Reinsurance And The Brazilian Market Prospects

With the imminent opening of the reinsurance market, the professionals operating in the Brazilian insurance market are envisaging an array of opportunities. Nonetheless, they are somewhat perplexed by the challenge of defining a new regulation and establishing procedures appropriate to structure and manage reinsurance programs and contracts.

Indeed, Brazil has been away for a long time from this vast and complex world that is the reinsurance market, wherein people from the most different countries know each other, speak the same language, adopt uniform codes of conduct and share similar concerns.

Undoubtedly, one way or the other, the Brazilian reinsurance companies have always been required to know the reinsurance to a certain extent, even if they were compelled to centralize their actions in this area around the Brazilian Reinsurance Institute - IRB (a Brazilian monopolistic reinsurer). The same can be said of specific professionals. But this is not the rule, and it is clear the necessity of a significant maturation and learning of the Brazilian market for the insurance companies operating in Brazil to take part in the international reinsurance market.

This situation is aggravated by the fact that, in the past years, the own international reinsurance market has being going through structural changes in its practices and the procedures for contract structuring, in regard, for instance, to (i) contract certainty and (ii) the discussion on the contents of clauses such as follow the settlements, follow the fortune, follow the forms, and cut through.

In this context, there is growing concern about the formalization of the relations between insurance and reinsurance companies, as well a greater care in drafting slips, coverage notes, and, if this is the case, contracts.

Furthermore, appropriate reinsurance programs and contracts are the result of the understanding of this activity and its potential as a risk management instrument, reinforcement and optimization of the capital structure and technology transfer. In addition, using reinsurance as an opportunity will depend on the definition by Brazilian reinsurance companies of underwriting, risk retention and reinsurance policies in line with their strategic planning and security and profitability goals.

Hence, great opportunities are expected for reinsurance companies - their entry into the Brazilian insurance market have always been hindered - and foreign insurance companies. This will...

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