On December 22, 2017, the National Council of Private Insurance (CNSP) published Resolution no. 353/2017, presenting two relevant modifications for the Brazilian reinsurance market: (i) the end of the restrictions on risk transfer operations involving companies belonging to the same financial group; and (ii) the repeal of the minimum compulsory retention with local reinsurers.
The new rule no longer establishes the maximum percentage for the cession of risks within the same financial conglomerate (formerly there was an allowance rate of 30% in 2017, reaching 75% in 2020). The new Resolution only provides that intra-group reinsurance operations should “guarantee an effective risk transfer between the parties” and “be held in balanced competition conditions”.
Furthermore, CNSP Resolution no. 353/2017 revokes the requirement for a compulsory contract with local reinsurers, with only the preferential offer to local reinsurers of 40% of the reinsurance cession in each automatic or facultative contract remaining in force, under the same conditions offered or accepted by the foreign reinsurance market.
In the event that local reinsurers do not accept the offer, there will be no obligation of a minimum percentage of compulsory retention with them and the cedant will be allowed to place all the risk with the foreign reinsurance market.
On one hand, this new Resolution represents greater freedom for intra-group risks cessions, and on the other hand, promotes a wider participation of the foreign reinsurance market in Brazilian risks.