Brazil's federal reinsurance company IRB-Brasil Re will be able to keep offering reinsurance and retrocession coverage until December 31 without meeting any additional government requirements, insurance regulator Susep and national insurance council CNSP announced in government newspaper Diário Oficial da União.
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Previously, IRB's special retrocession coverage authorization was scheduled to end October 17, local insurance federation CNSeg reported.
The change allowing IRB to continue operating as before is a result of the country's reinsurance regulations, the report said.
Under the laws opening the market in April, Susep approves three types of reinsurers: local reinsurers, which are incorporated in Brazil and provide only reinsurance coverage; admitted reinsurers, which are incorporated outside Brazil but have local offices; and eventual or occasional reinsurers, which are foreign reinsurance companies without representative offices in Brazil doing business via local brokers.
By law, local reinsurers have the first right of refusal to 60% of all reinsurance deals until 2010, which will drop to 40% thereafter.
There are currently only two other authorized local reinsurers, Munich Re and J.Malucelli Re, with US-based ACE (NYSE: ACE), Spain's Mapfre, and XL Re, the reinsurance business of Bermuda's XL Capital (NYSE: XL), still awaiting final approval.
"Everything will depend on IRB's decision on whether to agree to do the retrocession coverage or not, since the credit risk today with the world financial crisis is a factor to be taken into consideration," the federation quoted XL Re's Latin America head Carlos Caputo as saying.
IRB Re made 151mn reais (US$69.1mn) in profits in the first five months of 2008, up 7.1% on the same period last year, according to its latest financial statements. Premiums were down 8.2% to 651mn reais for the same period.
