New public consultation on the offer and transfer of reinsurance risks and insurance contracting abroad

The Superintendence of Private Insurance (“SUSEP”) opened Notice No. 17/2022 for public consultation, introducing a draft SUSEP Circular about:

• operational procedures for the preferential offer of risks to local reinsurers;
• proof of insufficient capacity supply of local and international reinsurers for the purpose of transferring risks with reinsurers that are not authorized to operate in Brazil; and
• contracting of insurance abroad.

As for the preferential offer and the characterization of insufficient supply of capacity of local and international reinsurers for the transfer of risks to reinsurers that are not authorized to operate in Brazil, the draft introduces the following proposals:

• Preferential offer: the concept of preferential offer remains unaltered, as a preemptive right of local reinsurers regarding the acceptance of an automatic or optional reinsurance contract, provided that it is accepted under the same conditions as it is offered or negotiated in the international market.
• Proof of insufficient supply: the proposal alters the triggering of the deadline for communication to SUSEP, establishing that transferors must communicate SUSEP within a maximum period of 30 days, counted from the contract’s initial date of effectiveness and no longer from the date of acceptance of the risk transfer date – such change aims to clarify the initial term of the deadline.
• Submission of Reinsurance Contract to SUSEP: waiver from the obligation to submit the reinsurance and retrocession contract to SUSEP after the operation is formalized. Custody of the document by the transferor will be sufficient to comply with the regulation.

As for operational procedures, the draft proposes:

• Electronic address (e-mail) for formal consultations: reinsurers are exempted from providing an electronic address to SUSEP in order to receive formal consultations.
• Deadline for acceptance or refusal: maintenance of the deadline for acceptance or refusal (in case of a preferential offer) of the offer by reinsurers: five working days in case of optional contracts and ten working days in case of automatic contracts.
• Tacit refusal: reinsurers’ failure to submit a statement within the regulatory deadlines will be considered as refusal for purposes of proving the insufficiency of capacity supply by local and international reinsurers, and, in case of a preferential offer, as a definitive refusal to cover the risk.
• Clearance of new consultations to the local reinsurer as of the definitive or tacit refusal of the risk: in case of definitive refusal of the risk under any conditions, failure to respond to the preferential offer by a local reinsurer, the transferor is released from the obligation to propose a new offer of the same contract to that reinsurer, either optional or automatic, even upon a change in terms and/or conditions of the risk. In other cases, if there is a change in terms and/or conditions, the transferor must submit a new offer to local reinsurers.
• Consultation including terms of offer with international reinsurers: inclusion of the possibility of the insurer adding to the preferential offer consultation, when any, quotes from international reinsurers who are committed to accept the conditions offered, separately or collectively.

Regarding the contracting of insurance abroad, the draft provides:

• SUSEP Inspection: SUSEP may, at any time, request from the insured and/or its intermediary, documents that prove the good standing of the contracting of insurance abroad, under penalty of application of fines.
• Obligation to keep documents that prove compliance with the requirements for contracting abroad by the insured and intermediary: for risks that are not covered in Brazil, SUSEP may require that the insured and/or its intermediary submit:

(i) a copy of the consultations made to at least five Brazilian insurers;
(ii) a copy of the respective coverage denials, duly justified;
(iii) a copy of the consultation made to the insurer abroad under the same terms as those requested to local insurers; or
(iv) proof that the insurance contracted abroad was subject to an international agreement ratified by the Brazilian National Congress. These documents must be stored for a minimum period of five years by the insured and his intermediary.

• Duty to communicate to SUSEP: the contracting of insurance abroad for coverage of risks abroad and for coverage of risks that were not accepted by local insurers must be informed to SUSEP within 60 days of the risk’s initial date of effectiveness. 

In addition, the draft Circular proposes the repeal of SUSEP Circulars No. 524/2016, 545/2017, 562/2017 and 603/2020 and the Electronic Circular Letter CGRES/Dir1/SUSEP No. 1/2020.

Interested parties can submit comments or suggestions to the text by e-mail to cgres.rj@susep.gov.br, according to the specific standardized table duly filled out, until November 23, 2022.

Demarest’s Insurance, Reinsurance, Health and Private Pension team will follow-up on the public consultation up the publication of its final text, and remains available to provide any further clarifications that may be necessary.