Zurich Financial to Open Reinsurance Unit in Booming Brazil

Zurich Financial Services , Switzerland’s biggest insurer, plans to open a reinsurance unit in Brazil, where almost $1 trillion worth of infrastructure projects are boosting demand for risk coverage.

Zurich, which had already won limited permission from Brazilian authorities to operate in the country, will soon apply for a full license, said Marcus Vinicius Martins, chief executive of Zurich’s Brazil vehicle and general insurance unit.

The plan comes as Brazil is poised for massive investment in infrastructure before hosting the World Cup in 2014 and the Olympic Games in 2016. It also has ambitious plans for the oil and gas industry as the country seeks to explore its massive deep-water crude reserves.

Policy underwriting in Brazil is expected to grow three times as fast as overall economic growth in 2011 and in the next few years, allowing Zurich to “offer clients a complete portfolio of insurance products,” Martins said in a statement distributed late Tuesday.

The government expects the economy to expand between 4 and 5 percent, compared with 7.5 percent in 2010.

Reinsurers help primary insurers shoulder the risks assumed for clients in the riskiest, most expensive projects — like oil exploration, heavy construction and defense.

More than 90 reinsurers and brokerages operate in the market, which was partly opened to the private sector in early 2007. Opening the $4 billion-a-year industry to private competitors was the solution that the government saw to decades of insufficient policy coverage of risky infrastructure programs.

Former President Luiz Inacio Lula da Silva, in a bid to lure more reinsurance coverage for the massive investments, ended a 69-year monopoly held by a state reinsurer, IRB-Brasil.

Zurich Financial Services, which is the world’s third-biggest insurance group according to the statement, participated as a side policy underwriter for the Brazilian dam projects of Jirau and Santo Antonio in the Amazon basin. The projects are valued at a combined $10 billion.

(Reporting by Guillermo Parra-Bernal)