Brazilian reinsurer IRB(Re), via its wholly owned subsidiary, Andrina Special Purpose Insurance Entity (SSPE), has issued the first insurance-linked securities (ILS) transaction in the country, a R$33.7 million transaction (USD 5.9m) covering risks related to the reinsurer’s surety bond portfolio.
This issuance of the first ILS transaction in Brazil comes after the country’s insurance regulator, Superintendence of Private Insurance (SUSEP), approved Brazil’s first ILS structure, Andrina from IRB(Re), in December 2024.
In 2022, Law 14,430 authorised the creation of the ILS market in Brazil, and after years of collaboration between insurance, reinsurance, legal, capital market experts and the Brazilian regulator to develop a bespoke framework for the local market, Andrina has been leveraged for the first time.
For this inaugural transaction, the reinsurer transferred certain risks related to its surety bond portfolio to Andrina, which were subsequently financed via the issuance of Letra de Risco de Seguro (Insurance Risk Letters), a type of ILS note that can be sold to capital market investors, in the local capital market.
“For this inaugural issuance, collaboration with public authorities and other key stakeholders was necessary to structure the market – mostly notably the Ministry of Finance, SUSEP, and the Brazilian Federal Revenue Service, in addition to support from B3 (the Brazilian stock exchange), Oliveira Trust, and law firms Machado Meyer and Mattos Filho,” explained IRB(Re).
Law firm Machado Meyer Advogados advised IRB(Re) and Andrina on the structuring and execution of this debut Brazilian ILS deal and describes the transaction as “innovative and historic” for Brazil’s insurance, reinsurance, and retrocession markets.
“This structure, widely adopted in jurisdictions such as the United States, the United Kingdom, the European Union and Bermuda, was implemented for the first time in Brazil, connecting the reinsurance and capital markets in the country in an unprecedented way,” said Machado Meyer. “The transaction represents a milestone, paving the way for new risk financing alternatives in Brazil, with the potential to significantly expand the capacity of the local market and attract institutional investors to assets linked to the insurance sector.”
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