Brazil has become the latest jurisdiction to relax collateral requirements as countries begin to see the benefit of well-capitalised investment from foreign reinsurers.
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.
For Lloyd’s, with its strong financial strength ratings, this means no collateral would have to be posted to operate as so long as certain requirements were met.
Yael Chen, Manager of International Regulatory Affairs at Lloyd’s, explains: “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% 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 favour of the world’s large reinsurance players.
Sean McGovern, Director and General Counsel at Lloyd’s, said: “We are 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.
In the past month, both Florida and New York have announced plans to relax their collateral requirements, although not to the extent of Brazil.
