On 27 September 2017, SUSEP published Resolution no. 350/2017, providing rules for retrocession accepted by local insurers and their intermediation, amongst other measures.

The Resolution authorises the retrocession between local insurance companies and foreign-based reinsurers not registered before SUSEP. Such operations can also be intermediated by foreign-based reinsurance brokers not registered within SUSEP.

On the other hand, the new Resolution prohibits the retrocession acceptance by open pension plan entities and cooperatives authorised to operate with insurance, as well as by Insurers authorised to work exclusively with micro-insurance or with DPVAT (Compulsory Motor Personal Third-Party Liability).

Other insurers, not included in the aforementioned categories, may enter into retrocession contracts only in lines of business in which they are authorised by SUSEP, and shall comply with the regulatory requirements applicable to reinsurance contracts. Their retrocession shall not exceed the limit of 2% of the premiums issued locally, considering the totality of their operations in each calendar year.

Exceptionally, SUSEP may authorise retrocession by local insurers up to 3% of the premiums issued if one of the technical justifiable reasons provided by the rule is evidenced.

Furthermore, SUSEP defines the term “spiral risks”2, verified by the acceptance of automatic and/or facultative retrocession contracts related to risks already accepted by the retrocessionaire in insurance contracts and/or other retrocession contracts. The Resolution seeks to avoid successive operations by accepting the same risk through different operations, prioritizing the pulverisation of risks in the market.

This article was co-authored by Marcia Cicarelli Barbosa De Oliveira and Laura Pelegrini at Demarest in partnership with DAC Beachcroft LLP.