Bermuda-based Flagstone Reinsurance Holdings Ltd. sees real opportunities for growth in the reinsurance market in Brazil.

The company opened a representative office in Brazil this year and will be able to access the South American country's reinsurance market through the Lloyd's office in Rio de Janeiro. Flagstone owns Lloyd's-based Marlborough Underwriting Agency.

Last year, the 69-year monopoly of the state-run reinsurer was broken, as the market was opened up in the rapidly growing country. Flagstone joined a host of Bermuda companies, including XL Capital, Everest Re and PartnerRe, who have positioned themselves to claim market share.

In a conference call with analysts to discuss second-quarter results, Flagstone executive chairman Mark Byrne said he was excited by the prospects.

"Acquiring even a one or two percent market share in Brazil could meaningfully impact premiums at Flagstone in the next one or two years," Mr. Byrne said. "Understandably, we are enthusiastic about the opportunity this move affords."

He added: "We view Brazil as an important opportunity for growth as it offers many of the features that are attractive to Flagstone. A rapidly growing economy in middle class and very modest insurance penetration on the order of 1.5 percent.

"As clearly illustrated through the previous acquisitions we've made, our model growth strategies stick to operating in places where we have a distinct competitive advantage and where the prospects for organic growth are high.

"We prefer this to trying to achieve high growth in a saturated market which generally allows growth only for those willing to cut price. With our presence in Brazil, we've just opened up a $44 billion primary market that's growing 20 percent a year, as well as a $5 billion or $6 billion reinsurance market also growing at 20 percent a year."

Last month, Flagstone lost out to Bermuda rival Validus Holdings in a bidding war for IPC Holdings. Had it been successful, the merger would have propelled Flagstone into the ranks of reinsurers with $3 billion-plus in capital — a level that some analysts and executives have suggested is necessary for reinsurers looking to be meaningful players in the global market.

Mr. Byrne said the $3 billion figure was "a completely artificial number" and that Flagstone had enjoyed substantial growth in business as a much smaller company.

"My guess is whoever said that is somebody who's got $3 billion, and when they have four, they'll say it has to be four," Mr. Byrne said.

"So I think it's mostly a nonsense that $1 billion company is not a meaningful player in this marketplace and we have heard that comment, but we don't ascribe much to it."

He added that Flagstone had grown revenues by 91 percent between 2006 and 2007, and by more than a third in each of the following two years. "That doesn't seem to be the growth pattern of a company that's having trouble getting clients to accept their name," he added.

"We see at least Flagstone as a $1.5 billion kind of company as absolutely completely viable."

The attraction of IPC had been to give Flagstone a "larger footprint", Mr. Byrne added, boosting its capital base to maximise the opportunities afforded by its expanding global platform.

Flagstone said last week that its second-quarter profits increased to $67.8 million from $41.9 million in the same period in 2008. Gross premiums written also rose 21.2 percent to $328.7 million from $271.2 million.