Based on an analysis prepared in 2014 by the Insurance and Reinsurance team of Tauil & Chequer Advogados in association with Mayer Brown LLP offices in New York and London, the Brazilian reinsurance market extended their discussions with the Brazilian insurance regulator (“SUSEP”) regarding the need to clarify certain parameters established by Article 37 of the Resolution No. 168 of the National Council of Private Insurance (“CNSP”), relating to the formalisation of reinsurance transactions in Brazil.
SUSEP’s regulation No. 524 (transcribed below) was published in the Official Gazette on January 21, 2016 and seeks to clarify and make provisions for additional criteria relating to Article 37 of Resolution No. 168 of the Brazilian National Council of Private Insurance.
The possibility of formalizing the reinsurance contract by either electronic means or by means of a physical document is the greatest breakthrough of the new regulation and will provide greater flexibility in completing new reinsurance business in Brazil.
The new regulation also states that the signature of the cedant may be waived for purposes of formal contractual compliance, subject to the rights of the regulatory authority, as well as the cedant and the reinsurer to verify signature of the contract to safeguard their interests.
Even in a conservative way, but with the intention to minimise potential controversies about the mandate of reinsurance brokers, regulation No. 524 clarifies that the acceptance of the terms and conditions of the reinsurance contract by the reinsurance broker does not replace the express agreement by the cedant, as well as establish that the coverage note issued by the reinsurance broker does not override the reinsurance contract.
The new rules are also valid for retrocession contracts and became enforceable on the date of publication of the new regulation.
Text of Article 37
Article 37 of Resolution CNSP Nº 168/2007 and amended by Resolution CNSP nº 203/2009:
Art. 37 – Reinsurance transactions shall be formalized contractually within 270 (two hundred and seventy) days from the start of coverage; otherwise, for all intents and purposes, the cover shall not be considered valid as of the start date.
- The provision in the caput of this article shall not release the cedant from its obligation to furnish SUSEP with documentary evidence of the reinsurance transaction at any time if so required.
- The reinsurer or reinsurers’ acceptance in the reinsurance proposal shall be deemed as proof of the agreed coverage.
- The contract shall include: date of proposal, date of acceptance, date of beginning of coverage, with the place to be referred to as to the time of beginning and end of agreement.
CIRCULAR SUSEP Nº 524, DE 14.01.2016
Clarifies and provides for additional criteria related to article 37 of CNSP Resolution no. 168 of 17 December 2007 and makes other provisions.
The SUPERINTENDENT OF THE PRIVATE INSURANCE SUPERINTENDENCY - SUSEP, pursuant to article 36, subparagraph “b”, decree-law no. 73 of 21 November 1966, article 3, sole paragraph, of Complementary Law no. 126 of 15 January 2007 and article 47 of CNSP Resolution no. 168 of 17 December 2007 and considering the contents of SUSEP Process no. 15414.003312/2014-94, Resolves as follows:
Article 1. To clarify and make provisions for additional criteria related to article 37 of CNSP Resolution no. 168 of 17 December 2007.
Article 2. For the purposes of the header of article 37 of CNSP Resolution no. 168 of 17 December 2007, the signing of the reinsurance contract by the properly identified reinsurer, containing the date and the identification of its representative and signatory will be considered as contractual certainty.
- Reinsurance contract shall be taken to mean a physical or electronic document containing all of the terms, conditions and clauses agreed upon between the cedant and the reinsurer, with respect to the contracted reinsurance, whether automatic or optional, and also containing the minimum of elements required by law.
- The agreement of the cedant with the terms and conditions of the reinsurance contract entered into must be proven to SUSEP if so required by the supervisory agency.
- If the signature of the cedant for the purpose of contractual certainty is waived, this shall not prevent the cedant and/or reinsurer from requiring it if they deem it necessary for their protection.
- A statement of acceptance by the reinsurance broker of the terms and conditions of the contract does not substitute the [requirement for the] express consent of the cedant.
- The cover note issued by the reinsurance broker does not substitute for the reinsurance contract.
Article 3. Amendments of the terms, conditions and/ or existing contractual clauses require the issuance of an endorsement, either physical or electronic, which then becomes an integral part of the original contract.
- Contractual certainty occurs upon the signing of the endorsement by the properly identified reinsurer, containing the date and the identification of its representative and signatory.
- The time frame for contractual certainty of such endorsement will be as established in article 37 of CNSP Resolution no. 168/2007, counting from the beginning of validity of such endorsement.
- The deadline for signing the endorsement is separate from the deadline for signing the original contract and does not replace the latter.
- The consent of the cedant with the terms and conditions of the endorsement referred to in the header of this article must be proved to SUSEP if so required by the supervisory agency.
Article 4. For the purposes of proving contractual certainty, the receipt by the cedant of a scanned copy of the formal contract shall be admissible.
Article 5. The contracts received by electronic means may be stored by the cedant on any electronic or magnetic recording media and hard copies do not need to be kept and stored. Sole paragraph. The [mandatory] period of custody for electronic documents will be for the same period of custody required for printed documents.
Article 6. Until the contract or endorsement is signed within the deadline prescribed by law, the acceptance by the reinsurer or reinsurers of the reinsurance proposal, including that sent by electronic means, shall be proof of the contracted coverage.
Article 7. The provisions of this Circular apply to retrocession contracts.
Article 8. This Circular shall come into force on the date of its publication.
(Official Gazette de 21 Jan. 2016 – pages 18 and 19 Section 1)