Lloyd's announced on 13 February that it will be making a formal application to be admitted as a reinsurer in Brazil with plans to set up its first representative office in Rio de Janeiro, subject to regulatory approval.
Speaking at a press conference in Rio, Lord Levene, Lloyd's chairman, commented on why now was the right time for expansion. He highlighted the liberalisation of the market in Brazil, the growing strength of its economy and increased demand for insurance in the region as key factors in Lloyd's decision to enter the market.
“The Lloyd’s market already enjoys a strong relationship with the Brazilian economy through a partnership with the country’s leading reinsurer the IRB. We look forward to sharing our expertise and capacity and supporting the development of a reinsurance centre in Rio.”
Brazil officially opened up its reinsurance market in January 2007 with the passing of a law bringing the Instituto de Reasseguros do Brasil's (IRB's) monopoly over the (re)insurance market to an end by permitting three categories of reinsurers ('local', 'admitted' and 'occasional' reinsurers) to operate locally. A number of international reinsurers have taken advantage of this liberalisation and have opened up representative branches in Brazil.
Attracted by the largest insurance market in Latin America, with total premium income of $33.8bn last year, a relatively low risk profile compared to areas such as the hurricane prone Gulf of Mexico, and further deregulation, XL and ACE have stepped up their interest in the area, whilst Munich Re and Catlin have plans to open offices shortly.
The insurance market currently represents 2.8% of GDP in Brazil, but ratings agency S&P expects the market to double in the medium to long term. Given this sort of potential many reinsurers have spotted the opportunities that a presence in Brazil may offer, among them Lloyd's.