FERMA:Brazil’s Response on Regulation Change Complaints O.K.;More Needed
The Federation of European Risk Management Associations (FERMA) described the Brazilian government’s response to complaints about proposed changes in re/insurance regulations as “a good first step” in rolling back “restrictive executive orders,” which threatened to undermine recent legislative reforms governing the country’s insurance market.
FERMA’s bulletin noted that that in “response to the issues raised from the insurance community, the Brazilian government published Resolution 232 to rescind the complete prohibition of intra-company cessions effected from 31 March 2011 through Resolution 224. Instead, insurers will be allowed to transfer up to 20 percent of each reinsurance treaty to companies based abroad that are linked with or belong to the same financial conglomerate.”
The insurance buyers that FERMA represents indicated that they “believe this concession is useful but not enough, given the 2007 decision of the Brazilian Parliament to end the more than a 70 year monopoly of the Instituto de Reaseguros do Brasil (IRB) and open the market to competition.
“Resolution 225, which also came into effect on 31 March 2011, mandates placement of 40 percent of reinsurance business with local reinsurers who can change terms and conditions without penalty, instead of simply giving them the right of first refusal.”
FERMA said it “shares the view of others in the insurance and reinsurance community that Resolution 224, even in its amended form, and Resolution 225, could prejudice development in Brazil because of:
1. An increase of costs and reduction of capacity of the insurance and reinsurance market
2. Concentration of major risks within the country instead of spread into the international reinsurance market
3. Reduction of the development of the market in respect of job creation and fiscal benefits
4. Prejudice to foreign insurers and reinsurers that have already invested in Brazil
5. Potential lack of coverage or capacity for important risks, such as the Olympic Games 2016 and FIFA World Cup 2014
FERMA’s statement also supports the large number of its members whose companies have invested in Brazil as well as the national and regional risk management associations – the Asociación Brasilera de Gerencia de Riesgos (ABGR) and the Asociación Latinoamerica de Administradores Riesgos y Seguros (ALARYS).
FERMA’s President, Peter den Dekker, added: “We still are open to dialogue with government entities in Brazil, in order to give as many explanations and clarifications as may be necessary to reach a consensus that is reasonable for all the involved parties.”
Source: FERMA