On August 21 1996, the Brazilian Congress approved an amendment to the Federal Constitution (Constitutional Amendment No. 13) extinguishing the monopoly on the reinsurance business in Brazil, assigned until then to the Instituto de Resseguros do Brasil - IRB ("IRB"). Subsequently, Article 59 of Law No. 9649, of May 27, 1988, changes its name to IRB-Brasil Resseguros S.A. ("IRB-Brasil Re"), and all the reinsurance activities in the country are under the control of IRB-Brasil whose majority shareholder is the Federal Government. Therefore, in practical terms, the reinsurance monopoly still exists de facto.
Circular No. 8 issued by the Head of IRB-Brasil Re on April 2, 2002 sets forth a special procedure, as outlined below, that enables insurance companies to negotiate internationally the reinsurance coverage for new risks assumed from April 2 onwards and that are known to demand optional placement abroad.
