AIA Joins Others in Opposing Reinsurance Restrictions in Brazil

The American Insurance Association (AIA), as part of an international coalition of insurance groups, urged the Brazilian government to suspend and reconsider the recent administrative actions that reverse the 2007 insurance market liberalization. The government’s actions in late March will severely limit affiliate reinsurance and mandate the placing of 40 percent of reinsurance with Brazilian companies.

Source: Source: AIA | Published on April 27, 2011

“These actions virtually cut the country off from the global reinsurance market and benefit the old monopoly state-run reinsurance company,” said David Snyder, AIA vice president and associate general counsel.  “Given the plans for huge infrastructure projects as well as the upcoming Olympics and World Cup to be held in Brazil, these restrictions will have profound implications if not reversed immediately.”

As one of the world’s largest and fastest growing economies, Brazil’s actions severely undermine the progress made in 2007.  If implemented, these regulations could negatively impact local job creation, reduce globalization of Brazil’s risk increasing its exposure, jeopardize existing investments by insurers and reinsurers, and increase the costs of insurance and reinsurance for Brazilian policyholders.

“With seemingly no justification, the Brazilian government is pursuing actions that not only negatively affect insurers, but will harm Brazilian consumers and reverse the liberalization progress made to date,” said Snyder.  “These protectionist measures are contradictory to the policies Brazil has been following and inconsistent with internationally supported principles.”

“Brazil’s effort to restrict insurance and reinsurance capacity is one of the most significant international issues facing the industry,” concluded Snyder. 

“Our coalition has reached out to Brazilian officials and hopes to cooperate with the Brazilian government in order to ensure that Brazil does not unnecessarily reverse the positive strides it has made and burden Brazilian policyholders.