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• 17 November 2022

SUSEP opens Public Consultation on draft Circular on offer and transfer of risk to reinsurers

On November 8, the Superintendence of Private Insurance (SUSEP) published Public Consultation Notice nº 17/2022/SUSEP, which invites all interested parties to send comments and suggestions within 15 calendar days to the draft Circular in respect of: (i) the preferential offer of risks to local reinsurers (ii) evidence of insufficient supply of capacity by local and foreign reinsurers for purposes of risk transfer with reinsurers not authorized to operate in the country (iii) contracting insurance abroad.

In its explanatory statement, SUSEP mentions the need to modernize and simplify the devices making them compatible with recent regulations of the autarchy and the CNSP in addition to reducing regulatory costs.

In summary, the draft proposes operational procedures for preferential risk offering to local reinsurers:

• Conceptualizes the offer as a pre-emptive right of local reinsurers in accepting an automatic or optional reinsurance contract provided it is accepted under the same conditions as offered or negotiated in the international market
• For preferential offers, the insurer must perform a formal consultation with one or more local reinsurers of its own choice. There must be a contract with one or more of these (in the case of acceptance) provided that the percentage supplied for in the legislation is respected. In case of non-acceptance, the insurer must make offers to other local reinsurers
• Definition of criteria for meeting the requirements of the legislation, namely: contracting the minimum percentage offer by local reinsurers (ii) acceptance, under the same terms and conditions, by other reinsurers when there is a total or partial refusal by all local reinsurers (iii) acceptance by foreign reinsurers of different terms and conditions provided that such conditions have also been offered and refused by local reinsurers

Evidence of insufficient supply of capacity by local and foreign reinsurers to transfer risks to those not authorized to operate in the country

• The risk coverage will be denied after formal consultation with all local and foreign reinsurers operating in the area of risk offered
• Insurers that cede risks in reinsurance and retrocession operations to reinsurers not authorized to operate in the country must notify SUSEP within a maximum period of 30 (thirty) days from the beginning of the contract term

Operational procedures:

• Consultations must also be made available to reinsurers and must contain the terms, conditions and information necessary for risk analysis
• Deadline for acceptance or refusal (in the case of preferential offer) of the offer by reinsurers. This is 5 working days in the case of optional contracts and 10 working days in the case of automatic contracts
• The above deadlines may be suspended in the case of requesting documents provided that it is justifiable and only once in optional contracts, and more than once in automatic contracts. This must run from the first business day following the delivery of the documents. documents and information
• ​​​The absence of a statement by reinsurers within the deadlines described above will be considered as a refusal for the purpose of proving the insufficiency of capacity offer by local and foreign reinsurers, and as a definitive refusal to cover the risk in the case of a preferential offer
• If there is a definitive refusal or no response to the preferential offer, there is no need for a new offer to the same local reinsurer even if under different terms and/or conditions. In other cases, if there is a change in the terms and/or conditions, the insurer must submit a new offer to local reinsurers
• The insurer may include in the preferential offer consultation, quotations from foreign reinsurers that are committed to accepting the conditions offered.

Insurance contracting abroad:

• SUSEP may at any time, request from the insured and/or their intermediary the documents that prove compliance with the contracting of insurance abroad in accordance with current regulations under penalty of incurring penalties
• In the case of risks for which coverage has not been obtained in the country, SUSEP may require the insured to submit (i) a copy of the consultations made to at least 5 Brazilian insurers – or to all parties, if the number available is low (ii) copy of the respective justified denials (iii) copy of the consultation to the foreign insurer in the same terms as was offered to the local ones.
• ​​​​​SUSEP must be informed of the contracting of insurance to cover risks abroad and to cover risks that were not accepted by local insurance companies within 60 days of the beginning of the risk period
• SUSEP will not intervene in disputes related to insurance contracts abroad
  ​​​​​Documents related to the contract must be kept for a minimum period of 5 years, which will be suspended in the event of an administrative process sanctioning SUSEP, legal proceedings or any other causes of interruption of the statute of limitations.

SUSEP proposes the full repeal of the Circulars No. 524/2016, 545/2017, 562/2017 603/2020 in addition to the Electronic Circular Letter CGRES/DIR1/SUSEP nº 1/2020.

Interested parties may submit comments and suggestions to the draft proposed by SUSEP up until 11/22/2022 in the formalities indicated by the regulatory agency

Lefosse’s Insurance, Reinsurance and Private Pensions Team closely monitors the changes that impact the Brazilian Sector. For further clarification on this matter, or others that may be of interest to you, contact our professionals.

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