SUSEP publishes notice of public consultation on insurance brokers, self-regulatory entities and educational institutions

On December 9th, the Superintendency of Private Insurance (SUSEP) published Public Consultation Notice No. 23/2022/SUSEP, which invites all interested parties to send comments and suggestions within 30 (thirty) calendar days of the draft regarding the procedures related to the instruction of SUSEP authorization processes for (i) operation, (ii) start of operations in the country, (iii) exercise of positions in statutory or contractual bodies, (iv) payment of capital and portfolio transfer, (v) conversion of the temporary authorization of companies participating in the Regulatory Sandbox and on (vi) conditions of corporate control structure of supervised bodies, reinsurance brokers, foreign reinsurers and representative offices of admitted reinsurers.

In summary, the draft proposes to complement CNSP Resolution No. 422/2021 with 5 (five) annexes listing the applicable documentation (i) to supervised bodies, (ii) to foreign reinsurers, (iii) to reinsurance, (iv) processes for election, appointment, removal and resignation of directors and (v) regulatory Sandbox processes.

The processes must observe the rules and definitions already provided for in CNSP Resolution No. 422/2021 and must be accompanied by the documents listed in the annexes of the draft circular object of Public Consultation No. 23/2022/SUSEP and forwarded to the Coordination General responsible for licensing at SUSEP or risk canceling the process.

In its statement of reasons, SUSEP justifies the need for a circular to organize, systematize and simplify procedures, deadlines and documentation applicable to processes involving supervised bodies, reinsurance brokers and foreign reinsurers. Currently, provisions on the procedures can be found in different regulations, which makes user execution and understanding difficult.

The draft circular divides the acts into specific areas and is not subject to prior authorization from SUSEP. There are alse two chapters to deal specifically with (i) the acts of election, appointment, removal and resignation and (ii) Regulatory Sandbox.

Rites and deadlines:

• Identification of the processes: At the time of filing, processes must contain identification of the person responsible for conducting them before SUSEP;
• Person in charge: The person in charge must be (i) in supervised companies – the director responsible for relations with SUSEP (ii) in foreign reinsurers – the attorney or representative and (iii) in authorized insurance brokerages – the technician in charge;
• Technical presentation: Prior to filing (i) requests for prior authorization to operate, (ii) requests for prior authorization to change corporate control, (iii) requests for registration of foreign reinsurers, and (iv) requests for authorization for the operation of reinsurance brokers or interested parties must request a technical presentation on the general aspects of the project as provided for in articles 12 and 40 of CNSP Resolution No. 422/2021. This must be carried out by the person responsible for conducting the process in SUSEP whose date and time will be defined by the General Coordinator responsible for licensing;
• A period of 90 (ninety) days for carrying out acts subject to prior authorization. The norms already established in article 4 of CNSP Resolution No. 422/2021 are already ratified in the sense that in acts subject to prior authorization. These are related to (i) requests supervised bodies related to the operation, dissolution or change of corporate purpose, transfer of corporate control, corporate transformation, merger, spin-off or incorporation, capital reduction, exercise of positions in statutory or contractual bodies, portfolio transfer, the change in the geographic area of operation and the request to convert the temporary authorization into a definitive one from the companies participating in the Regulatory Sandbox, and (ii) the exercise of a position in statutory or contractual bodies of the reinsurance brokers and by the representative of the admitted reinsurers, must be carried out within a period of 90 (ninety) days after its authorization;
• A period of 30 (thirty) days for protocols: The corporate acts subject to approval by SUSEP referred to in article 5 of CNSP Resolution No. 422/2021 are (i) the acquisition or expansion of qualifying holdings, capital increase and changes to the supervised bylaws, (ii) the start and end of operations in the country, the inclusion of a new branch or group of insurance in the authorization, the registration update and change of requests for foreign reinsurers, (iii) the operation and the dissolution or change of corporate purpose of reinsurance brokers, (iv) the start and end of operations in the market supervised by SUSEP of registration entities and companies initiating insurance services. (v) The acts listed in the item above or corporate acts subject to communication dealt with in article 6 of CNSP Resolution No. 422/2021 are (i) the change of corporate name, data of the attorney-in-fact and headquarters or country of origin and the merger, spin-off or incorporation of foreign reinsurers, (ii) the resignation or removal of members of statutory or contractual bodies of supervised bodies and reinsurance brokers and the representative of admitted reinsurers, (iii) change in the assignment of functions of the statutory directors of supervised bodies, (iv) the change of corporate name, transfer of control, merger, spin-off or incorporation, acquisition and expansion of qualified holdings, increase or decrease in capital and changes in the bylaws of reinsurance brokers. These must be filed with SUSEP within a period of up to 30 (thirty) days after its realization except in the case of ordinary liquidation when the deadline for submission will be 5 (five) days after its realization;
• Extension of deadlines: It is possible to request an extension of the deadlines provided provided that the requests are duly substantiated and accompanied by documentary support. However, the possibility of requesting a deadline extension does not apply to cases subject to administrative sanctions;
• Updating registration data: It is up to the supervised bodies, foreign reinsurers and reinsurance brokers to keep their registration data updated with SUSEP. This should include the month in which the corporate or contractual act is carried out, informing SUSEP in the form and period established by the specific regulation regardless of the protocol of the corporate act at SUSEP.

