Thursday, 17 November 2011
Ferma fleshes out hopes for Brazilian reinsurance laws
Ferma has released concrete details of its recommendations to the Brazilian insurance regulator, Susep, that it hopes will limit the impact of two unpopular reinsurance regulations in the South American country.
Jorge Luzzi, Group Risk Management Director for Pirelli worldwide, has been elected as the next president of Ferma
As reported in Commercial Risk Europe two weeks ago, Susep opened a consultation period on regulations 225 and 232 earlier this month amongst fears in the buying community that the laws will have a negative impact on the availability and security of reinsurance in Brazil.
In its letter, Ferma said it accepts that the obligation for buyers to place 40% of their risks with Brazilian-based reinsurers, as mandated by the resolutions, will remain. But the association made clear that its members believe this should be on a prompt first refusal basis to avoid unexpected changes in terms and conditions.
Ferma argued for a five or ten day time limit for reinsurers classed as local to accept or refuse the mandatory cession before business can be placed with reinsurers in the admitted and then general reinsurer categories.
It also said that requests for further information on this mandatory cession by local reinsurers should be limited.
Please sign up here to our full-time mailing list to ensure that you receive our weekly newsletter.
Other specific measures on Ferma’s wish list include an elimination or substantial redesign of the 20% limit on risk that local and admitted reinsurers that are part of global companies can transfer to subsidiaries of the same group overseas.
These recommendations were made in a letter sent on 10 November by Ferma president Jorge Luzzi to Susep.
It said that Ferma has received many representations of concern from risk managers, especially about the possible limits on capacity and threat to insurer security posed by the limits on the spreading of risk created by the regulations.
“We thank and welcome the offer by Susep of open discussion on regulations 225 and 232. The 20 percent limit on inter-group cessions could be very risky. If reinsurance which cannot be ceded to group companies goes straight into the international market, where similar risks are placed, there will be extra costs. These are likely to be passed on to the insurance buyer and there is the possibility of losing the mutuality concept,” said Mr Luzzi.
Ferma has also urged Susep to agree that the insurer must have responsibility for claims negotiation and settlement. “The relationship must be between the insurance buyer and the insurer, no matter what reinsurers are involved in the risk,” Mr Luzzi argued.
Please sign up here to our full-time mailing list to ensure that you receive our weekly newsletter.
EC concerned by rise of protectionism in Latin America
Vast potential in Brazil continues to draw foreign insurers despite ‘ferocious’ regulator’s reputation
Rates tumble after liberalisation but product innovation still low
Co-insurance creates risks for industry in Brazil, experts warn
Nat cats and exposures a real deal in Brazil warns report
Chile quake damage limited with estimated insured losses of under $100m
Mexico is a bright spot in the Latin American landscape for insurance buyers
Latin American insurance market up 18.1% but penetration remains stunted
Lower prices and higher risks boost D&O in global program-free Brazil
South American risk landscape improving but prepare for big differences warns Gil
Don’t be fooled by common language in Brazil
