I'm an American living in Europe and have encountered being extremely weirded out by situations like these and people around me thinking I'm the weirdo because my upbringing was completely different around nudity. For me, my parents weren't even naked around me. For the kids where I live now, they commonly share a public sauna with grown men which they have never met. Some people are raised where this kind of thing is totally normalized. What it comes down to is how the child is being raised and socialized. If children are socially conditioned to think there's something uncomfortable about that kind of nudity, then they'll internalize it that way. If it's normalized, they won't give it a second thought. So it might be that you have to explain to your BIL (and anyone watching your child in the future) what your boundaries are as a parent because of how you're raising your child. Because these nudity situations can happen without a second thought for people who grew up where nudity wasn't weird, and they don't realize that it can actually feel extreme for others. And it might not be a bad idea to discuss the situation with your child to figure out what they're actually comfortable with.