Documentation and general procedures:

• Basic instructions for processes: All processes dealt with in the draft circular must be initiated by (i) an application signed by a representative of the entity (ii) list of all the entity’s processes related to the authorization, homologation and communication of corporate acts, which have not yet been concluded at SUSEP and (iii) the list of documents forwarded (checklist), applying such requirements also to applications intended to meet requirements and complement the procedural instruction
• Elaboration of the checklist: The documentation related to the acts of the circular must be instructed individually and its identification must appear in the checklist in the same order that they will be presented in the process
• Signature: Models of applications, declarations and forms, published on the SUSEP website must be signed by the administrators or directors who have representation in the contract or bylaws, or by the attorney or representative in the case of a foreign reinsurer
• Filling in the templates: All fields in the templates must be filled in or risk the penalty of failing the claim
• Foreign documentation: All documentation from another country must be duly certified except for documents from countries with which Brazil has entered into an international agreement. They must be accompanied by a translation into Portuguese when written in another language. This has to be carried out by a sworn public translator in the form of current legislation except for the contrary and express manifestation of SUSEP.

Disciplined acts and procedures applicable to supervised bodies:

• With regard to the supervised bodies, the circular draft regulates the acts of (i) authorization to operate (ii) preparation of a business plan (iii) prior authorization and/or approval of changes in the corporate control structure (iv ) prior authorization and/or approval of spin-off, merger and incorporation (v) prior authorization and/or approval for capital reduction (vi) prior authorization and/or approval for cancellation of operating authorization, and (vii) approval of acts of acquisition or expansion of qualified participation, capital increase and amendment of the bylaws
• Application signed by the entity’s representative: The application must contain the classification of the supervised body in one of the segments dealt with in article 4 of CNSP Resolution No. 388/2020 (S1/S2/S3/S4).

Disciplined acts and procedures applicable to foreign reinsurers:

• With regard to supervised companies, the circular draft regulates the acts of (i) registration, with specific provisions for foreign reinsurers specialized in nuclear risks (ii) request for inclusion of a new branch or group of insurance in the authorization, registration update, change of attorney-in-fact, cancellation of registration (iii) communications of changes to the corporate name, data of the attorney-in-fact, headquarters or country of origin, merger, spin-off, incorporation (iv) registration and/or change of representative office
• Registration update: The need for a registration update does not apply to foreign reinsurers that have been registered in the current fiscal year provided that the documentation presented in the registration process makes reference to the last fiscal year
• Bank statements and release of amounts in foreign currency: The bank statements of the current account in foreign currency (linked to SUSEP) referring to the financial transactions of the last fiscal year must be presented in the periodic registration updates and must contain the letterhead of the banking institution and signature of the manager responsible for the issuance. To release amounts in foreign currency deposited in an account in Brazil, the reinsurer must present documentation that proves that it does not have private passive operations with Brazilian assignors
• Proof of a minimum period of activity of 5 (five) years: In the event of change of domicile of the foreign reinsurer, there must be compliance with item II of article 26 of CNSP Resolution No. 422/2021. This requires the registration of a foreign reinsurer at the beginning of local and international reinsurance underwriting operations in the country of origin for more than 5 (five) years in the branches that it intends to operate in Brazil. This may be considered any period of activity of the reinsurer in a previous headquarters. However, only statements issued by the insurance and reinsurance supervisory body in the country of origin are admitted with objective information about the branches in which the reinsurer has operated in the last 5 (five) years
• Operations of merger, spin-off or incorporation of foreign reinsurers: In cases where the company resulting from the operation is not a previously registered foreign reinsurer, it will be necessary to request a new authorization from SUSEP (which may lead to business discontinuity). In this case, in order to prove the requirement provided for in item II of article 26, of CNSP Resolution No. 422/2021 mentioned above, the effective operating time of the predecessor companies may be considered
• Deadline for submitting registration updates: The deadline for submitting registration updates is 180 (one hundred and eighty) days counted from the end of the fiscal year of each year in the country of origin
• Deadline for communication of information regarding the representative office, Lloyd’s and simultaneous registration of a foreign reinsurer as occasional and admitted: Although there is no provision in this regard in CNSP Resolution No. 422/2021, the provisions set forth in SUSEP Circular No. 527 remained unchanged /2016, regarding (i) the period of 30 (thirty) days for communicating to SUSEP the information regarding the representative office whether it be itself or outsourced (ii) the provisions on registration of Lloyd’s members and (iii) prohibition of simultaneous registration of a reinsurer as occasional and admitted, although it is possible to request a change.

