With the imminent opening of the reinsurance market, the professionals operating in the Brazilian insurance market are envisaging an array of opportunities. Nonetheless, they are somewhat perplexed by the challenge of defining a new regulation and establishing procedures appropriate to structure and manage reinsurance programs and contracts.

Indeed, Brazil has been away for a long time from this vast and complex world that is the reinsurance market, wherein people from the most different countries know each other, speak the same language, adopt uniform codes of conduct and share similar concerns.

Undoubtedly, one way or the other, the Brazilian reinsurance companies have always been required to know the reinsurance to a certain extent, even if they were compelled to centralize their actions in this area around the Brazilian Reinsurance Institute - IRB (a Brazilian monopolistic reinsurer). The same can be said of specific professionals. But this is not the rule, and it is clear the necessity of a significant maturation and learning of the Brazilian market for the insurance companies operating in Brazil to take part in the international reinsurance market.

This situation is aggravated by the fact that, in the past years, the own international reinsurance market has being going through structural changes in its practices and the procedures for contract structuring, in regard, for instance, to (i) contract certainty and (ii) the discussion on the contents of clauses such as follow the settlements, follow the fortune, follow the forms, and cut through.

In this context, there is growing concern about the formalization of the relations between insurance and reinsurance companies, as well a greater care in drafting slips, coverage notes, and, if this is the case, contracts.

Furthermore, appropriate reinsurance programs and contracts are the result of the understanding of this activity and its potential as a risk management instrument, reinforcement and optimization of the capital structure and technology transfer. In addition, using reinsurance as an opportunity will depend on the definition by Brazilian reinsurance companies of underwriting, risk retention and reinsurance policies in line with their strategic planning and security and profitability goals.

Hence, great opportunities are expected for reinsurance companies - their entry into the Brazilian insurance market have always been hindered - and foreign insurance companies. This will certainly take place, because the Brazilian insurance companies are increasingly opened to partnership building with foreign-based partners, driven by necessity as well as in search of greater competitiveness.

The own competitive environment of the Brazilian reinsurance market has become more comfortable for the entry of new players or the reinforcement of the performance of those already operating in this market, considering the growing adaptation of our supervising rules and practices to the standards recommended by the International Association of Supervisors - IAIS.

In regard to the regulation, the announced regulator's willingness to keep the regulatory modernization process going represents the awareness of the need for caution, discussion and comprehension of reinsurance as a premise for an appropriate performance.

As it is known, the proper regulation of the reinsurance activity should be minimal, given its nature and the size of its "consumers" (insurance companies). However, the historically interventionist and paternalist regulatory practice in Brazil, although under a fast transformation process, implies a great challenge for the regulator, who will need to follow the path of breaking the traditional excessive regulation of players that, in this case, naturally self-regulate their activities, especially in regard to contracts between insurance and reinsurance companies.

This is indeed a highly professional environment, which, instead of protection and regulatory interventionism, naturally demands, as a condition for survival, responsibility and technical skill on the part of those that are buyers, sellers or service providers.

Summing up, with the prospects of an appropriate regulation and private agents willing to take part in a new and promising business environment, Brazil may be seen as a great investment opportunity. This is true for both reinsurance and insurance companies willing to explore a market whose growth potential is evident and hardly found in other places.

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