The Reinsurance Brokers and the New Brazilian Reinsurance Market

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2 The Reinsurance Brokers and the New Brazilian Reinsurance Market Carlos Alberto Lenz César Protasio Chairman Orypaba Rio Administração e Corretagem de Resseguro Ltda / JLT RE Member of ABECOR-RE, Brazilian Association of Reinsurance Brokers September 2008

3 The Broker x Law 126/2007 The intermediary (RI Broker) shall be a brokerage company authorized to intermediate reinsurance business, and covered by a professional liability insurance policy (as defined by the insurance regulating body), having a specialist licensed insurance broker as its general and/or operational manager Reinsurance contracts with intermediation of RI brokers cannot have clauses limiting a direct relationship between cedent and reinsurer.(art. 15). An intermediation Clause must be included defining whether the broker is authorized to collect the RI premiums or RI recoveries (art.16)

4 The Broker x Law 126/2007 If the reinsurance broker is authorized to collect reinsurance premiums and recoveries, the following will apply: I Payment of the reinsurance premium by the ceding to the broker is deemed to be payment to the reinsurer; and II Payment of reinsurance recoveries by the reinsurer to the broker is deemed to be payment to the cedent only to the extent that the cedent effectively receives such payment (art 16)

5 The Broker x Regulation (CNSP/SUSEP) The operation of reinsurance brokerage companies depends upon previous and express authorization of SUSEP Conditions for operation Publication of declaration of purpose. 1 Disclosure of the structure of the group which controls the company 2 Express authorization for disclosure, to Brazilian authorities, financial figures and operational information of the business made in Brazil Resolution No. 173

6 The Broker x Regulation (CNSP/SUSEP) Organization as a corporate stock company (sociedade anônima) or a limited partnership (sociedade limitada), according to the Brazilian Civil Code The beginning of operation must be in ninety days maximum from the publication of the operating authorization act Professional Civil Liability Insurance Policy, with a BRL ,00 minimum indemnification limit, or equivalent amount in other foreign freely convertible currency

7 The Broker x Regulation (CNSP/SUSEP) The technical representative referred to in this article must be an insurance broker duly accredited, Brokers Obligations to Clients Remit to Brazilian cedents: 1 Until the beginning of the risk, confirmation of reinsurance coverage, with its pertaining conditions, along with the percentages of acceptance per reinsurer 2 In up to five working days, from the date of formalization, the cover notes documenting the reinsurance and retrocession operations and contracts, regularly signed.

8 The Broker x Regulation (CNSP/SUSEP) Brokers Obligations to Clients (cont.) Grant the cedent access to all information available on the reinsurers in which the risks intermediated have been placed, either in automatic or facultative contracts; and Disclose to all parties involved the information that the reinsurance brokerage company is affiliated to an insurance or reinsurance company, if that is the case.

9 The Broker x Regulation (CNSP/SUSEP) Brokers other Obligations The Brokers and the additional regulation (CNSP and SUSEP) shall keep, in Brazil, current accounts for the intermediation of reinsurance and retrocession. As per CMN Resolution number 3525 (three five two five) dated December 2007 The accounts referred to in this article must be used solely for the payments and receipts relative to the reinsurance and retrocession transactions intermediated

10 The Broker x Regulation (CNSP/SUSEP) Brokers other Obligations The reinsurance brokerage company shall keep in file in magnetic or electronic media, provided the applicable legal and regulatory provisions are complied with the documents proving the reinsurance and retrocession operations intermediated by the company, in which the acceptance of the reinsurers must be registered, as well as: Business communications and mail Proof of reinsurance placements Statements of premiums and indemnities flow Current account statements

11 Previous Conditions Before the end of RI monopoly, brokers were not allowed to intermediate business between insurance company and IRB-Brasil Re 50% of IRB s retrocession was, and still is, through brokers In 2007 there were 28 brokers working with IRB, placing retrocession (contracts and facultative) in the international market The amount of business placed in 2007 through brokers was around BRL 800 M (US$ 500 M)

