While Brazil is now the world's ninth largest economy, with an estimated value of around a trillion dollars, the deregulation of its financial services industry still remains a work in progress. This is particularly the case for the reinsurance market, which this year celebrates the tenth anniversary since the commencement of its denationalisation with the enactment of Lei Complementar No. 126 in January of 2007 ("LC 126").

The initial liberalisation phase allowed the cession of risks to foreign reinsurers of up to 40 per cent, a quota later increased to 60 per cent. The exception to the restriction was in those cases where there was a verifiable lack of local capacity, with some additional flexibility for intragroup risk transfers.

Whilst the new regime allowed the establishment of local branches, most foreign insurers continued to be registered as 'ultimate' reinsurers only, participating in the Brazilian market merely through a local representative. The former state entity, IRB Brasil Resseguros S.A., became a market player alongside other national Brazilian reinsurers, while a new market regulator, SUSEP the superintendence for private insurance, was created.

Further liberalisation arrived on 1 January 2017, with the implementation of bylaws increasing to 70% the percentage of risks that can be ceded to foreign reinsurers. This figure is expected to continue to increase each year until each reaches 85 per cent in 2020, though these changes will only come into full force once LC 126 has been formally amended (currently, reinsurance allocation still requires preferential offers to the local market).

To date, foreign reinsurance participants have benefited greatly since the enactment of LC 126, through participation in risks generating approximately USD $3.1billion of net premiums. In addition to the current 16 local registered reinsurers, Brazil now has 38 branches of foreign reinsurers and 77 registered 'ultimate'/non-domiciled reinsurers. With further relaxation on the way, foreign participation in the market is only likely to increase further.