The first ever insurance-linked securities (ILS) issuance in Brazil has been completed today, as local reinsurance firm IRB (Re) sponsored the issuance of a R$33.7 million deal to securitize surety bond risks, using its Andrina Special Purpose Insurance Entity (SSPE)., Andrina Sociedade Seguradora de Propósito Específico, or Andrina Special Purpose Insurance Entity.Now the Andrina ILS structure has been utilised for the first time, to securitize insurance risks and issue ILS to be sold to investors in this landmark deal.The ILS regulations in Brazil allow for the structures known as Sociedades Seguradoras de Propósito Específico (SSPE) to issue Letra de Risco de Seguro (Insurance Risk Letters) as a type of ILS note that can be sold to capital market investors, to collateralize insurance or reinsurance arrangements.

Just like we see in other ILS arrangements, a sponsor such as IRB (Re) can utilise an SSPE to enter into collateralized reinsurance arrangements that are funded by the sale of insurance-linked notes (using LRS’), with the underlying risks securitized in a typical way.Now the first issuance of LRS, or Brazilian ILS, has been completed today by sponsor IRB (Re), with an R$33.7 million (approximately US $6 million) issuance that securitizes certain surety bond risks and transfer that risk to investors.IRB (Re) ceded certain risks from its surety bond portfolio to Andrina SSPE, which were then financed through the issuance of LRS’ (ILS) in the local capital market.

Marcos Falcão, CEO of IRB(Re) explained, “We are inaugurating a new modality of risk transfer in the local market.The issuance of insurance letters allows risks from the insurance market to be absorbed by the capital market.“In the international market, the large volume of these letters are cat-bonds, also known as catastrophe securities.

“In this way, we expanded the sources of capital for insurers and reinsurers in the country, allowing the increase in capacity of the entire sector.” The first Andrina ILS, this securitization of surety bond risks, was structured in partnership with Itaú-Unibanco.“With this, the financial market now has new risk options available for the investment portfolio.This is because these securities linked to insurance and reinsurance are not correlated with the traditional financial market.

That is, their profitability is not affected by economic cycles or price variations in the economy, such as interest rates and exchange rates,” IRB (Re) CEO Falcão added.IRB (Re) also said, “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.” The choice to utilise Brazil’s ILS regulatory regime for the first time to securitize and transfer surety bond risks reflects the high-demand for this kind of insurance protection, Cesar Cavalcante, president of Andrina explained.Cavalcante further explained, “”We will continue to look for new opportunities to expand and enhance this new business.

LRS is widely used abroad and we have a great opportunity to strengthen our market, highlighting and complying with the social role of the sector: protecting society.” “To pave the way to this first issue, precisely because of our pioneering, cooperation with the government and other actors was necessary in order to structure the market.In fact, a great effort was made so that the legal requirements were met,” added Cavalcante, who highlighted the cooperation and assistance of the Ministry of Finance, Susep and the Federal Revenue, as well as the support of B3, Oliveira Trust and the Machado Meyer and Mattos Filho offices in getting this inaugural Brazil ILS deal to market.Law firm Machado Meyer provided legal advice and assistance to IRB (Re) and Andrina SSPE on the sturcturing and execution of this inaugural Brazilian ILS issuance.

Machado Meyer said this groundbreaking deal in Brazil connects “the reinsurance and capital markets in the country in an unprecedented way.” The company added, “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.” Machado Meyer partner Cassio Gama Amaral led the work on the first ILS issuance from Andrina SSPE, with the participation of attorney Andre Filipe Guimarães Fortunato.The transaction documents were signed on May 28th 2025, with the issuance being settled today on May 30th.It is fantastic to see the first ILS issuance under Brazil’s homegrown regulatory regime for SSPE’s and LRS’ and good to see the structure has been used to securitize a differentiated type of insurance risk, in surety, compared to the far more typical catastrophe exposures.

As the Brazilian insurance and reinsurance market gets up to speed on what is now possible using their local ILS regulations to access efficient capacity from global capital markets, it will be very interesting to watch for future ILS activity from the country..All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance can be accessed online.Our can be subscribed to using the typical podcast services providers, including Apple, Google, Spotify and more.