Brazilian regulator SUSEP increases percentage of reinsurance market share available to foreign Reinsurers from the current 60% to 85%

On 20 July 2015, CNSP Resolution 322 was passed amending CNSP Resolution 168/2007 and repealing CNSP Resolution 232/2011 to the effect of gradually diminishing the market share that cedants must first offer to local reinsurers.  Admitted and occasional reinsurers can only get 60% of the risk currently.  As of 1 January 2017, this will increase to 70%, 75% from 1 January 2018; 80% from 1 January 2019, and finally 85% from 1 January 2020.

Resolution 332 also increases the intra-group retrocession percentage allowed for (re)insurance groups headquartered abroad, provided they have admitted or occasional reinsurance status in Brazil, from the current 20%, to 30% in 2017; 45% in 2018; 60% in 2019; and 75% in 2020.

Some say that these changes, whilst welcomed by admitted and occasional reinsurers, may cause smallish local reinsurers to reconsider their status.  However, at a time when the Brazilian Real is rapidly devaluating, it may not pay off to pull reserves out of Brazil for a while.  There are of course international (re)insurance groups which trade in Brazil with all three local, admitted, and occasional status, on which the currency risk will be less obvious, and who welcome the new measures altogether as they will have more flexibility to trade.

The regulation is a positive step in the right direction, as the Brazilian market learns to live with true competition and foreign investment.

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Kennedys Latin America in association with TMLaw Kenendys Brazil.

 View Alex GUILLAMONT’s profile (Kennedys Latin America)

Fabio Torres and Dennys Zimmermann (TMLaw Brazil in association with Kennedys)