Reinsurers in Brazil could find opportunities to grow in the local surety market and in health reinsurance provision, according to rating agency Standard & Poor’s.
With Brazilian reinsurers having found growth in other Latin American countries, as they seek diversification and expand into markets which have less in the way of cultural barriers, reinsurers in Brazil could also be looking closer to home.
Proposed changes in law 8666, which provides rules for bidding procedures and government contracts in Brazil, could provide opportunities in the surety market, as the Brazilian Congress now debates whether to increase the guarantees required for infrastructure projects financed by government.
The new law could increase the requirement to collateralize these projects to 30%, which S&P says could offer an opportunity to Brazilian surety companies as they would require more reinsurance to support the projects.
Health reinsurance is another area of potential growth, as the sector currently uses low levels of reinsurance capital, according to S&P.
Health insurers are regulated differently to reinsurers or P&C insurers, meaning they generally utilise less reinsurance coverage. But S&P notes that this could change and regulators may require health insurers to follow a stricter solvency regime, resulting in increased capital requirements for domestic health insurers and as a result a need for more reinsurance as capital relief.
Global reinsurers could also benefit, of course, and the major players have been competing heavily with the domestic market, which may result in any growth opportunities being shared.