Zurich-based insurer ACE (NYSE: ACE) plans to use its Brazilian reinsurance businesses as its gateway to Latin America, Jacques Bonneau, ACE head of global reinsurance business, told BNamericas.
"As opposed to people going out of Miami or Mexico, I actually see Brazil as the center from which we expand," the executive said.
However, ACE plans to start fairly small in Brazil to begin with, waiting until its operations in the country are "self-sustaining," Bonneau said.
"How we've done it in other operations is that we start off small and slowly and if we think the opportunities are there in the marketplace, we'll obviously write more business and put more resources [in]," he said.
"In a market that's very cyclical and very leveraged, you don't [want to] have a huge infrastructure [which forces you] to write business in order to sustain [it]."
Despite this emphasis on a small size, ACE will operate in the Brazilian reinsurance market through four different operations. The company got its eventual reinsurer license in July and is still awaiting its admitted license for subsidiary Tempest Re and its local license for ACE Reaseguradora Brasil.
In November, Spain's Mapfre became the fourth firm to get approval from insurance regulator Susep as a local reinsurer, joining Germany's Munich Re, local firm J Malucelli Re and former monopolist IRB-Brasil Re. XL Re, the reinsurer of Bermuda's XL Capital (NYSE: XL), is also awaiting approval as a local reinsurer.
ACE is also considering writing business through its Lloyd's of London syndicate, Bonneau said.
Asked about the perceived contradiction between starting small and having four different operations in Brazil, Bonneau said ACE's strategy was flexibility.
"Clients may have different views of who they want on their reinsurance panel and there's clearly a movement now in the marketplace to look at more diversification rather than less," he said. "So with different legal entities and different balance sheets, that can also have a positive impact for us as we look at business."
ACE will focus on P&C, marine, and offshore energy coverage, mainly through treaty operations, Bonneau said. However, the company will consider some facultative business.
ACE's group-wide operations recorded a profit of US$54mn in the third quarter, down 91.7% from 3Q07, while its global reinsurance division saw recurring profits fall 34.5% to US$93mn in the same comparison.
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