BRAZIL Law and Practice Contributed by: Thiago Junqueira and Daniel Barreto Gelbecke, Junqueira & Gelbecke Advogados
admitted and occasional reinsurers, all of which must be registered with SUSEP and comply with applica- ble regulatory and reporting obligations. There is no automatic recognition of foreign licences, and market access is based on registration and ongoing compli- ance rather than passporting. 3.2 Fronting Fronting arrangements are permitted in Brazil. Brazilian regulation allows insurers to issue policies and cede a substantial portion of the risk to reinsur- ers, including through fronting structures. The appli- cable retention requirement is assessed on a global and annual basis, rather than on a per-policy or per- risk basis, which allows insurers to cede most or even nearly all of the risk associated with specific treaties or facultative placements, provided that overall regula- tory parameters are respected. In practice, fronting is commonly used in large and complex risks, cross-border programmes and group structures involving international reinsurers. These arrangements often include claims co-operation or claims control provisions reflecting the reinsurer’s economic exposure. In light of the new Brazilian Insur- ance Contract Act, however, the validity and enforce- ability of clauses that may interfere with the insurer’s exclusive duty toward the insured are currently being debated, particularly where such provisions could affect claims-handling autonomy or the timing of set- tlement. Notwithstanding the extent of the cession, the Brazil- ian insurer remains fully and exclusively liable to the insured under Brazilian law, and reinsurance does not create any direct contractual relationship between the reinsurer and the insured. 4. Transaction Activity 4.1 M&A Activities Relating to Insurance Companies M&A activity in the Brazilian insurance sector has been consistently active in recent years, with a nota- ble increase in transaction volume in 2024. Market studies indicate a higher number of deals compared
to previous years and, while macroeconomic condi- tions remain challenging, M&A activity is expected to continue at relevant levels. The profile of transactions has shifted gradually. Earli- er consolidation waves were largely focused on insur- ers acquiring competitors in order to expand market share by line of business. More recently, a growing portion of transactions has involved distribution chan- nels, particularly insurance brokers, managing gen- eral agents (MGAs) and service platforms, reflecting strategic interest in access to clients, operational effi- ciency and digital integration. In addition, M&A strategies may increasingly leverage the growing pool of insurtechs fostered by SUSEP’s regulatory sandbox, an experimental framework for technology-driven and innovative insurance projects, supported by a more flexible application of certain prudential requirements, which can make the market more attractive to both strategic and financial inves- tors. Both domestic and foreign investors participate in the market. International insurance and reinsurance groups continue to pursue selective investments, especially in large-risk, specialty and reinsurance- related operations, while transactions among local players have gained relative importance. Outbound investment by Brazilian insurers remains more limited. From a regulatory perspective, transactions involving insurers, local reinsurers and other regulated entities are subject to approval (prior approval in some cases) or notification to SUSEP, depending on their structure, shareholding and impact. Regulatory review, compe- tition clearance and capital requirements remain rel- evant factors in deal structuring and timing. Overall, consolidation, technological change and regulatory developments are likely to continue influencing M&A activity in the sector.
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