On April 29, 2013, Brazil’s National Council for Private Insurance ("CNSP") issued Resolution No. 286, which sets forth complementary rules for the establishment of the Brazilian Fund and Guarantee Management Agency ("ABGF"), recently created by article 37 of Law No. 12.712/2012.

Law No. 12.712 was passed by the Brazilian National Congress on August 30, 2012. Among other provisions, the law allows the Federal Government to establish a new state-owned company with the purpose of operating in the insurance and reinsurance sectors, buying out other market participants and providing coverage for risks related to the implementation of large infrastructure projects, especially those related to the Growth Acceleration Program – PAC, the FIFA World Cup in 2014 and the 2016 Olympic Games.

The establishment of a new state-owned company is being criticized by the local market as reflecting a protectionist and statist policy that is likely to interfere with the operation of the private insurance and reinsurance market. The new Resolution is also thought to undermine the positive effects expected from the privatization of the state-owned reinsurer, IRB-Brasil Re, which is likely to take place some time at the start of the second half of 2013.

Brazilian insurance and reinsurance market stakeholders are also concerned with the provisions of Articles 55 and 56 of Law no. 12.712/2012, which permits the regulatory agency ("SUSEP") to allow for greater flexibility in the requirements to be met by ABGF with regards to incorporation and functioning. This provision could authorize public entities to dispense with public bidding procedures when purchasing insurance cover from ABGF, thus creating an undue competitive advantage for the state-owned company over other players in the private market.

However, it should be noted that the issuance of the new Resolution does not necessarily mean that the ABGF will be created or will function in the way announced by the Federal Government, since a strong opposition thereto from the internal market is still expected.