SUSEP publishes draft circular and resolution on survival coverage in personal insurance plans
On December 9th, the Superintendence of Private Insurance SUSEP published two notices of public consultations, nº 24/2022 and nº 25/2022, on operating rules and complementary criteria regarding survival coverage in personal insurance plans.
The new proposals aim to update and consolidate legislation on the subject as well as address communicability. These changes also aim to expand the market and modernize the products already offered.
The Insurance team at Lefosse compared the drafts with the rules that are intended to be revoked. We have listed the main changes below:
CNSP Resolution Draft – Public Consultation No. 24/2022
- The insured’s contractually provided deferral period will also be seen as a triggering event for the payment of the insured capital. The insured is contracted through adherence to the income offer and commencement date
- Survival coverage will be allowed to be offered separately or together with risk coverage
- An ‘Income Certificate’ will be regarded as a document intended for the beneficiary that can be issued by any means that can be proven, whether physical or remote. This formalizes the granting of income and aspects related to income cycles, types of income, terms and parameters used to calculate the value of income
- ‘Income Offering’ is another new concept. This will be a document issued by physical or remote means in which the insurance company offers a benefit in the form of income
- Resolution No. 348/2017 – ‘Mathematical Provision of Benefits to be Granted’ and the ‘Mathematical Provision of Benefits Granted’ have been given the acronyms of PMBaC and PMBC respectively. The Provision for Financial Surpluses remains as PEF.
Survival Coverage Plans:
- What was previously referred to as Life with Immediate Income (VDR), now becomes Life with Immediate or Deferred Income (VRID). This is a modality where payment of a single premium guarantees the payment of the capital insured in the form of immediate or deferred income.
- The real interest rate limit of 6% (already stated in the previous regulation) does not apply to the term structure provided for in Article 9
- In collective plan contracts established by the employer, it is allowed to establish automatic adhesion clauses for its employees and directors without charge to the participant in the initial period defined in the regulation but should respect the deadlines of the legislation
- The new norm allows the VGBL plan to provide for the transformation of only part of the PMBaC into income. But the objective criteria must be defined in the hiring proposal or in the income offer, or in the case of collective plans, in the adhesion proposal or in the offer of income.
- May be provided for in cases where survivor coverage is offered together with risk coverage
- During operationalization, it is forbidden for financial resources to transit in any form by the insured person or by the legal entity establishing the plan if applicable
- The insurance company will be authorized to redeem FIE shares in an amount corresponding to the one that is being communicated.
Draft Circular – Public Consultation No. 25/2022
Survival Coverage Plans:
- The VGBL plan will be authorized provided that automatic transfer of PMBaC resources between FIEs of the same plan referring to the accumulated value defined at the time of contracting.
- During the period of payment of the insured capital, the reversal of financial results in the form of income is optional in cases where the predicted real interest rate for calculating the contracted income is greater than or equal to 2.50% p.a. This does not include benefits that use the structure of interest rates to calculate the income factor and in this case will not be applied
- The information on the performance fees applied must be identical to that of the FIE(s) linked to the plan and in accordance with CVM regulations
- If the manager decides, Multi-fund plans have the ability to close contributions from a given fund with the aim of making a given investment strategy viable or when the fund has reached its capacity. This is applicable in cases where (i) offers a similar fund in compliance with AMBIMA and CVM criteria (ii) maintains at least 10 funds open for contributions in the multi-fund plan and (iii) that the closure does not make the plan discretionary and remains closed to any type of contribution regardless of the origin
- According to CNSP, the FIEs of non-qualified policyholders must observe the criteria set out in the CVM Instruction for funds that are not intended exclusively for qualified or professional investors.
- Previsions should be made for a combined plan to allow the use of PMBaC resources related to survival coverage to pay for risk coverage
- In joint plans, survivor coverage may be structured in the variable contribution modality
- For risk coverage, the structure of the combined plan may provide for a period to remain in effect even if the premiums have not been paid. In case of default by the insured, the insurance company may make use of communicability for a maximum period of 12 consecutive months, pursuant to art. 52, at the end of which the insured must be notified to regularize his/her situation
- The cost of risk coverage may be carried out automatically
- The institute may only use the balance of the PMBaC portion referring to the sum of the nominal values of the premiums paid by the insured
- The insurance company must provide policyholders with information on how much of the communicability value represents that has been used to fund risk coverage, income tax and IOF when applicable
- For Income Tax purposes, every year companies must state the values of the PMBaC referring to risk coverage and subject to taxation.
