Brazil: Major Insurance and Reinsurance Developments in 2008

Last Updated: 22 January 2009
Article by M. Machua Millett

Although all of the Latin American jurisdictions had notable regulatory and market developments in 2008, Brazil stands out as particularly significant given the size of the market involved and the fundamental nature of the developments seen there in the past year.

Reinsurance Explosion

Brazil is by far the largest insurance market in Latin America, representing approximately 44% of the gross written premiums in the region. That being said, with by far the largest population in South America, the 10th largest economy in the world by GDP, low insurance penetration rates and more than 81% of current insurance premiums concentrated in life, auto and fire insurance, the Brazilian insurance market still has tremendous growth potential (estimated by some to be the third best growth potential in the world, behind only China and India). Indeed, Fitch Ratings recently released a report finding that the Brazilian insurance market grew by 15% in 2007 and predicting that, given the country's low insurance penetration and favorable economic environment, the market will experience "consistent growth in the short and medium term . . . ."

Therefore, it came as little surprise that the opening of the Brazilian reinsurance market to competition in early 2008 brought a flood of attention and interested foreign reinsurers to the country.

1. Background: The Monopoly Comes to an End

After many years of debate and an "impending" opening that had lasted some ten years, on January 15, 2007, Complimentary Law No. 126 established a framework for ending the long-standing government monopoly on the reinsurance business in Brazil and opened the Brazilian reinsurance market to private foreign insurers. On December 17, 2007, SUSEP and the National Council on Private Insurance ("CNSP") issued Resolution No. 168, which implemented Complimentary Law No. 126 and established the requirements for foreign reinsurers wishing to underwrite reinsurance in Brazil. Resolution No. 168 became effective on April 19, 2008, effectively opening the doors to private reinsurers to obtain authorization to do business in Brazil.

Complimentary Law No. 126 and Resolution No. 168 established three categories of private reinsurers: (1) local reinsurers (resseguradores locales); (2) admitted reinsurers (resseguradores admitidos); and (3) occasional reinsurers (resseguradores eventuais). Local reinsurers are defined as reinsurers organized under Brazilian law as Brazilian corporations (sociedades anonimas). Admitted reinsurers are defined as reinsurance companies incorporated under the law of foreign jurisdictions that maintain a representative office in Brazil and are registered as such with SUSEP. Finally, occasional reinsurers are defined as reinsurance companies incorporated in foreign jurisdictions that do not have a representative office in Brazil, but are registered with SUSEP.

a. Local Reinsurers

A foreign reinsurer wishing to establish a subsidiary in Brazil to act as a local reinsurer must establish a Brazilian corporation under Brazilian law with the performance of reinsurance and retrocession activities as its sole business. Such a local reinsurer is subject to all local laws and regulations generally applicable to Brazilian insurers, except as otherwise excepted under Brazilian law. A local insurer must hold minimum capital of R$ 60 million (approximately US$ 28 million), plus appropriate risk-based capital as provided by law.

b. Admitted Reinsurers

A foreign reinsurer wishing to establish a representative office in Brazil must meet the following requirements:

  • Authorization in its country of incorporation to underwrite local and international reinsurance in the same lines as it seeks to underwrite in Brazil;
  • Solvency, and operation in its country of incorporation for greater than 5 years;
  • A minimum net worth/surplus of greater than US$100 million or the equivalent;
  • A permanent agent domiciled in Brazil, with broad powers of administrative and judicial representation.
  • The following minimum rating from the following rating agencies: Standard & Poor's (BBB-), Fitch (BBB-), Moody's (Baa3), AM Best (B+);
  • A bank account in foreign currency "linked" to SUSEP with a minimum of US$ 1 million for life reinsurers or US$ 5 million for general reinsurers;
  • A local representative office in Brazil that acts as an independent entity or branch of the company, with a head of the representative office that meets the various requirements to be an office of a local insurance company; and
  • Compliance with annual and continuing reporting requirements to SUSEP concerning, among other things, status, internal controls and supervisory fees.

c. Occasional Reinsurers

A foreign reinsurer not wishing to establish a representative office in Brazil, is permitted to register with SUSEP as an occasional reinsurer if it satisfies the following requirements:

  • Authorization in its country of incorporation to underwrite local and international reinsurance in the same lines as it seeks to underwrite in Brazil;
  • Solvency, and operation in its country of incorporation for greater than 5 years;
  • A minimum net worth/surplus of greater than US$150 million or the equivalent;
  • The following minimum rating from the following rating agencies: Standard & Poor's (BBB), Fitch (BBB), Moody's (Baa2), AM Best (B++); and
  • A permanent agent domiciled in Brazil, with broad powers of administrative and judicial representation.

2. Market Reaction: The Rush to Register

In the months following the opening in April 2008, the reinsurance authorization applications poured into SUSEP, often overwhelming the personnel that had been dedicated to processing these requests. Nonetheless, despite some delays and other minor issues, SUSEP was able to process the flood of requests with relative efficiency. By the end of the year, a total of 41 private reinsurers and some 30 reinsurance brokers had received authorization, with a significant number of applications still being processed. Of the 41 reinsurance companies, 5 received authorization as local reinsurers, 16 as admitted reinsurers and 20 as occasional reinsurers.

