With stock market turbulence and industry consolidation in 2008 have come financial strength ratings downgrades for more than 100 insurers and reinsurers. While such downgrades can result in numerous consequences, one potentially unrecognized consequence is non-compliance with regulatory reporting guidelines in numerous jurisdictions in Latin America and other parts of the world.
In order to obtain regulatory authorization to conduct insurance and reinsurance business in many countries in Latin America and elsewhere, companies must file, among other things, a certified copy of their financial strength rating. In addition, to remain in compliance with registration requirements, many countries require companies to periodically or continuously update such filings to reflect any change in financial strength rating. For those countries requiring continuous updates, such as Honduras, the company is often required to provide an update within three months of the downgrade or face penalties, including potential deregistration.
It is therefore of great importance for companies facing downgrades to review the regulatory requirements of their jurisdictions of registration to ensure that any necessary updates have been properly filed.