US reinsurance company Transatlantic Re will bank on growing demand for construction insurance and surety bonds to gain a foothold in an open reinsurance market in Brazil, VP Paulo Pereira told BNamericas.
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"Construction is growing a lot as well as property and we're going to bet heavily on surety bonds," he said.
Pereira also pointed to agricultural coverage as a potential growth segment in the insurance and reinsurance industries in Brazil.
"You can't ignore agriculture in a country like Brazil. Agricultural insurance is a promising market and we're going to keep an eye on it".
Brazil is the world's third largest agricultural exporter behind the EU and US yet premiums from agricultural insurance account for less than 1% by some estimates.
Transatlantic Re applied last week for a license to work in Brazil as an admitted reinsurer and expects to receive authorization from insurance regulator Susep within the next two weeks, Pereira said.
"We're feeling out the market," he said. "We expect competition to be tight with four or five local reinsurers, 20-25 admitted reinsurers and occasional reinsurers."
The law signed in January last year to end IRB's monopoly defined local reinsurers as companies incorporated in Brazil and working solely with reinsurance, admitted reinsurers as incorporated outside Brazil but with representative offices in the country and occasional reinsurers as incorporated outside Brazil and without local offices.
Lloyd's of London, Swiss Re and SCOR have applied as admitted reinsurers, while J Malucelli and Munich Re have asked to join federal reinsurer IRB-Brasil Re as local reinsurers.
Local reinsurers will have the right of first refusal for 60% of business through January 2010, falling to 40% after that.
"IRB will be an important player in an open market and will have our support as an admitted reinsurer," Pereira said, adding the government will have to give IRB management greater autonomy, much like federal energy company Petrobras (NYSE: PBR).
"Insurers that have contracts with IRB are going to want IRB to stay strong," he added.
Transatlantic Re is a subsidiary of Transatlantic Holdings (NYSE: TRH), which also includes Trans Re Zurich and Putnam Re.
Transatlantic Holdings booked US$113mn in net profits in the fourth quarter last year, down 2% on the same quarter in 2006. Written premiums rose 10% year-on-year to US$1bn in 4Q07.
