Publication of the new CNSP Resolution No. 447/2022 and SUSEP Circular No. 677/2022, which provide for housing insurance

On October 14th, the National Council for Private Insurance (CNSP) published Resolution No. 477/2022 (“Resolution”) which replaced Resolutions No. 205/2009 and No. 212/2010 about the same subject.

As with the previous Resolutions, the CNSP divided the modalities into (i) housing insurance of the housing financial system (SH/SFH), which had a single policy that was in force until the end of 2009, but is being replaced by an equivalent guarantee granted by the compensation fund salary variations (FCVS) and (ii) housing insurance under market policies (SH/AM) – collective or individual – for which private insurance companies are responsible for managing their respective portfolios.

Both modalities aim to guarantee the payment of the outstanding installments of the insured’s debt to finance the acquisition, renovation or construction of a property, in the event of a covered accident, which must include, at the very least, death and permanent disability (MIP) and damage to physical assets of the property (DFI).

The Resolution provides more precise definitions of terms related to SH/SFH and SH/AM, some of which are highlighted below:

• Definition of main work activity as the one in which the insured has the highest income;
• Effective cost of housing insurance (CESH): cost in relation to MIP and DFI risk coverage, for comparability purposes;
• Personal Health Declaration (DPS): document with standardized requirements, which must be completed and signed by the proponent to provide information on their health condition for the purpose of risk acceptance.

It also innovates by predicting which financed properties can be covered by insurance:

• construction and acquisition of residential units;
• renovation of units originally financed, or not, on which there was no provision in the previous regulation;
• property acquired by a legal entity;
• construction and acquisition of commercial units.

Coverage innovations:

• Provision that the insurance may be limited to MIP coverage in the case of financing for the acquisition of land and construction material, expansion or renovation;
• Forecast that the insurance may be limited to DFI coverage in the case of financing to civil construction entrepreneurs until the contracts with promising comparators are signed; and, in the case of awarded property, on behalf of the financial institution.

Regarding the underwriting of Risk:

• Provision that the insurance company may require DPS from the proponent upon contracting once only.

Claim confirmation:

• The medical statement proving the insured’s permanent disability must be issued by a doctor specializing in the area of the disease or injury that causes the disability;
• In the event of disagreements about the cause, nature and extent of the injuries, the deadline for defining when the indemnity will be suspended from the date on which the insurance company proposes the constitution of a medical returning board to be counted from the first subsequent business day from the one in which the report was issued.

Cancellation:

• In the case of SH/AM, this can only be carried out by means of an agreement between (i) the insured, the insurance company and the financed, in the case of individual insurance; and (ii) insured, insurance company and policyholder, in the case of collective insurance and in compliance with the legislation in force as to the percentage of consenting parties.

Communication:

• Direct communication between the parties, the insured and the insurance company (and vice versa) is allowed provided that the stipulator, in collective insurance, or the financier, in individual insurance, is participates promptly.

Insurance replacement:

• In the case of replacement of the insurance in the interest of the insured, there is provision that the new insurance company may require a new DPS from the proponent, unless there is no change of insurer, in which case there can be no new DPS requirement in portability, nor even alteration of the grace periods; and
• The substitute insurance will observe the conditions established by the substitute insurance company. The continuity of grace period, however, will prevail.

Credit assignment or portfolio transfer:

• This is expressly impossible for insurance companies to refuse: in the event of partial or total assignment of credits between financing institutions or portfolio transfer, (i) new DPS cannot be required; (ii) refused policyholders, even if they have any disease, maintaining the original risk restrictions, if any; (iii) the grace period counts were changed;
• The possibility of other changes to the insurance: only if there is a favorable opinion from 75% of the transferred insureds, in the case of collective insurance or of each financed transfer in the case of individual insurance;
• The replaced insurance company must deliver to the replacement insurance company, within 30 days from the start of the new policy, (i) the existing DPS; (ii) information regarding grace periods; (iii) the condition of compliance by the policyholder, in the case of collective insurance, or by the financier, in the case of individual insurance.

Finally, the Resolution provides that insurance plans registered before its validity and which do not comply with its provisions, must be adapted within 180 days of its entry into force (November 1, 2022).

Plans registered after the entry into force of the Resolution must comply with its criteria.

On the same date (10/14/2022), SUSEP also published SUSEP Resolution No. 677 of 2022 on the effective housing cost (CESH), which fully revoked Circular No. 400 of 2010.

In summary, the new resolution presents the same provisions as the previous declaration. Where it differs is in terms of the provision that the CESH must be presented in policies in the case of individual insurance, and in individual certificates, and the collective of SH/AM.

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