Amendments to rules applicable to financial operations of supervised companies subject to public consultation by SUSEP

The Superintendence of Private Insurance (“SUSEP”) placed Notice No. 21/2022 for public consultation, introducing a CNSP Resolution draft that provides for amendments to CNSP Resolution No. 432/2021.

The purpose of such amendments is to ease the access of the supervised market to new sources of financing, allowing companies and entities supervised by SUSEP to carry out financial operations with related parties, within a reasonable limit.

In this regard, the main changes and determinations brought by the draft resolution were:

i. Expansion of the definition of related parties to supervised companies, to include:

• • its controllers or controlling associates, whether individuals or legal entities;
  • its administrators and members of collegiate bodies, as provided for in its Articles of Association or by-laws;
  • the spouse, companion and relatives, both by blood or affinity, up to the second degree of kinship, of individuals mentioned in items (i) and (ii); and
  • individuals or legal entities with qualified shareholding in the capital or owner’s equity of the supervised company.

ii. Permission for supervised companies to hold, in their “free portfolio,” shares of investment funds not classified as restricted or exclusive, and whose portfolios contain securities of the supervised company itself and related parties. This provision is also applicable in regard to resources required in Brazil to guarantee the admitted reinsurer’s obligations

iii. Prohibition regarding Open Supplementary Pension Entities (“EAPC”) contracting service provisions with related parties, according to the prohibition already provided for in article 71 of Complementary Law No. 109/2001.

iv. Permission for supervised companies (except EAPC) to contract loans and financing with related parties that are financial institutions authorized by the Central Bank of Brazil

v.  Permission for supervised companies to raise funds through the issuance of debt instruments, by means of public offering, which enables related parties to be part of the target public of the offering, but only if such related parties are supervised by SUSEP.

vi. Inclusion of a provision to consider any operation as carried out with a related party, provided that it characterizes: indirect business, simulated or upon intermediation of a third party – with the purpose of carrying out an operation not compatible with the conditions practiced in the market.

vii. Requirement that certain contracts entered into by supervised companies with related parties contain a clause that enables SUSEP to determine that the supervised company unilaterally suspend or terminate such contract, without the application of a fine.

viii. Operations with related parties must be approved and monitored by the Board of Directors and Executive Board.

ix. Supervised companies must establish a policy for carrying out operations with related parties, establishing guidelines, procedures and measures to be followed. Such policy must be approved by the Board of Directors or Decision-Making Board, if any, or by a General Shareholders’ Meeting with personal administrative accountability to the management members for any losses suffered by supervised companies.

The full Resolution Draft can be accessed here.

Interested parties can submit comments or suggestions to the text by e-mail to corac@susep.gov.br, using the specific standardized table duly filled out by January 09, 2023.

Demarest’s Insurance, Reinsurance, Health and Private Pension team will monitor the developments of this public consultation and is available to provide any further clarifications that may be necessary.