New capacity needed for Brazil risks: Gallagher

A combination of reinsurers seeing greater opportunities for growth in other parts of the world and a reticence to work with too many carriers co-insuring a single risk means there is a need for new capacity willing to write risks in Brazil. But that is why Miami Reinsurance Week represents the perfect arena to find new players.

That is according to Rodrigo Protasio, CEO of insurance business, Brazil, Gallagher. He told Miami Reinsurance Week Today that there is a real need for new capacity to be deployed in a market which needs to place many large, complex risks, especially on the energy side, and suffers from a dearth of local reinsurers. He estimates that some 70 per cent of reinsurance is placed with international players.

“We are here this week to find new markets, willing to write business in Brazil,” he said. “That could be reinsurers or managing general agents or some of the larger, global players that write a mixture of insurance and reinsurance. The decision makers for many such companies are in Miami and this is a perfect way to meet them.”

He adds that the market offers great growth potential for carriers willing to invest in understanding the region. The insurance market has consistently grown by double digits for the past decade and more complex, large risks are emerging. 

One of these is cyber, which has a very low penetration in Brazil, despite the country being very technologically savvy. It also has some of the biggest offshore oil developments in the world.

Daniela Reia, chief broking officer, Brazil, Gallagher, also explains another new development in the market that is limiting capacity. In the aftermath of some heavy cat losses in the region, including floods and wildfires, some reinsurers bore higher losses than they anticipated due to the size and nature of some co-insurance agreements in place. 

In some cases, as many as 10 insurers could be involved on a single risk, meaning an aggregation of losses for reinsurers.

In response, reinsurers have sought to limit the number of insurers they will work with on a single risk: to a maximum of four or five. This has meant that more reinsurance is needed – but the capacity has not always been there to cover this. 

“As such, we need more reinsurance support,” Reia said. “The risks are becoming more complex and those losses highlighted some of the challenges. We are in Miami to speak to new carriers and sources of capacity for Brazil.”

The Brazil insurance market is worth around $122 billion in gross written premiums; property/casualty business represents some $23 billion of that. Some 20 per cent of that is ceded, which is lower than some other Latin America countries which have a higher exposure to natural catastrophes.

Protasio believes there is huge potential in the market. Despite being in Latin America, Gallagher only started in Brazil three years ago. It now is responsible for almost $500 million between insurance and reinsurance and employs some 400 colleagues.

“We are also open to acquisitions,” he added.

For more news from Miami Reinsurance Week Today, click here.

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