On Monday, March 28, 2011, the National Council of Private Insurance (CNSP) published Resolution 232/11 repealing Resolution 224/10. Resolution 232/11 becomes effective today. As previously reported, CNSP had published Resolution 224/10 in December, which provided that insurance risks in Brazil could not be ceded to related companies or companies belonging to the same financial group located abroad.

Although Resolution 224/10 has been repealed, Resolution 232/11 is not a complete withdrawal of Resolution 224/10. Resolution 232/11 instead provides that no more than 20% of the premium applicable to a contract may be ceded by insurance companies and local reinsurers to related companies or companies that belong to the same financial group based abroad. Companies belonging to the same financial group are broadly defined to cover any companies, directly or indirectly, related by 10% or more of equity ownership, or having common control or operating under the same trademark or tradename. The 20% cap does not apply to guarantees, export credits, rural, domestic and nuclear risks. With respect to agreements already executed, the obligation to comply with the 20% cap will apply on renewal or as of March 31, 2012, whichever is earlier.

Note that Resolution 225/10, which was also published in December and provides that local insurance companies will need to cede at least 40% of each reinsurance cession to local reinsurers, instead of merely providing a right of first refusal as before, also becomes effective today.