NU Online News Service, Nov. 23, 11:05 a.m.EST

The U.S. insurance industry, both property casualty and life, isurging Brazil to stop restricting reinsurance access to onlydomestic reinsurers in one of the world's leading emerging marketsfor insurance.

Dave Snyder, general counsel for the American InsuranceAssociation (AIA), says there is a “significant sense of urgencyhere.”

He adds, “Insurers have invested significant resources inBrazil's insurance market only to have the clock turned back onmarket access. The two previously adopted resolutions willvirtually cut off Brazil from the foreign-reinsurance market andthe globalization of risk that characterizes it and should bereversed.”

Colletta Kemper, vice president of industry affairs for theCouncil of Insurance Agents and Brokers, says, “We are furthertroubled that the process for accessing the non-admitted market isinefficient, burdensome, could result in higher prices, worse termsand conditions for insurance buyers and capacity problems for thelarger risky commercial accounts.”

The two resolutions in question, CNSP Res. No. 225/10 and CNSPRes. No. 232/10, were adopted earlier this year.

Res. No. 225 requires that 40 percent of reinsurance mustbe placed in the local Brazilian market.

Under Res. 232, a broker is required to first go to the localmarket.

Kemper says that if the local market declines, the broker cantake the risk to the admitted market and then to the so-called“occasional” reinsurance market.

She says, “If the local market accepts the risk, we're concernedthat this will drive up rates and result in worse terms andconditions for the buyer if the broker is forced into a marketwhere he can't negotiate the terms and conditions,”

Kemper says, “The process is inefficient and burdensome andwould require the broker to submit proposals to all eight localreinsurers, the 28 admitted reinsurers and the 56 occasionalinsurers before being able to place the risk in the globalreinsurance market.”

Kemper says that financial security is also an issue. “It'snot clear whether a ceding company would be forced to cede to alocal reinsurer with a lower financial rating than is prudent,” shesays.

A number of associations filed comments with the Brazilianregulatory authority against the resolutions, including the AIA,the Council, the Property Casualty Insurers Association of America,the General Insurance Association of Japan, the Association ofBermuda Insurers and Reinsurers and the Risk and InsuranceManagement Society.

The American Council of Life Insurers (ACLI) has also signed on.The European Insurance and Reinsurance Federation (CEA) hasweighed in previously.