CNSP Resolution No. 168 Approved in December 2007
As announced in previous editions of Worldwide Compliance, Law 126/07
liberalising the Brazilian reinsurance market was enacted in January 2007. The
enabling reinsurance regulations (ie CNSP Resolution No. 168) were approved in
December 2007, following a comprehensive public hearing process carried out by
SUSEP, and will become effective on 19 April 2008. This means that from 19 April, in order to place reinsurance/retrocession business from Brazilian ceding companies, reinsurers will need to be classified as ‘Local’, ‘Admitted’ or ‘Occasional’2.
Lloyd’s participated in the above-mentioned public consultation process. In addition to sending an official submission to SUSEP in November, which consisted of
detailed comments on various articles of the draft regulations, Lloyd’s also made
oral representations aiming to achieve ‘optimal’ regulations for this market. Lloyd’s
is very pleased with the published rules, particularly with the fact that strongly
rated (‘Admitted’) reinsurers will not be required to provide collateral. Instead of
100% claims reserves, we understand there will be a calibrated collateral
requirement, which will relieve higher-rated reinsurers, such as Lloyd’s. For
example, A- firms and above will not be required to post any collateral at all.
Reinsurers below that will need to post collateral at different levels.
Lloyd’s Strategy: Admitted Reinsurer
Lloyd’s is keen to register as an ‘Admitted’ reinsurer in Brazil. Appropriate action is under way to complete registration as soon as possible – hopefully by 19 April –
which will allow Lloyd’s underwriters to continue to trade without interruption in
Brazil. For this, Lloyd’s will need, amongst other requirements, to appoint a
representative who will be based full-time in Brazil, to establish a (local)
representative office (possibly in Rio de Janeiro or Sao Paulo) and to meet the $5m (local) deposit requirement.
Once the new regulations are effective, cedants will be able to place
reinsurance/retrocession abroad directly or through a locally registered
intermediary. However, please note that coverholders (intermediaries or service
companies) will not be allowed to operate in Brazil, since the concept of ‘binding
authorities’ is not recognised by Brazilian law.
Lloyd’s Visit to Brazil in February 2008
Lloyd’s Chairman, Lord Levene, together with Jose Ribeiro, Director, International
Markets and Business Development, and Sean McGovern, Director and General
Counsel, are visiting Brazil again in February, following their previous visit in
October 2007. The programme will include meetings with insurance executives and government authorities, in order to progress matters related to Lloyd’s registration
as ‘Admitted’ in Brazil.
1Superintendencia de Seguros Privados - ie local insurance regulator
2.Also known as 'Eventual'
