trend in their business sector. They grow and then they decline, grow and then decline. Until they change their cultural view of short term “fixes”, Brazil will remain the same.
It is a great country, beautiful and full of resources, but they need reform in the Business sector.