2 weeks ago
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The Brazilian insurance regulator SUSEP has now authorised the first insurance-linked securities (ILS) structure in the country, with Andrina sponsored by IRB Re and now approved to issue Letra de Risco de Seguro (Insurance Risk Letters), which is the name for the insurance-linked notes a Brazilian ILS structure can issue to be sold to investors.
As we’d reported previously, it was already known that the first ILS vehicle in Brazil was expected to be Andrina Seguros and that it would be sponsored by local reinsurance company IRB Re.
Now, the official authorisation from the government’s regulator has been announced, with Andrina Sociedade Seguradora de Propósito Específico, or Andrina Special Purpose Insurance Company, added to the register by the Superintendence of Private Insurance (SUSEP).
The ILS vehicle used by Brazil is known as a Sociedades Seguradoras de Propósito Específico (SSPE), and these allow issuance of LRS’ (Insurance Risk Letters) as a type of note that can be sole to capital market investors.
Just like we see in other ILS domiciles, a sponsor such as IRB Re can use an SSPE to enter into collateralized reinsurance arrangements that are funded by the sale of insurance-linked notes (using LRS’).
This landmark authorisation caps a number of years of work by insurance, reinsurance, legal and capital market experts alongside the Brazilian regulator to establish a regulatory framework that is designed to work for the local domestic market’s needs, but draws on standards set globally for best practice.
The goal is to facilitate access to the capital markets for reinsurance capacity, while also creating a structure that is designed to be accessible for investors around the world, as well as in Brazil.
Andrina SSPE is now authorised to issue LRS’ to attract capital to support and fund reinsurance agreements it may enter into with sponsor IRB Re.
IRB Re, which is the largest reinsurer headquartered in Brazil, has direct shareholding control of Andrina SSPE and while a transaction has so far not been seen, it’s likely the reinsurance company will look to put this first ILS structure in Brazil to use in the near future, we understand.
Law firm Machado Meyer provided legal assistance to IRB Re in the establishment of Andrin and the company believes this is particularly significant for Brazil’s insurance and reinsurance market, marking “the beginning of a new era.”
The law firm said, “The establishment of Andrina will introduce a groundbreaking mechanism for managing catastrophic risks, such as natural disasters, by facilitating the issuance of ILS in Brazil. This development will enhance the country’s reinsurance capacity and open new opportunities for local and international investors, contributing to the growth and innovation of the Brazilian insurance sector.”
Machado Meyer assisted with this first Brazilian ILS structure by guiding IRB Re through each step of the process to establish and get Andrina authorised. The law firm worked to secure all necessary regulatory approvals and supported IRB Re’s Board of Officers and Board of Directors in the definition and approval of Andrina’s bylaws, corporate structure, internal policies and more.
Having local legal expertise is an important step for Brazil’s ILS market ambitions.
Also read our recent article: Brazil aligning ILS approach with global standards to transform catastrophe coverage.
English (US) ·