Regarding the Term Structure of the Interest Rate (ETTJ):
- Insurance companies will be allowed to indicate in the plan (for the calculation of the income factor) the structure of the interest rate prepared and updated by ANBIMA. If this is not possible, the latest version published should be used
- The actuarial technical note must contain the methodology for calculating the income factor based on the ETTJ and the respective actuarial table
- When offering income, the insurance company must state the percentage to be applied on the ETTJ for the calculation of the income factor. The most up to date version must be used
- Insurance companies will be allowed to define actuarial income calculated based on the ETTJ percentage complying with the conditions and parameters established in the Technical Note of the plan.
Redemption and Portability:
- The grace period for redemption is between 60 days and 60 months (except if redemptions are made to meet scheduled financial payments). A period of 12 to 24 months was established exclusively for conjugated plans
- Insurance company must recognize the triggering event within 15 days, after deliver the basic documents. If there is justifiable doubt regarding the occurrence, other documents may be required, and this will suspend the deadline. If redemption is not due, the company must inform the insured within the same period
- Redemption payment must be made within 2 business days of the redemption quote for the FIEs where the funds were invested. In the case of total redemption, the redemption must consider the values of the PMBaC and PEF balances. For partial redemption, only the balance of the PMBaC, is considered and the percentage stipulated by the insured. This will be composed of installments calculated proportionally to the sum of the nominal value of the premiums paid by the insured and the other resources, observing the amounts established by the insured for purposes of FIE quotas
- Portability must happen up to the 2nd business day prior to the transfer date of the resources. In the case of partial portability, the amount requested by the insured must be added to the portion corresponding to the balance of the PEF. This will be calculated proportionally to the sum of the nominal value of the premiums paid by the insured and other resources for the purpose of redeeming the quotas for FIEs and the respective amounts established by the insured
- The insurance company transferring the resources must carry out the portability within 2 business days after the quotation of the redemption in the investment fund. In multi-fund plans, this is up to the 36th calendar day immediately after the request is filed or on the scheduled date for the portability to take effect.
The Income Offer:
- The insurance company will be allowed to offer income conversion to the participant at any time. Deferred income may be offered provided that the period between the contracting date and the income receipt date does not exceed 4 years
- It is the right of the insured and/or assisted to receive information and support to make appropriate decisions according to their situation. This assistance must be offered in each income offer and at least 90 days before the end of the deferral period or the end of each income cycle
- ETTJ structured income offers will have an equivalent real interest rate which is also referred to as the constant interest rate
- The period of validity for contracting an income conversion offer will be 5 days
- Offers made on the same day will present the same conditions for all policyholders with the exception of individual issues such as age and sex inherent to actuarial income
- The following information will be required for the conversion offer: (i) type of income (ii) income start and end date when applicable (iii) income amount (iv) the amount of the conversion (v) equivalent real interest rate mentioned in art. 43 when applicable (vi) percentage of use of the ETTJ when applicable (vii) the biometric table used (viii) existence or not of reversal of financial surpluses (ix) expiry date of the conversion offer (x) SUSEP process of the plan (xi) ‘For contracting the annuity, other characteristics of the plan and annuity available in the regulation must be taken into account, considering that they may be relevant in the decision-making process.’ (xii) ‘The consumer can choose to contract the income in another company through the portability of resources’ and, (xiii) ‘Portability and redemption institutes, referring to accumulated resources, apply until the moment of contracting the income.’
- The insurance company will be responsible for issuing the Income Certificate and the new Participant Certificate as soon as the offer is accepted.
The Income Cycle:
- The insured may choose to define the number of income cycles, the type of each cycle, the percentage of the total provision that he/she wishes to convert in each cycle and the duration periods when applicable. It is also authorized to change this schedule at any time
- Considering the planning of cycles defined by the insured, the insurance company may make an offer of income and must obligatorily present a new plan at least 90 days before the beginning of the new cycle
- The minimum term of the income must be 5 years
- It is optional for the insured person to contract more than one income for the same cycle
- A new Individual Certificate will be issued at each definition or modification of the income cycle.
