But current legislation could still diminish capacity for FIFA World Cup and 2016 Olympics
The Federation of European Risk Management Associations (Ferma) has welcomed a decision by the Brazilian government to liberalise its insurance market following concerns from risk managers, insurers and brokers.
Resolution 224, which prohibited intra-company cessions, was repealed effective March 31 and replaced with Resolution 232. The new resolution will allow insurers to transfer up to 20% of reinsurance treaties to foreign based companies that are linked or belonging to the same financial conglomerate.
Ferma believes the concession is only a step in the right direction though, and is calling for more measures to liberalise the market. Resolution 225, effected from March 31, stipulates that 40% of reinsurance business must be placed with local reinsurers, who are allowed to change terms and conditions without penalty.
The federation believes that the current legislation could undermine development in Brazil, and suggested that it will increase costs, concentrate risk domestically, damage job creation and fiscal benefits and prejudice current foreign insurance and reinsurance investors.
Ferma also suggested that resolutions 224 and 225 could also potentially diminish coverage and capacity for the upcoming 2014 FIFA World Cup and the 2016 Olympic Games.
President of FERMA, Peter den Dekker, stated: “We still are open to dialogue with government entities in Brazil, in order to give as many explanations and clarifications as may be necessary to reach a consensus that is reasonable for all the involved parties.”