The Federation of European Risk Management Associations (FERMA) has asked the Brazilian government to withdraw two new reinsurance regulations that will restrict the cession of insurance risks to foreign reinsurers.
Resolutions 224/10 and 225/10 are both due to come into effect on March 31, 2011 after the implementation of 224/10 was postponed January 31st. Both resolutions were enacted by Brazil's National Council of Private Insurance (CNSP) in December 2010 without public consultation, as reported here and here on our blog. Resolution 224/10 provides that insurance risks cannot be ceded to foreign reinsurers within the same group. Resolution 225/10 provides that local insurance companies will need to cede at least 40% of each reinsurance cession to local reinsurers, instead of merely providing a right of first refusal as before.
FERMA President Peter den Dekker said in a statement: "We believe that these regulations will damage the interests of our members and the development of the insurance and reinsurance market in Brazil. We therefore ask the Brazilian government to rescind them." The statement said FERMA had taken the "unusual step" of making the appeal to support the large number of its members whose companies have invested in Brazil since the market was liberalized in 2007. Resolution 224/10 would particularly affect foreign reinsurers who have obtained licenses or set up local operations to write Brazilian risks but would now be forbidden from ceding them back to a group company for greater capacity, FERMA said.