Given the market growth and development expected to be spurred in part by the newly admitted reinsurers, SUSEP recently stated that it expects the nation's insurance and reinsurance market to top R$ 100 billion (approximately US$ 62 billion) this year and to grow another 12-15% in the coming year. As discussed below, however, some have already begun to question whether the market can support such a high number of foreign reinsurers.

3. Remaining Issues: Regulatory and Market Limitations

Certain commentators and industry participants lobbied for a further postponement of the opening of the Brazilian reinsurance market on the basis that the country lacked the regulatory and market resources to supervise and support an open reinsurance market. Although these actors certainly had their vested interests in delaying the market's opening, certain questions do remain as to how and whether the Brazilian economy and authorities will be able to sustain and regulate a liberalized reinsurance. Furthermore, although SUSEP placed certain restrictions on the market liberalization in response to the expressed concerns, many of these restrictions have caused more controversy and confusion than comfort among industry players.

a. Restrictions on Liberalization

Although significantly liberalized by the new reinsurance statute and regulations, there should be no mistake that Brazil is not yet an entirely free market, instead having opted for an "orderly opening of the market" reflected in several significant limitations on the role of foreign reinsurers.

1. "Right of First Refusal"

Ceding companies must offer local reinsurers the right of first refusal on at least 60% of the premiums ceded until January 16, 2010 (and 40% for at least three years thereafter). This vetting requirement permits a ceding company to first obtain quotes from foreign reinsurers and then present a quote to local reinsurers, who will have either 5 days (facultative reinsurance) or 10 days (treaty reinsurance) to match such quote. The vetting requirement will be fulfilled when local reinsurers either accept 60% of the risk or when all local reinsurers have refused or partially refused to match the foreign reinsurer's quote.

It is the sole responsibility of the local insurer, not the reinsurer, to comply with this vetting requirement. How this requirement can and will be enforced has been the source of considerable debate among commentators and market participants.

2. Cession Limits

Cessions to occasional reinsurers by a Brazilian insurer may not exceed 10% of the insurer's total annual premiums ceded to reinsurers. Furthermore, no Brazilian insurer or local reinsurer may cede more than 50% of the risk it underwrites annually to admitted or occasional reinsurers. Compliance with this requirement is also the sole responsibility of the local insurer or reinsurer and has likewise caused significant debate as to its manageability and enforceability.

3. "Tax Haven" Restriction for Occasional Reinsurers

No foreign reinsurer may register as an occasional reinsurer if it is incorporated in a "tax haven," a term defined to mean any jurisdiction in which income tax is levied at less than 20% and/or where reinsurance companies are subject to excessively strict rules of confidentiality regarding their constitution and composition. This limitation clearly applies to companies domiciled in Bermuda and poses some concern for companies located in other jurisdictions that might be found to satisfy the definition of "tax haven," such as Delaware. That being said, international companies may use companies organized in acceptable jurisdictions, so long as they meet the other requirements for registration as an occasional reinsurer, and then retrocede to companies based in Bermuda or other "tax havens."

b. Growing Pains and Market Uncertainties

Although business prospects for foreign reinsurers that can negotiate these regulatory hurdles appear bright, a number of significant market issues also remain, including the following:

  • Is the Brazilian reinsurance market, even if it grows as predicted, of a size sufficient to support the recent influx of foreign reinsurer?
  • Will the restrictions discussed above be progressively loosened, remain the same or be further tightened as foreign participation in the Brazilian reinsurance market grows?
  • How, if at all, will admitted and occasional reinsurers be taxed by Brazilian authorities?
  • Will admitted and occasional reinsurers be permitted to resolve disputes with ceding insurers in foreign arbitration or be required to litigate or arbitrate disputes within Brazil?
  • What role will the IRB now play in the Brazilian reinsurance market? Should the further extension of the IRB's right to retrocede to non-registered foreign insurers be seen as a method of smoothing the transition to an open market or a warning sign that the IRB will likely continue to receive favorable governmental treatment?
  • Can enough qualified personnel be found in Brazil and/or brought in from abroad to properly staff branch and representative offices of foreign reinsurers?

Conclusion: Cautious Optimism

Trends in the Latin American economies generally and insurance markets specifically indicate that insurance and reinsurance companies with a dedicated strategy and experienced advisors can take advantage of tremendous opportunities in the region. On the other hand, however, the undertaking of activities in the region without a coherent plan or full understanding of the local regulations and markets can lead to unprofitable operations and significant potential enforcement issues with local regulators.

Given the sorts of local idiosyncrasies that exist in many of the Latin American markets, and the frequent fundamental changes such as those seen in the past year in regulatory requirements, failure to understand and closely monitor market and regulatory developments can impact both a company's profitability and its continuing right to conduct business in the region's jurisdictions. It is therefore imperative that insurance and reinsurance companies operating or considering expansion into the region obtain the assistance of experienced and knowledgeable advisors.

If you would be interested in learning more about these issues and/or insurance and reinsurance developments in other Latin American countries in 2008, we would like to invite you to our free webinar on January 21, 2009 entitled "(Re)emerging Mercados: Significant Recent Developments in the Latin American Insurance and Reinsurance Markets." To view an invitation and register for this event, please click here:

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.