SUSEP initiates public consultation on resolution governing Universal Life (UL) Insurance

On December 06, 2024, the Superintendence of Private Insurance (“SUSEP”) launched Public Consultation Notice No. 12/2024, to obtain market contributions aimed at developing a new resolution on the Universal Life Insurance product, which replaces CNSP Resolution No. 344, of December 26, 2016.

The proposed resolution was based on a study carried out in 2023 by the Brazilian National Federation of Life and Private Pension (FenaPrevi), which revealed that Universal Life (UL) Insurance is one of the most prominent products in the life sector in countries such as Mexico and the United States. However, in Brazil, its potential has not yet been fully exploited.

According to the study, the main obstacles to including this product in the national market involve the absence of a specific regulation on the subject and legal uncertainty regarding its tax framework. In the understanding currently applied by the Brazilian Federal Revenue (RFB), any financial gains through the insurance product must be taxed, which makes the product unattractive.

To overcome these obstacles, the resolution proposed by SUSEP seeks to disassociate the Universal Life Insurance from accumulation or investment products, thus facilitating consumers’ understanding. It also allows for a more appropriate tax treatment that can make its implementation and commercialization viable for the supervised entities.

The key changes regarding the current regulation are as follows:

• Exemption from SUSEP’s prior approval for commercializing the product, to the extent that the Universal Life Insurance does not offer survival coverage that would require submission to the entity under the law;
• Review of terminologies, such as the change of “Risk insured capital” and “Accumulation Insured Capital” to “Risk portion” and “Supplementary portion”, to reflect, with greater technical precision and transparency, the characteristics of the product and facilitate its understanding by consumers;
• Reduction of the minimum term from five to four years;
• Exclusion of the current provision preventing extraordinary contributions to provide more flexibility to the insured, in compliance with the limits of each category integrating the Universal Life Insurance; and
• Possibility of the support provision balance being compensated based on the reference index linked to the Interbank Deposit Certificate (CDI), established as a benchmark for assessing profitability.

Interested parties can submit their comments and suggestions by January 06, 2025, through the electronic form available on SUSEP’s website, according to the guidelines in the notice published. In addition, the documents regarding the public consultation are available in full on SUSEP’s webpage.

The key documents included in the notice can be accessed through the following links:

Access Notice 12/2024 in full.

Access the minutes of the resolution in full.

Access the explanatory statement in full.

Access the comparison chart in full.

Demarest’s Insurance, Reinsurance, Health and Private Pension Team is monitoring the developments of the public consultation and remains available to provide any additional clarifications that may be necessary.