Although the authorities have denied that there is any lack of capacity in the market, the issue dominated the opening day of ABGR's bi-annual conference that took place in São Paulo.

Coincidently or not, the day following the close of the conference saw Susep announce its consultation on the reinsurance rules.

“The new reinsurance rules were the main topic discussed during the conference, especially in the opening session,” Cristiane Alves, the president of ABGR, told Commercial Risk Europe in an interview from São Paulo. “We humbly believe that it was as a result of the debates of the first day that Susep decided to reopen the file the following day.”

Insurers, brokers, risk managers and other players in the insurance market were invited by Susep to present their own views about the subject. ABGR started to work on its answer once the conference was over, after receiving input from its members. The proposal was sealed on Tuesday and sent to the supervisor.

In the document, ABGR argues that the changes implemented in March have fuelled concerns among companies that reinsurance premiums will get more expensive, which will increase the costs of doing business in Brazil and affect the ability of Brazilian companies to compete abroad.

In order to avoid such consequences, ABGR has proposed changes to the two resolutions. Although the association is happy to maintain the obligation on insurance companies to offer at least 40% of insurance contracts to local reinsurers, it demands that reinsurance buyers be allowed to look to other alternatives if local reinsurers are not interested in their contracts.

ABGR suggests that if the local reinsurers refuse to take the business, the contracts can be taken to companies that enjoy the status of ‘admitted’ or ‘eventual’ reinsurers in Brazil. These are companies that have met stringent capital requirements when they applied to work in the Brazilian market. If they do not want to take the risks, buyers should be allowed to go directly to international markets, ABGR states.

The consultation is open until 9 November and the associations of insurers, reinsurers and brokers in Brazil have indicated that they are going to file their own proposals to the government. Some people support the need for the sector to form a common front in order to avoid sudden changes of rules like the two March resolutions.

During the ABGR conference, a leading insurance lawyer was quoted as saying that the government took advantage of the disunion of the insurance industry to implement changes that almost nobody in the market wanted.

Participants at the ABGR conference have expressed particular concern with the next round of renewals for large reinsurance contracts, which will take place in March of next year in Brazil. “If the rules are not changed, there will be a lack of capacity for big Brazilian companies to buy the insurance coverages they need,” warned Ms Alves. “The regulation is not clear and people don't know what buyers will be allowed to do if local reinsurers don't have the capacity demanded by the market.”

But other themes also caught the attention of the participants during the conference. According to Ms Alves Brazilian risk managers expressed similar concerns to those expressed in early October at the Ferma Forum in Stockholm, where themes like compliance and regulation were much discussed.

The transfer of risks for the large infrastructure investments that Brazil is poised to make in the next few years was high on the agenda.

“We also had interesting discussions on the issue of environmental responsibility, which is an area where we are still trying to bring some solutions to Brazil,” Ms Alves said. “The insurance market is trying to come up with innovations, but we are aware that risks linked to the environment remain a problem for companies.”

Ms Alves stressed that the conference was a success, gathering more than 1,000 people during its three days. Participants came not only from Brazil, but also from other Latin American countries and even Angola, the fast-growing oil economy in Portuguese-speaking Africa.

She said that the interest reflects the rise of risk management in Brazil, thanks in part to the scrapping back in 2008 of the 70-year-old reinsurance monopoly held by Instituto de Resseguros do Brasil, IRB. “For a long time, we had to work with IRB, which would take all the risks,” she said. “But after the market was liberalised, much interest was generated about risk management. Therefore, something that was not good for us, the reinsurance monopoly, helped risk management to develop when it was over.”

ABGR already has around 400 members and there is a growing demand for information about risk management processes in the country, she said. The next conference is scheduled for 2013, but the association plans to promote a number of events next year to spread the risk management gospel.

One of the ideas, according to Ms Alves, is to take seminars and meetings to parts of Brazil other than São Paulo, where the organisation has its headquarters. The formation of new risk managers and the drawing of talent to the ranks of the profession also figure among the main goals of the association.

The Brazilian reinsurance market is set to figure highly at Commercial Risk Europe's Risk Survey Seminar on Latin America, which will take place in Madrid on 8 November. For information on the event please click here.

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