On April 10 2017 the National Supplementary Health Agency (ANS) issued Normative Instruction (NI) 54/2017, regulating the free flow of securities and allowing Brazilian health insurers to request an annual prior authorisation in order to negotiate and use their assets as financial guarantees to obtain additional revenue. This measure is vital for the health insurance sector, as the use of financial guarantees for assets may play an important role in companies' fight against the existing political and economic situation in Brazil.

According to the existing regulation, assets that can be used as financial guarantees may include real estate properties and investments in securities held by:

  • the health insurer;
  • the health insurer's controlling shareholder;
  • a legal entity directly or indirectly controlled by the company; or
  • the legal entity's controlling shareholder.

Once assets are presented to and accepted by the ANS, they serve as technical provisions and therefore as financial resources to cover patients' medical expenses. Consequently, approval must be sought from the ANS if securities are to be used differently or moved.

The authorisation established by NI 54/2017 refers solely to securities used as financial guarantees, not to real estate properties. Securities have a higher market liquidity compared with real estate assets, which makes sales negotiations faster and more dynamic, thus requiring a more specific regulation.

Until the issuance of NI 54/2017, health insurers had to request approval from the ANS for every transaction involving the negotiation of securities used as financial guarantees. The timeline for obtaining approval was around two months. This long timeframe could seriously affect the intended transactions because of market fluctuations

With the issuance of NI 54/2017, the ANS changed this scenario. Under NI 54/2017, applying for the annual prior authorisation requires health insurers to:

  • comply with standards of transparency and disclosure in relation to corporate governance;
  • have no operational real properties registered as guaranteed assets with the ANS; and
  • ensure that they are not in a financial situation that could lead the ANS to believe that there is a risk to the continuity of the services that the company provides to its consumers.

Provided that the health insurer complies with all of the requirements, the ANS will authorise the negotiation of the company's assets as financial guarantees for a 12-month period beginning on the date on which the request is approved. The authorisation may also be renewed for another 12-month period, as long as the company continues to comply with all of the requirements.

NI 54/2017 will come into effect on May 11 2017. By the end of 2017, several health insurers are expected to make use of the new annual authorisation in order to increase their financial revenues resulting from securities transactions.

For further information on this topic please contact Elysangela de Oliveira Rabelo at TozziniFreire Advogados by telephone (+55 11 50 86 50 00) or email ([email protected]). The TozziniFreire Advogados website can be accessed at www.tozzinifreire.com.br.