Mapfre Re do Brasil, the Brazilian reinsurance subsidiary of Spanish insurer Mapfre, plans to focus on market demand rather than go after its own subsidiaries for reinsurance coverage, unit CEO Bosco Francoy told BNamericas.
Last week, the company was approved as a local reinsurer, making it one of only four companies that currently enjoy the right of first refusal on the first 60% of reinsurance deals until 2010 which falls to 40% thereafter.
A question raised by the approval was whether Mapfre would follow the lead of fellow local reinsurer, J Malucelli Re, which has done more than 95% of its business from May-September with a fellow Paraná Banco subsidiary, the surety bond business of the J Malucelli group.
"I believe initially [Mapfre Re will take on] a good part of the risks of the Mapfre group in Brazil," industry analyst Luiz Roberto Castiglione said when asked about where the group would seek premium growth.
Insurers often seek support from the reinsurance unit of the same company, which is the relationship Federal Insurance Company, which was admitted as an admitted reinsurer this month, will have with the Brazilian operations of US insurer Chubb (NYSE: CB), local daily Gazeta Mercantil quoted Osvaldo Lopes of insurance brokerage Quorum as saying.
However, Mapfre's corporate structure encourages local market growth, Francoy said.
"The relationship with [Mapfre's] insurers across the world is based out of a department in Madrid," the executive explained. "For this reason, the local reinsurance [operation] will work principally with and for the market."
The new local reinsurer also plans to have a balance of life and non-life reinsurance coverage through a mix of treaty and facultative contracts, he said.
As for the general market tendencies after the opening of the market in April, Francoy sees a mixture of forces at work, but a net effect of prices on the rise.
"The forecasts for the sector show growth in Brazil and the trends in reinsurance point clearly to an increase in prices," he said.
The law that opened Brazil's reinsurance market creates three categories of reinsurers: local reinsurers incorporated in Brazil and dedicated solely to reinsurance; admitted reinsurers incorporated outside Brazil but with representative offices in the country; and eventual reinsurers incorporated outside Brazil and without local offices.
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