New rules applicable to the operation of Stop Loss insurance

The Superintendence of Private Insurance (“SUSEP”) published SUSEP Circular No. 670/2022, which provides for the criteria to be observed by insurance companies for the operation of stop loss insurance.

The new Resolution repeals Circular No. 215/2022.

According to the new Circular, “Stop loss” consists of an insurance that aims to ensure operational stability of the Insured in relation to its commitment made to the users by bearing the part of the risk that exceeds the deductible established by contract.

In addition, all insurance companies which are regularly authorized by SUSEP to operate in property damage insurance are qualified to operate in the aforementioned insurance.

The new Circular provides that the risks borne by the insured that are eligible for Stop Loss insurance coverage can be determined, individually or jointly, according to (i) each user; (ii) specific event; or (iii) the entire portfolio of the insured.

In this regard, the insurer can offer coverage for part of the insured’s portfolio. However, such product will depend on prior approval by SUSEP for commercialization.

Regarding insurance contracts, the new Circular contains the following provisions:

• The definition of the covered event must be made clear in the contractual conditions;
• The contract must pre-establish the deductible per insurable risk; and
• The maximum limit of indemnity must be included in the contracting conditions, whose establishment criteria must be provided for in the actuarial technical note of the insurance plan.

Additionally, as established in the previous Circular, the policy must provide a fixed term of validity, and the establishment of automatic renewal is forbidden.

The new Resolution entered into force on August 01, 2022.

Demarest’s Insurance, Reinsurance, Health and Private Pension team is available to provide more information on this and other related topics