As of Sunday January 17, 2010, foreign reinsurers will be permitted access to a larger portion of the Brazilian reinsurance market as local reinsurers' right of first refusal will be reduced from 60% of risks in the market to only 40%. The change is triggered by the passage of three years since the enactment of Supplemental Law 126, which first opened the Brazilian reinsurance market to foreign competition. It represents a major step in the gradual opening of the Brazilian reinsurance market.
Among the issues to watch in regard to this fundamental change in the market (more than half of risk was previously subject to the right of first refusal as opposed to less than half as of January 17), is the effect upon the profitability and competitiveness of IRB Re-Brasil and the other local reinsurers. While the last numbers released indicated that IRB Re-Brasil (the government-owned former market monopoly holder) still held nearly 80% of the market's reinsurance, its profitability has taken a major hit over the last year as it has sought to compete with foreign companies.
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