Superintendence of Private Insurance opens public consultation addressing remuneration policy of supervised entities

The Superintendence of Private Insurance (“SUSEP”) opened a public consultation to address Notice No. 002/2024, which brings a resolution draft by the Brazilian Council of Private Insurance (CNSP) that provides for the remuneration policy of insurance companies, open supplementary private pension entities, capitalization companies and local reinsurers.

This resolution seeks to establish a comprehensive remuneration policy that includes managers, partners not under the company’s bylaws, key employees in controlling functions, and others whose activities have an impact on risk exposure. Such policy is expected to improve the supervised entities’ risk management, capital management and internal controls, in line with the company’s contingency plan and existing policies for risk management, compliance, conduct, and sustainability, to secure long-term value generation, as well as hire and retain qualified and experienced professionals.

The resolution draft provides that:

• Variable remuneration must:
  • Be adjusted to the targets of the remuneration policy and to the employee’s level of responsibility, considering the performance of the individual, the unit, and the supervised entity as a whole; and
  • Include risk adjustment mechanisms that effectively address the remuneration’s reduction in proportion to assumed financial and non-financial risks, and to the risk of harmful incidents.
• Employee remuneration must include a long-term incentive plan (“ILP”) when the amount of their annual variable remuneration is equal to or exceeds 6.5 times the amount of their monthly fixed remuneration, or 150 minimum wages.
• ILP will correspond to 40% the total variable remuneration amount, and will increase proportionally to the employee’s responsibility, for a period compatible with the risk time frame of at least 3 years.
• 50% of ILP must be paid in shares or share-linked instruments, which can be owned by the company if it is publicly held.
• The remuneration policy must clearly and expressly provide for:
  • Fixed and variable remuneration modalities including criteria regarding payment, risk adjustment, deferral and vesting;
  • The identification of key employees in controlling roles that can influence the supervised entity’s exposure to risks; and
  • The members and regulations of the remuneration committee.
• The remuneration policy must be approved by the board of directors, published internally and externally (by April 30 of each fiscal year), and reevaluated at least every two years.
• The board of directors or executive board must ensure that the policy is effectively enforced and must ratify the amounts to be paid to employees, including variable remuneration amounts.
• The remuneration committee must be implemented to assist the board of directors in its policy remuneration responsibilities, except for supervised entities classified under segments S2 and S3.
• Supervised entities whose Internal Controls System (SCI, in Portuguese) and Risk Management Structure (EGR, in Portuguese) are unified must have only one remuneration committee and policy, which must be established by the leading supervised entity of the “prudential group”. 

Additionally, the new resolution would repeal provisions of CNSP Resolution No. 416/2021, which prohibit bonuses or financial incentives related to the performance of business units (art. 9, paragraph 4 and art. 10, paragraph 7, item 2 of CNSP Resolution No. 416/2021). In other words, the current wording of the new regulation will authorize this type of incentive.

Access the draft resolution in full.

Contributions can be submitted to corac@susep.gov.br, by April 19, 2024, by filling out a standardized table..

Demarest’s Insurance, Reinsurance, Health and Private Pension team will monitor all developments of the public consultation and remains available to provide further clarifications.