It should be noted that, with regard to the provisions referring to (i) the communication of registration changes of the representative offices and (ii) the need to request a new authorization from SUSEP in the event of a merger, spin-off or incorporation of foreign reinsurers that results in a foreign reinsurer not previously registered, there are a number of considerations.

The first is that despite the circular draft foreseeing the duty to communicate to SUSEP the alterations related to the representative offices, there is no mention in the proposed draft regarding which alterations must be communicated.

It is worth noting that if the need for communication applies to any and all alterations, such a provision is in contradiction with the purpose of CNSP Resolution No. 422/2021 and the circular itself to simplify the procedures it governs.

Regarding the need to communicate to SUSEP in the event of a merger, spin-off or incorporation of foreign reinsurers that results in a foreign reinsurer not previously registered, the proposed draft is again vague as it does not provide for the eventual need for adoption of measures to avoid the discontinuity of business and contracts in force or to be renewed.

Disciplined acts and procedures applicable to reinsurance brokers:

•  With regard to reinsurance brokers, the minutes of circulation regulate the acts of (i) authorization to operate (ii) approval of cancellation of authorization to operate, also considering the change in the corporate purpose that mischaracterizes the activity of reinsurance brokerage and (iii) communications of changes to the corporate name and by-laws, transfer of corporate control, merger, spin-off, incorporation, acquisition or expansion of qualified interest, capital increase or reduction, transformation of legal form
• Social contract: As already provided for in SUSEP Circular No. 528/2016, it remains mandatory to include in the social contract of reinsurance brokers the corporate name, corporate purpose and technical responsible, under the current terms, respectively, of articles 14, 13 and 21, item V, of CNSP Resolution No. 422/2021, excluding, however, the requirement for the existence of a clause establishing that the term of office holders in its statutory or contractual bodies, with the exception of the fiscal council, shall extend to the possession of their successors
• Technical person in charge: Must be an insurance broker qualified to operate in all lines of insurance, and have an active registration with SUSEP
• Professional civil liability insurance: Regarding professional civil liability insurance, the draft provides for the need to present the policy within 30 (thirty) days of contracting or renewing it, under penalty of suspension of the authorization for operation, as well as that the policy is accompanied by the respective proof of payment, not being accepted, for this purpose, contract proposal or quotation.

Technical interview:

The technical interview is applicable to cases subject to prior authorization by SUSEP. The draft circular remained unchanged in the forecasts contained in SUSEP Circular No. 529/2016.

Thus, the members of the control group (i) may be asked about any topic related to the project proposal or the applicant group and (ii) may not be replaced by attorneys-in-fact or representatives except in cases of incorporation of a company to be controlled by legal entity headquartered abroad. In this situation, SUSEP may admit the representation provided that the attorney-in-fact has specific powers and has the necessary knowledge for the technical interview, especially regarding the controlling shareholder, the company’s control group and the holders of qualified participation.

In the event that the project is considered inappropriate, the General Coordinator responsible for licensing will inform the interested parties who may appeal the decision to the competent Board within a period of 30 (thirty) days.

Business plan:

With regard to the business plan contained in the list of documents applicable to supervised bodies (Annex I of the respective draft circular), the requirement to present the plan of the company or supervised entity for a period of 3 (three) years is maintained from its elaboration in SUSEP Circular nº 311/2005. However, the regulations do not provide a fixed period for revising the plan.

However, with regard to the elements of the business plan, the draft proposes the inclusion (i) of the policy regarding data protection (ii) of the initial investment and expected return (iii) of risk identification (iv) ) the deadline for starting activities, after the publication of the authorization for operation (v) the policy of internal controls and risk management (vi) the consultation policy regarding the relationship with the customer, and (vii) of the environmental, social and corporate governance policy.

In addition, the determination remains that financial projections be prepared considering half-yearly intervals with the novelty of including a capital requirement study comparing the capital required to operate, with the adjusted shareholders’ equity.

Election, appointment, removal and resignation of directors:

The circular draft maintains the provision contained in SUSEP Circular nº 234/2003 in the sense that it is up to the supervised bodies to attribute individual responsibility to the administrator by area of their activity.