12 POLÍTICA DE COLOCAÇÃO DE RISCOS NO EXTERIOR Total de Participação de Resseguradores e de cada Corretor nas Retrocessões (Facultativos + Contratos) Abril/2008 PARTICIPANTE / BROKER CÓDIGO / CODE Percentuais / % Jan/08 a Apr/08 Apr/07 a Apr/08 AON GROUP DVS 10, ,1083 GUY CARPENTER -MMC DVS 7,4776 8,6693 WILLIS FABER GRUPO DVS 5,2092 6,1549 ISB -INTERNATIONAL SPACE BROKERS, INC ,1824 4,4949 JARDINE LLOYD THOMPSON DVS 5,0622 4,3073 COOPER GAY & CO. LTD ,1456 2,5228 HSBC INSURANCE BROKERS DVS 2,2613 1,3818 CATALYST RE CONSULTING L.L.C ,3112 1,3281 BENFIELD GREIG GRUPO DVS 1,1981 1,2917 NHM -NAUSCH, HOGAN & MURRAY (UK) ,6456 1,1949 MILLER INSURANCE GROUP ,6972 1,0016 ARTHUR J. GALLAGHER (UK) LTD ,566 0,8616 LOCKTON COMPANIES INTERNATIONAL LTD ,4952 0,812 MEXBRIT REINSURANCE INTERMEDIARIES ,1043 0,5959 PEARSON WEBB SPRINGBETT LTD ,7727 0,5885 COLEMONT INSURANCE BROKERS LIMITED ,9043 0,5048 UNITED INSURANCE BROKERS LIMITED -UIB ,1199 0,4104

13 POLÍTICA DE COLOCAÇÃO DE RISCOS NO EXTERIOR Total de Participação de Resseguradores e de cada Corretor nas Retrocessões (Facultativos + Contratos) Abril/2008 PARTICIPANTE / BROKER CÓDIGO / CODE Percentuais / % Jan/08 a Apr/08 Apr/07 a Apr/08 MCGRIFF, SEIBELS & WILLIAMS OF TEXAS ,0294 0,4085 WELLS FARGO RE, INC ,6662 0,3452 RIMACO RISK MANAGEMENT CO. S.A ,3141 0,1974 ROPNER INS.SERVICE LTD ,3209 0,1626 BMS INTERNATIONAL INTERMEDIARIES LTD ,0196 0,139 HEATH LAMBERT GRUPO DVS 0,0292 0,1131 TYSER INTERNATIONAL INS & REINS BROKERS ,1029 0,072 IBS -REINSURANCE BROKERS SINGAPORE PTE ,0245 BESSO LIMITED ,0147 0,0231 CIRCLES GROUP S/A ,0259 0,0131 SWINGLEHURST LIMITED ,0151 0,0087 LSR -LONDON SPECIAL RISKS LIMITED ,0128 0,0047 NMB -NEWMAN MARTIN AND BUCHAN LIMITED ,0028 MARSH & MCLENNAN COM DVS 0, SUBTOTAL 49, ,7436 RESSEGURADORES DIRETOS / DIRECT RI 50, ,2564 TOTAL (COR+RESS)

14 Top 10 Brokers AON GROUP GUY CARPENTER - MMC WILLIS FABER GROUP JARDINE LLOYD THOMPSON / ORYPABA RIO ISB - INTERNATIONAL SPACE BROKERS COOPER GAY & CO. LTD BENFIELD GREIG GROUP MILLER INSURANCE GROUP HSBC INSURANCE BROKERS LTD/CAPITAL RE ARTHUR J. GALLAGHER (UK) LTD Source: IRB Brasil Re

15 The new Scenario Major opportunities to RI Brokers, to serve both insurance companies and reinsurers established in Brazil Nowadays RI Brokers are allowed to intermediate business within Brazilian Market as well as abroad There must be a legal entity in accordance with the Brazilian Law RI Brokers can place both reinsurance and retrocession

16 Brokers Opportunities Intermediate reinsurance between Brazilian insurance companies and reinsurers (Local, Admitted and Occasional) Place Large Fac Business in the international market Place retrocession for Brazilian local reinsurers Develop new products with Brazilian insurers and reinsurers Provide services for all players of the new market, in premium, claims collection and reinsurance design (limits, covers, wording etc.)

