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The Actuary The magazine of the Institute & Faculty of Actuaries

Brazilian reinsurance restrictions continue to anger insurers

The CEA, the European insurance and reinsurance federation, and 17 international associations have contacted the Brazilian government to express their concerns about two reinsurance regulations enacted on 31 March without prior consultation that will have a detrimental impact on the Brazilian insurance market.

The regulations require the placement of 40% of reinsurance business with local Brazilian reinsurers and prohibit local (re)insurers from ceding more than 20% of their insurance premium to an affiliated, intra-group reinsurer located abroad. The latter requirement will be applied retroactively to existing reinsurance contracts that extend beyond 31 March 2012. The insurers believe that this is illegal under Brazilian law as it constitutes an abrogation of contract terms.

Michaela Koller, director general of the CEA, commented: "Both regulations mark a clear departure from international regulatory standards and will 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."

The CEA says these changes to Brazil’s reinsurance regulations could have an impact on insurance coverage for big events in Brazil, such as the FIFA World Cup in 2014 and the Olympic Games in 2016, as well as planned offshore oil production projects.