The director designated as responsible for relations with SUSEP must (i) be responsible for the relationship with the Autarchy, providing (alone or together with other directors), the required information and (ii) supervise administrative and economic-financial activities, including compliance of all corporate legislation and that applicable to the achievement of the respective corporate objectives.

Cumulation with other attributions and functions remains authorized as long as there is no conflict of interest and non-compliance with good governance practices.

However, with the revocation of several regulations on the subject the circular fails to consolidate the list of functions to be assigned to each of the directors, which still remain sparse and arranged in several different regulations.

If there is an election or change in the composition of the board of directors or in the specific functions assigned to the directors, all positions and functions must be ratified in the corporate act maintaining the period of 30 (thirty) days, provided for in SUSEP Circular No. 526/2016. This communication is communicated to SUSEP and such communication must be duly instructed in the manner established in Annex IV of the circular draft.

The same period applies to communications of resignation or removal of occupants of statutory or contractual positions in supervised bodies, reinsurance brokers and representative offices of admitted reinsurers. It also deals with the appointment of a new representative in the event of resignation or removal of a representative from the representation of an admitted reinsurer and instruction of the approval processes for election to exercise positions in statutory and contractual bodies or dismissal. In this sense, the circular resolves the issue of the current short deadline for communicating the resignation.

Regarding consultations with SUSEP, which are submitted to supervised bodies and reinsurance brokers prior to carrying out the corporate act provided for in article 43, paragraph 1 of CNSP Resolution No. 422/2021, the draft circular also establishes the information and documents that must be forwarded to SUSEP including the documents necessary to prove the unblemished reputation and fulfillment of the technical training requirements required by CNSP Resolution No. 422/2021.

Sandbox Regulatory:

The circular establishes the procedures, documents and information that must be submitted to SUSEP for (i) prior authorization requests for conversion of definitive authorization of participants in the experimental regulatory environment (Sandbox regulatory) (ii) approval requests for conversion of temporary authorization of operation in definitive authorization of the participants of the experimental regulatory environment (iii) conversion of the insurance company participating exclusively in the experimental regulatory environment (iv) statutory changes, election of members of statutory bodies, corporate reorganization, increase or reduction of capital of the participants of the Sandbox Regulatory environment.

Procedures related to the instruction of SUSEP authorization processes for operation, start of operations in the country, exercise of positions in statutory or contractual bodies, capital payment, conversion of the temporary authorization of the companies participating in the Sandbox Regulatory, as well as those related to the conditions of the corporate control structure of supervised bodies, reinsurance brokers, foreign reinsurers and representative offices of admitted reinsurers.

Microinsurance:

With regard to microinsurance, the proposed draft states that insurance companies and open supplementary pension entities constituted will be able to operate in microinsurance, applying to micro-insurers the same rules of authorization to operate, derived corporate changes, suspension and cancellation of authorization to operation applicable to other insurance companies.

Maintained rules:

The draft proposes the revocation of the following devices: SUSEP Circular nº 234, of August 28, 2003; SUSEP Circular No. 311, of December 27, 2005; SUSEP Circular No. 439, of June 27, 2012; SUSEP Circular No. 526, of February 25, 2016; SUSEP Circular No. 527, of February 25, 2016; SUSEP Circular No. 528, of February 25, 2016; SUSEP Circular No. 529, of February 25, 2016; SUSEP Circular No. 589, of July 5, 2019; SUSEP Circular No. 606, of June 19, 2020; Circular Letter No. 2/Susep/Dirat/Cgrat, of March 19, 2010; Circular Letter No. 5/Susep/Dirat/Cgrat, of December 15, 2011; Circular Letter No. 6/Susep/Dirat/Cgrat, of December 15, 2011; Circular Letter No. 7/Susep/Dirat/Cgrat, of December 15, 2011; Circular Letter No. 8/Susep/Dirat/Cgrat, of April 10, 2013; Circular Letter No. 9/Susep/Dirat/Cgrat, of March 28, 2014; Circular Letter No. 10/Susep/Dirat/Cgrat, of June 30, 2014; Circular Letter No. 11/Susep/Dirat/Cgrat, of September 25, 2014; Circular Letter No. 1/Susep/Cgrat, of February 29, 2016; and Electronic Circular Letter No. 1/2019/Susep/Technical Board 1/Cgral.

Interested parties should forward their comments and suggestions to the draft by 01/09/2022, by email to cgraj.rj@susep.gov.br, using the specific standardized table, available on the Susep website click here.

Lefosse’s Insurance, Reinsurance and Private Pension practice will continue to follow the news and changes that impact the sector. For further clarification on this subject, or other areas that may be of interest to you, please contact one of our professionals.