17 Brokers Opportunities Prior de opening the RI Brokers had 50% of IRB s retrocession, which represented US$ 500 millions Now RI Brokers can support also the reinsurance placement of insurance companies, which may represent at least US$ 1 billion in total If RI Brokers keep the same market share of 50% of all placements, they may achieve the total amount of US$ 1 billion in premiums for the next year, increasing this amount in the short future We estimate a potential market for RI Brokers of US$ 2 billions in premiums

18 Brokers Opportunities Source: SUSEP 17th of April 2008 AON LTD. BENFIELD GROUP LTD. CAPITAL RE - (HSBC) COOPER GAY & CO. LTD. GUY CARPENTER & CO. MEXBRIT LTD. ORYPABA RIO - (JLT RE) WILLIS LTD. Most of the 28 brokers registered in IRB will register in SUSEP to work in the new reinsurance market

19 Brokers already approved by SUSEP AON RE BRASIL - CORRETORA DE RESSEGUROS LTDA ASSURÊ INTERNACIONAL CORRETAGEM DE RESSEGUROS LTDA. BENFIELD DO BRASIL CORRETORA DE RESSEGUROS LTDA. CAPITAL RE CORRETORA DE RESSEGUROS LTDA. CATALYST RE CORRETORA DE RESSEGUROS LTDA. COLEMONT BRASIL CORRETAGEM DE RESSEGUROS LTDA. COOPER GAY DO BRASIL CORRETORA DE RESSEGUROS LTDA. CORMATT - CORRETORA DE RESSEGUROS LTDA. ESPECIALIZADA RE CORRETORA DE RESSEGUROS LTDA. GRB - GLOBAL RISK BRASIL SOLUÇÕES DE RISCO LTDA. GUY CARPENTER & COMPANY LTDA. INTER AEROSPACE CORRETORA DE SEGUROS LTDA. JLT RE BRASIL ADMINISTRAÇÃO E CORRETAGEM DE RESSEGUROS LTDA. LARIM CORRETORA DE RESSEGUROS LTDA. LBS INSURANCE UNION REPRESENTAÇÃO E CORRETAGEM DE SEGUROS S/S LTDA. MARSH RE CORRETAGEM DE RESSEGUROS LTDA. MEXBRIT BRASIL CONSULTORIA DE SEGUROS E RESSEGUROS LTDA. MILLER DO BRASIL CORRETORA DE RESSEGUROS LTDA.

20 Brokers already approved... NAUSCH HOGAN & MURRAY BRASIL CORRETORA DE SEGUROS LTDA. ORYPABA RIO ADMINISTRAÇÃO E CORRETAGEM DE RESSEGUROS LTDA. PECUS CORRETORA DE RESSEGUROS LTDA. SECURITAS UNIÃO CORRETORA DE RESSEGUROS S.A. UIB RE BRASIL CORRETORA DE RESSEGUROS LTDA. WILLIS CORRETORA DE RESSEGUROS LTDA.

21 Brazil The new image Brazil is well known for a lot of good memories in the short and long past.

22 Brazil The new image But now Brazil is also Known for a lot of New Business Opportunities for national and foreigners. International Reinsurance Center New Investments

23 Thank you Carlos Alberto Lenz César Protasio Orypaba Rio Administração e Corretagem de Resseguro Ltda / JLT RE Member of ABECOR-RE, Brazilian Association of Reinsurance Brokers Back