Global investment company Galapagos Capital has announced the issuance of up to R$100 million in Insurance Risk Letters (LRS), which are the Brazilian regulatory regime version of insurance-linked securities (ILS), marking the second ever ILS issuance in Brazil, and the first from Galapagos Capital.Recall at the end of 2024, a special purpose reinsurance vehicle, that allowed the company to issue the Brazilian brand of insurance-linked securities (ILS).The first LRS issuance came earlier this year in May, when reinsurance firm Galapagos Capital’s R$100 million LRS issuance was reportedly carried out with BS2 Seguros serving as counterparty to the transaction, holding responsibility for issuing judicial guarantee insurance policies which it appears underpin the LRS securities.As a result, the second ILS transaction to come out of Brazil’s regulatory regime for LRS’, is again a little different and not property catastrophe risk focused as we more typically see worldwide.

Rather being more of a surety type risk (surety judicial bonds), similar to the first Andrina deal that also transferred a type of surety bond risk to the capital markets.These LRS deals in Brazil allow a sponsor or cedent to access institutional capital markets backed sources of reinsurance capacity, to fund underwritten risks across a wide-range of risk classes.It’s worth noting, that BS2 Seguros, is a P&C insurance company backed by Brazilian financial services company BS2 Bank which holds a majority stake, along with South African insurance underwriter Traficc.

Galapagos Capital also confirmed that its LRS issuance has a term of six years.According to Roberto Takatsu, partner at Galapagos Capital, the company will follow an initial strategy of prudence, where it will prioritize issuances aimed at professional investors, pension funds, and multi-family offices, focusing on conservative structures to consolidate market confidence.“We are entering a market that can unlock various opportunities – from credit operations to coverage of complex risks in agribusiness and natural disasters.

Brazil now has a new instrument to expand its insurance and credit capacity, reducing historical bottlenecks,” commented Takatsu.To enable the issuance, Galapagos Capital developed a digital system that integrates insurance and securitization.The process required months of negotiations with SUSEP (Superintendence of Private Insurance), the Federal Revenue Service, the CVM (Securities and Exchange Commission of Brazil), and B3 (Brazilian Stock Exchange), which resulted in a framework capable of supporting the creation of the new model.

Furthermore, the transaction was supported by Madrona Advogados, (legal counsel) and Vórtx (settlement and registration), as well as collaboration between SUSEP, the Federal Revenue Service, and B3.With two Brazilian ILS transactions now issued in 2025, this marks a clear signal that the country’s ILS initiative will continue to gain traction over time.It will be very interesting to watch for future ILS activity from the country in the near future..

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