- It will be at the discretion of the insurance company to define financial income calculated based on shares or percentage of the PMBC on the ETTJ percentage or for a certain period. The conditions and parameters established in the Technical Note of the plan must be observed
- The balance of the PMBC must be invested in FIE shares. In the event of the beneficiary’s death before the end of the income, this must be made available to the beneficiary for receipt in cash through total redemption or for payment of income depending on the preference of the insured/assisted
- The payment amount will be defined according to the total value of the FIE quota on the date the funds are obtained by the insurance company but must observe the date established in the Income Certificate and have no monetary restatement
- The minimum term for payment of income by offer of income or parameters at the time of hiring will be 5 years.
Hiring and Adhesion Proposal and other Post-Hiring documents:
- Among the information that must be provided to policyholders annually, new item of Art. 77, regarding preserving accumulated capital, also included information that is advisable to reduce the risk of investments – especially the percentages in variable income – in the last 5 years prior to the granting of capital
- It will not be necessary for insurance companies to request prior consent from policyholders for changes related to investment funds in the following cases: (i) provided that the possibility is in the plan’s regulations, replacement of FIE by initiative of the insurance company, (with change of CNPJ and denomination and when the investment policy is preserved), there is no increase in the maximum administration fee and/or the maximum performance fee provided it does not entail any burden to policyholders and, (ii) if the alterations are intended to include the possibility of investing in a new product/asset or carrying out certain operations imposed by the CMN, as long as the classification of the fund according to the criteria of ANBIMA and CVM the investment strategy investment percentages by asset class and allocation percentages based on asset risk is maintained
- It will be the responsibility of the insurance company to provide the applicant, the legal representative or the insurance broker with a protocol identifying the received proposal showing the date and time of receipt
- The insurance company must issue and send the policy and the individual certificate. For the latter, in addition to the other information listed in Art. 93, the income cycle schedule must also be included in case of a new definition or update by the insured
- In the case of a multi-fund plan that foresees the possibility of closing contributions from one of the funds after a decision by the manager, this information must be included in the hiring proposal and in the individual certificate
- In relation to the Income Certificate, the following information must be included: (i) name and CNPJ of the insurance company (ii) denomination and number of the administrative process through which the plan was approved by SUSEP of the plan (iii) identification of the insured and respective registration data (iv) date of offer of income (v) date of contracting the income (vi) income start and end date, when applicable (vii) type of income (viii) the income amount (ix) the conversion amount (x) equivalent real interest rate mentioned in article 43 when applicable (xi) the percentage of use of the ETTJ when applicable (xii) the biometric table used when applicable (xiii) existence or not of reversal of financial surpluses (xiv) note of possible additional benefits linked to income (xv) indication of the chapter of the regulation in which the complete description of the type of income appears
- The plan’s regulation must provide information on (i) communicability (ii) structure of the joint plan, specifically regarding risk coverage (iii) possible reduction of the PMBAC due to the debt related to the cost of the risk coverage(s) (iv) impossibility of canceling any of the coverages separately and (v) the insured’s right to cancel the plan at any time regardless of the grace period referred to in § 6 of art. 22
- In collective contracts instituted by the employer, the latter will be allowed to establish a clause for automatic conversion of its employees and directors, at no cost to the insured at the time of automatic enrollment. The individual certificate, the plan’s regulations and the provision of a communication channel about the plan must be provided. Furthermore, an initial period must be determined for the collection of contributions for the cost of the plan without charge to the employee or director. This period cannot be less than 60 days and no longer than 120 days. The insured person must be notified at least 30 days before the end of the period, that if he/she does not cancel the plan by the end of the initial period, he/she will have to contribute to its cost with the employer’s co-payment up to the deadline for modification of the tax regime.
Interested parties should submit suggestions regarding the drafts by 01/09/2023, and the draft circular should be sent to firstname.lastname@example.org and the draft resolution email@example.com. br, using the chart available on the SUSEP website. Click here to access the site.
Lefosse’s Insurance, Reinsurance and Private Pension practice will continue to follow all the industry news. We are at your disposal for clarification on this subject or and others that may be of interest to you.
Luciana Dias Prado
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