SUSEP publishes clarifications on clause for non-coverage of losses arising out of corruption acts in surety bonds
SUSEP issued Letter No. 1, dated 15th August 2018 (“Carta Circular Eletrônica SUSEP Nº 001”), addressing several consultations made by obligees, which questioned the compliance of clauses in surety bonds excluding coverage for losses arising out of corruption acts.
SUSEP informed that all matters related to the loss of coverage arising out of corruption acts shall undergo an assessment for any malicious action conducted by the obligee or its representative.
In other words, even if principal breaches any anticorruption rules under the agreement guaranteed by the bond and obligee does not have knowledge or has not participated in such act, surety must remain liable under the bond.
Accordingly, such clause may provide that only malicious actions by the obligee or its representatives and by the principal or its representatives, violating anticorruption rules, are not covered by the surety bond.
In view of the foregoing, sureties that have wording in their policies conflicting with the above understanding must amend the respective clause on the matter within 30 days as from the date of publication of the Electronic Letter No. 1 in order to comply with the terms of such Electronic Letter.
Please note that the above understanding is specific to surety bonds. Other lines of business, such as D&O, which usually have exclusion of coverage to acts connected with corruption are not affected by the above understanding.
You may see the whole provision of Electronic Letter No. 1 on the following link:
Ricardo Ribeiro da Luz Loew