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MeneameThe lower results from Brazil's federally controlled reinsurer IRB-Brasil Re demonstrate some of the headwinds the company is facing, but IRB remains well-positioned to take advantage of the country's growing insurance market, Luiz Bojunga, a reinsurance consultant with law firm Doria, Jacobina, Rosado e Gondinho Advogados, told BNamericas.
"IRB has the most diversified risk portfolio and still takes 78% of the market," Bojunga said of the firm, which lost its monopoly status in April last year. "It's natural that its enormous market share should start to give way, year after year."
IRB had 97.9mn reais (US$56.7mn) in profits in the first eight months of 2009, down 58.5% from the same period in 2008, as claims chipped away at its profits. The consultant said that 2008 was a particularly good year for IRB, but that it had started increasing its retention rates during the year, despite the worsening of loss rates seen so far in 2009.
In spite of the bad luck and changing market conditions regarding its retrocession, Bojunga said that the plan announced by federally controlled Banco do Brasil (BB) to work with the country's finance ministry to take on a stake in IRB could be highly beneficial to both.
"A [possible] capital injection could be really important to increase the subscription capacity of IRB," the consultant said of BB's possible involvement and ownership in the state-run reinsurer.
IRB's earned premiums grew to 1.11bn reais in the first eight months of 2009, up 1.9% over January-August 2008.
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