On November 17 2011 the insurance regulator issued Resolution 36,266/2011, modifying the regime for operating as reinsurance broker in Argentina. The new resolution amends the regime established by Resolution 35,615/2011, which was issued in February 2011 (for further details please see "Insurance regulator enacts new reinsurance framework").
The main points of the new regulation are as follows:
- Reinsurance brokerage may be carried out only through Argentine corporations or branches of foreign corporations. These authorised brokers must have an initial capital of at least AR$1 million (approximately US$235,000).
- Brokers must have an errors and omissions insurance policy with an insured amount equal to US$3 million or 10% of the total value of the premiums in connection with the broker's intermediation activities in the preceding fiscal year. The policy must be issued in favour of the broker and must be valid for the term of the latter's obligations as such. The deductible amount may not exceed US$50,000.
- Brokers may place reinsurance only with reinsurers that are authorised under the current regime.
- Brokers must remit the notes of coverage, signed by all intervening reinsurers, to cedants within 30 days of inception of the reinsurance contract. For non-mandatory reinsurance, brokers may sign the notes if the coverage is for less than US$3 million or if they are authorised to do so on behalf of the reinsurer. This power must be conferred in writing and filed annually with the insurance regulator, together with the annual financial statements. Revocations must be reported to the regulator within 30 days. The coverage note must clearly set out the commission and brokerage costs.
- Brokers must remit the complete signed contract within six months as from the inception of the reinsurance contract. All commissions and costs of intermediation shall be informed in the contract.
- The insurance regulator must notify - or reject - all brokerage commissions that exceed:
- 20% for facultative reinsurance;
- 5% for proportional automatic reinsurance; and
- 15% for non-proportional automatic reinsurance.
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- Coverage notes and contracts must indicate the bank accounts to be used. Separate bank accounts must be used for premiums and claims payments (ie, the trust account), and for commissions (ie, the commission account).
- Among other matters, the broker must notify the regulator within 30 days of the termination of a reinsurance contract(1) or any cut-off agreement;
- Brokers must have an individual file for each reinsurance operation, each containing the following documents bearing the broker's signature:
- the offer or slip;
- dated confirmation of the underwriting issued by the broker;
- a coverage note corresponding to the underwriting, with an indication of the broker's commission; and
- documents evidencing the payment of premiums and other payments.
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- The insurance regulator may cancel a broker's registration for violation of any of the obligations under the resolution. Any such cancellation must be for just cause.
This resolution is consistent with other reinsurance regulations issued since February 2011, which have substantially changed the Argentine reinsurance market.
For further information on this topic please contact Martín Argañaraz Luque at Allende & Brea by telephone (+54 11 4318 9900), fax (+54 11 4318 9999) or email ([email protected]).
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