Brazil Relaxes Collateral Requirements for ‘Alien Reinsurers’

Brazil has become the latest jurisdiction to relax collateral requirements as countries begin to see the benefit of well-capitalized investment from foreign reinsurers, notes a bulletin on the Lloyd’s web site (www.lloyds.com) “The Conselho Nacional de Seguros Privados (CNSP) – Brazil’s National Council of Private Insurance – made the decision this week to radically overhaul existing policies regarding reinsurers’ collateral needs,” said Lloyd’s.

For Lloyd’s, whose financial strength is very strong and ‘A’ rated, this means no collateral would have to be posted to operate as long as certain requirements were met.

Yael Chen, Manager of International Regulatory Affairs at Lloyd’s, explained: “We have been waiting for this for a long time. At the meeting of the CNSP on 17 December the rules have finally been approved. We understand that the collateral requirements, which are the main concern of the international reinsurers, have been changed substantially.

“Instead of 100 percent claims reserves, there will be a calibrated collateral requirement that will relieve higher rated reinsurers, like Lloyd’s. For example, A – firms and above will not be required to provide any collateral. Reinsurers below that would need different levels, further details yet to be disclosed.”

Earlier this month the Brazilian Insurance and Reinsurance Authority (SUSEP) met with the insurance and reinsurance markets, and presented its analysis of the proposals made by several players in the market, which shall regulate reinsurance in Brazil. The final decision went to the CNSP, which has voted in favor of the world’s large reinsurance players.

Sean McGovern, Director and General Counsel at Lloyd’s, indicated that Lloyd’s is “pleased with the regulatory framework proposed by SUSEP which will permit financially strong foreign reinsurers to participate in the market without posting collateral. Lloyd’s has supported the Brazilian insurance market for many years as a reinsurer of the IRB. We now intend to apply to be registered as an admitted reinsurer and to grow our support for and links with the local market.”

Brazil’s action follows announcements by Florida and New York insurance regulators that they plan to relax their collateral requirements, although it does not appear they are prepared to go as far as Brazilian authorities.

Source: Lloyd’s