CNSP Resolution No. 440/2022: New Criteria on the Updating and Recalculation of Amounts Related to Insurance, Open Supplementary Private Pension and Capitalization Operations

The Superintendence of Private Insurance (“SUSEP”) published CNSP Resolution No. 440/2022, which provides for the criteria on the updating and recalculation of amounts related to insurance, open supplementary private pension, and capitalization operations.

The new Resolution repeals CNSP Resolution No. 103/2004 and entered into force on August 01, 2022.

According to the new Resolution, the amounts corresponding to the obligations arising from insurance, open supplementary private pension and capitalization operations, are subject to updating as of the date they become enforceable. In the event that the deadline for compliance with such obligation is not met, these amounts are subject to the application of interest for late payment and, if provided for in the contract, a penalty.

Personal liability insurances and supplementary private pension plans structured in the benefit modality must observe the following rules:

• Defined Benefit Modality
• Provision of an annual update for amounts, based on an agreed index, in compliance with SUSEP’s specific regulations.
• For contracts that are valid for one year or less, the updating of the contracted amounts based on price indexes during the period that precedes the concession of the insured capital or benefit is forbidden, except when, due to renewals, the contracting period exceeds one year.
• The insured amounts, premiums, benefits, and contributions will be updated on the contracting anniversary date. Contracted parties have the option to establish another base date, provided that the contractually provided amounts are updated until the previous base date and, from then on, the annual periodicity is respected.
• In case of plans structured under the financial system, in the period prior to the granting of the insured capital or benefit, the adoption of a clause for recalculating the insured capital or benefit according to objective factors provided for in the contract is permitted.
• In cases of insurance with survivorship coverage, the annual updating clause must take into consideration the difference in periodicity between the monetary updating of premiums/contributions and capital insured/benefits and the Mathematical Provision of Benefits to be Granted (“PMBaC”) defined in the plan’s technical actuarial note.
• Variable Contribution Modality
• The adoption of an annual updating clause for premiums and contributions is allowed, based on an agreed index, and in compliance with the specific regulation issued by SUSEP.
• Common Provisions
• The mathematical provisions defined in the plan’s technical actuarial note must be monthly updated, based on the index agreed upon in the contract.

The insured capital and benefits paid as income will be, from the date they are granted, updated annually and increased by the amount resulting from the difference generated between the monthly updating of the Mathematical Provision of Benefits Granted and the annual updating applied to income, according to the methodology defined in the plan’s technical actuarial note. Alternatively, and as long as there is express provision, the amount resulting from such difference may be calculated and paid once a year, with no increase in the amount of the monthly income.

• Admission of new participants in open private pension plans that provide for an update clause in disagreement with the provisions of the new Resolution is prohibited.

As for damage insurance, the rules are as follows:

• The updating of amounts will be made based on the index and periodicity contained in the proposal, in the contractual conditions, and in the technical actuarial note, observing the specific regulation issued by SUSEP.
• In insurance agreements whose covered risks are linked to a main purpose, (i) the index and periodicity for updating the policy amounts, when applicable, must be the same defined in the main purpose or in its specific legislation, if any; and (ii) there must be a clause for mandatory change of the guarantee limit due to changes previously stipulated in the main purpose (if there is a need to recalculate the premium, the criteria must be justified in the actuarial technical note).

Regarding the capitalization operations, there are the followings provisions:

• The updating of amounts will be based on an agreed index, observing the specific regulations of SUSEP.
• The updating of payment amounts, when provided, must be carried out annually by the index agreed in the general conditions of the capitalization bond.
• The inclusion of a clause for updating amounts of contributions, when paid in the form of periodic or monthly payments, in capitalization bonds with a payment period equal to or less than one year, is prohibited.
• The mathematical provision for capitalization defined in the plan’s actuarial technical note must be updated monthly, based on the agreed index.

Finally, the new Resolution provides that, in insurance contracts issued in foreign currency, it is possible to update amounts based on an agreed index, except for pecuniary obligations, whose updating must comply with specific regulations.
A noteworthy inclusion is that the plans and contracts signed before the new Resolution comes into force must be adapted to the new rules within 180 days after its entry into force.

Demarest’s Insurance, Reinsurance, Private Pension and Health team is available to provide any further clarifications that may be necessary.