“Notably, the reinsurers of these losses were generally not located in the jurisdiction where the loss event occurred. Thus the losses were exported to ‘foreign’ reinsurers [that] then make claims payments to the local insurers in the economy where the event occurred. The impact of this is to speed recovery in the disaster-affected economy, since the loss is not largely borne by the local business and insurance community. The amount of the reinsured share of the losses sent to non-domestic reinsurers from these events ranged from 90 to 100%,” said Michaela Koller, Director General of the CEA.

According to Frank Nutter, President, Reinsurance Association of America, “Brazil’s protectionist reinsurance regulations, adopted in 2011, restrict the degree to which non-Brazilian reinsurers can share Brazilian losses; thus losses are not distributed globally as they are under other mega-loss events.”

He explained that the impact of the Brazilian regulations is to compel mega event losses to be contained within the Brazilian economy, meaning that Brazil would not receive the economic boost from reinsurance recoveries that were received in 2011 in Australia, Japan, New Zealand and Thailand; and in 2010 in Chile.

“Brazil is now the seventh largest economy in the world, largely as the result of its international trade,” said Dr Robert Hartwig, President and Economist for the Insurance Information Institute. “But that rapid growth has left the economy vulnerable to large scale catastrophic losses similar to those suffered in other fast-growing economies such as Thailand and Chile. Free and open access to global reinsurance markets is essential if Brazil is to protect its long-term investments in its future,” he said.

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