Brazil’s insurance regulator, the Superintendency of Private Insurance (SUSEP), recently issued a circular imposing stricter vetting requirements upon Brazilian companies before they may purchase insurance from foreign insurers. In particular, Circular No. 126 increases from 3 to 10 the number of domestic insurers from which Brazilian companies must obtain declinations before they may purchase coverage from a foreign insurer. The provisions of the circular are not immediately effective, but will likely come into force in January 2009.
In the event of failure to comply with the vetting requirement, the Brazilian company would be subject to penalties to be outlined in a subsequent SUSEP circular. Penalties provided for under comparable provisions indicate that punishment might include fines as high as the full amount of the foreign coverage purchased.
Although the circular, and the other existing vetting requirements, apply only to “Brazilian companies,” some uncertainty still remains as to whether that term is understood by SUSEP to include local subsidiaries of multinational corporations.