As of Sunday January 17, 2010, foreign reinsurers will be
permitted access to a larger portion of the Brazilian reinsurance
market as local reinsurers' right of first refusal will be
reduced from 60% of risks in the market to only 40%. The change is
triggered by the passage of three years since the enactment of
Supplemental Law 126, which first opened the Brazilian reinsurance
market to foreign competition. It represents a major step in the
gradual opening of the Brazilian reinsurance market.
Among the issues to watch in regard to this fundamental change in
the market (more than half of risk was previously subject to the
right of first refusal as opposed to less than half as of January
17), is the effect upon the profitability and competitiveness of
IRB Re-Brasil and the other local reinsurers. While the last
numbers released indicated that IRB Re-Brasil (the government-owned
former market monopoly holder) still held nearly 80% of the
market's reinsurance, its profitability has taken a major hit
over the last year as it has sought to compete with foreign
companies.
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