New rules on corporate matters applicable to (re) insurers, capitalization institutions, open pension plan entities and reinsurance brokers

At the end of 2015, the Brazilian Insurance and Reinsurance Regulator SUSEP published CNSP Resolution No. 330/2015, which was detailed in SUSEP Circulars Nos. 526, 527, 528 and 529, all dated (and effective as from) 1 March 2016.

Such rules have changed a lot of provisions related to incorporation, authorisation to operate, change of control, corporate restructuring and appointment, resignation and destitution of directors and officers of insurers, capitalisation institutions, open pension plan entities and local reinsurers ("Local Entities"), representative offices of admitted reinsurers ("RepOffices") and reinsurance brokerage companies (collectively, the "Regulated Entities").

Among the main changes, CNSP Resolution No. 330/2015 introduces new definitions for "control group", "financial conglomerate" and "economic group", which may influence the procedures regarding incorporation and change of control of Local Entities. The definition of 'economic group' could lead to future discussion since it is based on a concept of 'dominant influence' over a group of companies, which is not actually defined by CNSP Resolution No. 330/2015.

Another important change relates to the increase from 5% to 15% of the interest deemed to be a "qualified interest" for purposes of notification to SUSEP by Local Entities. For a shareholder to be considered as a qualified shareholder, she/he/it must hold at least 15% of the Local Entities' corporate capital. This change is very positive since direct and indirect shareholders of Local Entities may increase their corporate interest up to less than 15% without triggering the requirement to notify SUSEP.

With respect to the incorporation, authorisation to operate, change of control and corporate restructuring of Local Entities, the following new provisions shall apply: all shareholders that form part of the economic group as well as those that may, directly or indirectly, influence Local Entities' business must be identified; all investors (and not only controlling shareholders or shareholders having a qualified interest) must identify the origin of the sums invested; SUSEP may require that a shareholders/quotaholders' agreement is entered into so that the controlling group is clearly identified; SUSEP will schedule an interview with future controlling shareholders of new Local Entities; direct holding companies of Local Entities must be headquartered in Brazil; SUSEP may deny authorisation to operate in Brazil to shareholders headquartered in countries in respect of which the Financial Action Task Force on Money Laundering (FATF) recommended measures in view of defects in the prevention of money laundering and terrorist financing (also applicable to admitted reinsurers); and SUSEP may cancel Local Entities' authorization to operate if they are not compliant with their respective business plan.

For foreign reinsurance companies, now attorneys-in-fact are required to provide evidence of prior experience in (re)insurance and the RepOffices must have a permanent representative and deputy.

Rules applicable to reinsurance brokers have undergone significant changes that will further regulate their operations. For instance, now reinsurance brokers must submit a business plan to SUSEP, which was only required in relation to Local Entities. Furthermore, all members of a reinsurance broker's control group as well as qualified shareholders must be identified and evidence of the origin of their financial resources provided. A restrictive provision was also included in CNSP Resolution No. 330/2015 in order to establish certain requirements for an individual or entity to figure as a controlling shareholder/quotaholder of a reinsurance brokerage firm.

Furthermore, new rules modified procedures to appoint directors and officers of Regulated Entities. Under the new rules, the appointment of directors and officers must be previously approved by SUSEP, which shall have up to 60 days to issue an opinion, otherwise the directors and officers shall be deemed accepted and the company may proceed with next steps. Within 60 days after the prior approval is issued, the Regulated Entity must hold the meeting to appoint the directors and officers and she/he may take office immediately afterwards. Regardless of the prior approval, the corporate act appointing directors and officers still needs to be submitted for SUSEP's final homologation before being registered with the trade board, which evidences that an old problem faced by the insurance market (the gap between the appointment and the registration of the act with the trade board) has not been solved by this new regulation. Prior approval shall not be needed if the appointed director/officer occupies or has occupied during the six previous months, functions in Regulated Entities. Even when prior approval is waived, the homologation procedure is required, following the same rationale above.