Bermuda-based XL Capital Ltd. stands to increase its share of the growing Brazilian reinsurance market, after receiving regulatory approval to operate as a local reinsurer, incorporated in Brazil and regulated by Brazilian authorities.

In June, XL Re, XL's reinsurance subsidiary, was approved to operate as an admitted reinsurer — a reinsurer incorporated and regulated outside Brazil, but with local representation.

The new local reinsurer, XL Re Brazil, will operate full offices in Rio de Janeiro and in Sao Paulo, according to regional operating officer Carlos Caputo, who will manage all XL Re operations in Brazil.

The law that ended Brazil's 69-year regulated reinsurance monopoly grants local reinsurers right of first-refusal for 100 percent of ceded reinsurance — 60 percent of which must be placed in the local market until 2010. Up to 40 percent of business must be placed in the local market thereafter.

"This approval signals the beginning of XL Re's service to the entire Brazilian insurance market from both admitted and local reinsurance platforms," James Veghte, chief executive of XL Re, said.

"Our two-platform approach speaks to our long-term commitment to the Brazilian market and positions us to be a market leader. We look forward to providing Brazil an array of services and business specialties in a new reinsurance environment."