The new regulation may result in the expansion of Brazil's reinsurance market, as well as the development of new products.

The Brazilian Private Insurance National Board, so-called CNSP, issued Regulation No. 353/2017 (Regulation 353) (December 20, 2017), which eliminates limitations established under Regulation No. 168/2007 (Regulation 168) to cede risks to foreign reinsurers. According to CNSP, the elimination looks to enhance the Brazilian reinsurance regulatory framework with an eye on global reinsurance best practices.

Before Regulation 353, Regulation 168 allowed Brazilian insurance and reinsurance companies to transfer risks to foreign related companies or members of the same financial conglomerate, subject to premium thresholds for each contract as shown below:

Also, before Regulation 353, Brazilian insurance companies, under Regulation 168, were required to cede reinsurance to Brazilian reinsurance companies for each contract as shown below:

Through Regulation 353, CNSP eliminated both: (1) the cap applicable to the cession of reinsurance to foreign related reinsurers; and (2) the minimum threshold that protected Brazilian reinsurers. Regulation 353 introduces, however, a right of first refusal under which Brazilian reinsurance companies have to be offered at least 40% of a Brazilian insurance company's reinsurance cession and the Brazilian reinsurance company's exercise of that right must be made under the same conditions offered and/or accepted in the international market (i.e., the right of first refusal must guarantee equal treatment to all reinsurance companies).

These eliminations are welcome news, as they are expected to result in an expansion of the Brazilian reinsurance market and the development and launch of additional products.

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