SUSEP opens public consultation regarding circular on Cargo Insurance

The Superintendence of Private Insurance (“SUSEP”) opened a public consultation addressing draft circular letter that establishes the rules and criteria for cargo insurance operations (Notice No. 5/2024/SUSEP) contracted by shippers involved in the domestic transportation of cargo.

The matter had already been subject to a public consultation in November 2022, through Notice no. 19/2022. However, shortly after its publication, Provisional Measure No. 1,153/2022 was published (later converted into Law No. 14,599/2023), which directly impacted the insurance covered by this regulation.

As a result, SUSEP identified the need to adjust the 2022 draft in order to adapt it to the new legal provisions and submitted a new draft for public consultation.

At first, the explanatory memorandum for the public consultation provides the market with an important clarification regarding the mandatory contracting of cargo insurance.

In this regard, SUSEP reported that it had consulted the Federal Attorney’s Office and confirmed that Law No. 14,599/2023 did not rule out, nor is it contrary to, the regulation that includes cargo insurance in the list of mandatory insurance (art. 20, item “h”, of Decree Law No. 73/1966). Article 1 of the draft circular placed for public consultation clarifies that the contracting of cargo insurance is mandatory.

Also, the draft circular does not propose standardized clauses for cargo insurance. It only provides for general guidelines and minimum mandatory elements that must be included in the product, in line with the position that SUSEP has been adopting in order to increase flexibility in contract structuring and in the creation of products by insurers.

Accordingly, SUSEP excluded articles 37 and 38 of the 2022 draft circular, which addressed the binding of contractual conditions to the Institute Cargo Clauses, published by the Institute of London Underwriters, and to the conditions established by the Incoterms, published by the International Chamber of Commerce (ICC).

According to the consultation’s explanatory memorandum, these provisions were excluded at the request of the National Federation of General Insurance (“FENSEG”), so as to enable more liberty in the development of products. In any case, SUSEP has stated that the absence of a provision in the circular does not prevent the optional use of such clauses according to the interests of insurers.

The main points addressed by the draft circular are:

• The existence of other insurance (art. 4): The new provision suggested allows the insured to contract more than one policy on the same asset and against the same risks, as long as the insurers involved are notified in advance of the intention to do so, under penalty of losing the right to compensation and cancellation of the insurance.
• Risks covered (arts. 9 and 10): Cargo insurance will cover at least damage to cargo caused by the risks covered by the ICC-C conditions: Fire, lightning or explosion; stranding, sinking or capsizing of the ship; crashing or collision of the ship; collision, crash and forced landing of an aircraft; discharge of cargo at port of distress; jettison; perils of the sea; general average and salvage costs; costs under the “both-to-blame collision clause”; and shipping costs.

Article 10 of the draft also provides for coverage for all risks of loss or damage to cargo as a result of external causes, except for risks that are expressly excluded, similar to the ICC-A conditions.

• Expenses covered (arts. 11 and 12): (i) Expenses incurred in defending, safeguarding, recovering the insured item and minimizing loss and damage, provided they result from covered risks; and (ii) Ordinary and extraordinary expenses arising directly and exclusively from the customs inspection.
• Coverage for special cargo and operations (art. 13): Specific coverage may be offered for special cargo and operations, for example, for the transportation of cattle, live animals, bulk shipment, bulk oil, among others provided for in the provision, and the contractual conditions must provide for the specific characteristics of the coverage.
• Maximum guarantee limit (arts. 15 and 16): The sum insured must correspond to the amount informed by the insured on the commercial invoice or other appropriate document representing the insured goods. Shipments, journeys or accumulations with a maximum guarantee limit (“LMG”) higher than that indicated in the policy will depend on the prior express agreement of the insurer.
• Deductible (art. 18): The establishment of a deductible is allowed.
• Actual Total Loss (art. 29): The contractual conditions must include a clause classifying the Actual Total Loss as an indemnifiable loss equal to or greater than 75% of the value of the insured item, and establishing how this loss will be calculated.
• Waiver of subrogation (art. 30): The existence of a waiver of subrogation by the insurer, or any other instrument with the same purpose, does not exempt the contracting of legally mandatory insurance.

As for the cargo insurance plans currently on the market, article 35 of the draft establishes a period of 270 days to adapt to the new regulation, counting from the circular’s entry into force.

Finally, the draft proposes the repeal of SUSEP Circulars No. 354/2007; No. 421/2011; No. 422/2011; and No. 586/2019; and Circular Letter No. 2/2015/SUSEP/DIRAT/CGPRO of January 29, 2015.

Interested parties can submit comments or suggestions on the text by April 25, 2024 to cgres.rj@susep.gov.br, by filling out the standardized specific table.

Access the circular draft in full.

Demarest’s Insurance, Reinsurance, Health and Private Pension team is paying close attention to the changes in transport insurance and the practices adopted by the market since the publication of Provisional Measure No. 1,153/2022 and the publication of Law No. 14,599/2023, will continue to monitor the matter until the final text is published, and is available to provide any clarifications.