The Ministry of Finance and Public Credit recently issued a ruling interpreting the requirement to establish special funds under the Insurance and Bonding Companies Law. Article 274 of the law requires life, personal accident, medical expense, health, civil and professional liability, maritime and transport, fire, agricultural, automobile, catastrophic and diverse risk insurers to establish special funds, in an attempt to create another layer of security for insureds.
Special funds must be established using contributions collected from insureds in addition to premiums. These additional contributions must be paid into private trusts established with the sole purpose of receiving the contributions and using them to pay insured events within the limits provided by the law.
The Ministry of Finance and Public Credit has clarified that special funds should be established to support compliance with obligations that stem only from insurance (and not reinsurance) contracts.
The National Insurance and Bonding Commission recently issued an amendment to the Sole Insurance and Bonding Regulations implementing the ministry's interpretation. The amendment expressly indicates that contributions made to trusts managing special funds must correspond only to contributions for direct insurance (and not reinsurance).
The clarification will ease some of the sector's financial concerns, as reinsurance-based contributions would have required insureds to contribute twice as much to the special funds.
For further information on this topic please contact Carlos Ramos Miranda at Hogan Lovells BSTL by telephone (+52 55 5091 0000) or email ([email protected]). The Hogan Lovells website can be accessed at www.hoganlovells.com