New Decree increases the access of occasional reinsurers to the reinsurance market in Brazil

On 11th December 2019, the Presidency of Brazil issued Decree No. 10,167 (dated 10th December 2019), setting forth that insurance companies and local reinsurers may cede risks to occasional reinsurers, one of the types of foreign reinsurers allowed to operate in Brazil, up to 95% (ninety five per cent) of the total amount of premium ceded in reinsurance by the insurance company / local reinsurer within one year, when taking into account the global amount of transactions carried out by such companies.

This new legislation revoked Decree No. 6,499 (dated 1st July 2008), which had set the threshold of business that could be ceded from insurance company and local reinsurers to occasional reinsurers, corresponding, respectively, to 10% and 50% of the total amount of premium ceded in reinsurance transactions by the insurance company / local reinsurer within one year.

Decree No. 10,167/2019 also provides the discretion for the Brazilian (Re)insurance Authority (“SUSEP”) to increase the threshold of 95% for specific lines of business, if it deems appropriate, and suggests a trend of the current government to open the (re)insurance market.
In this regard, on 7th November 2019, a regulatory bill aiming to amend Resolution CNSP No. 168/2007, the regulation that governs reinsurance and retrocession activities, was also put under consultation by SUSEP, in order to permit open and closed pension fund companies and private health care operators to purchase reinsurance.

In addition, the bill aims to bring flexibility to the market by revoking certain provisions of Resolution CNSP No. 168/2007, such as (a) the requirement for ceding companies to inform SUSEP about transactions carried out with connected companies or pertaining to the same financial conglomerate, (b) the requirement for companies to inform SUSEP about the concentration of reinsurance and retrocession transactions with admitted or occasional reinsurers, according to the percentages set out by the regulation, (c) the requirement for audit committees to draft a report regarding the preferential offer of 40% to local reinsurers, and (d) to completely revoke the Chapter regarding warranties and provisions imposed upon insurance companies and local reinsurers, including premium for expected claims.

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