IRB-Brasil Reaseguros Looks to Strengthen Capital Base

Brazilian reinsurer IRB-Brasil Reaseguros will need to raise additional funding in the next two to three years to maintain an adequate level of capital, local paper
Valor Econmico
reported, citing IRB president Leonardo Paixao.

IRB’s capital is currently close to 2.6bn real (BRL), or about US$1.1bn, well above the BRL900m required by local insurance regulator the Superintendence of Private Insurance (Susep), while the company’s 2013 premium income increased by 12% in to BRL2.7bn.

If IRB maintains this pace of growth it will need to bolster its capital, probably through an initial public offering (IPO) Paixao said.

IRB enjoyed a monopoly of Brazil’s reinsurance segment for 69 years until 2007, when the government began a process of privatisation that concluded last October. The federal government remains a major shareholder, together with Banco do Brasil, Ita, Banco Bradesco and FIP Caixa Barcelona.

As part of IRB’s privatisation, the government decreed that the company’s majority shareholders should take any measures necessary to broaden the company’s capital base within five years.

In a separate development local isurance firm Chubb do Brasil has denied allegations of fraud levied against the company’s management by the federal prosecutor’s office in Sao Paulo, which have yet to be served on its officers.

The complaint, filed on the website of the federal prosecutor’s office (FPO) in Sao Paulo on 26 February, alleges that a policy was adopted by the company, a subsidiary of US insurer Chubb Group, “to deny indemnity insurance to increase company profits, a practice which in itself is criminal.”

The president of Chubb do Brasil, Rose Acacio Queiroz Filho, and three other directors of the company were accused by the FPO of the fraud, as well as two other employees. The three directors are claims director Arthur Lippel Junior, claims manager Miguel Regiani Filho and finance director Elizabeth Kavanagh Alves. The two accused employees are Elisabete de Oliveira Castro and Roberto Morais Baccini.

“The company’s board decided to create a sophisticated criminal scheme in which commissions were paid through the creation of fictitious claims, corresponding to the percentage that the employees were entitled by goals achieved,” alleged the complaint. “The company, however, would create fictitious claims and the amounts paid in compensation would be precisely equivalent to the fees to which employees were entitled,” added the FPO.

According to the FPO, the fraudulent scheme dates back to 2005 and lasted until 2008 with 118 complaints made, amounting to BRL1.2m.

A statement issued by Chubb denied the allegations. “The accusations against the officers are inconsistent with the evidence produced in previous investigations of these matters by the state of Sao Paulo’s prosecutor’s office that were initiated in 2008 when those same officers informed the Prosecutor of suspected wrongdoing by a former company employee.

“Two different members of the state of Sao Paulo’s prosecutor’s office (at the initial and appellate levels) found that there was no involvement of the officers of the company in any wrongdoing, but did find wrongdoing by the above referenced former employee,” added Chubb which vowed to “vigorously defend itself and its officers.”

 

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