The Argentinean regulator has published a new resolution which further clarifies the new rules affecting foreign reinsurers effective September 1, 2011. In particular, it complements Resolution 35,615 which was published back in February of this year setting out a new legal framework for reinsurance (see our previous blogs here and here).
Resolution 35,794 sets out two categories for reinsurers wishing to do business in Argentina commencing on September 1: "Local" reinsurers and "Admitted" reinsurers. Local reinsurers may be Argentine companies or local branches or subsidiaries of foreign companies, and require a minimum capital of either AR$20 million (approximately US$5 million) or 16% of net premiums in the previous 12 months (whichever is higher). Local reinsurers may not retain risks totalling more than 10% of their capital, and they must retain at least 15% of total premiums. For these purposes, both capital and premiums will be calculated annually. Local reinsurers may enter into retrocession agreements, but only with other local or admitted reinsurers. Importantly, however, local reinsurers may not cede more than 40% of premiums to any related companies or companies in the same financial group abroad. This limit may be exceeded, on an exceptional basis, if prior approval is obtained from the Insurance Superintendency (SSN).
The alternative category, Admitted reinsurers, is available for foreign reinsurers wishing to write what was termed "exceptional" contracts under Article 19 of Resolution 35,615. These contracts are for risks that cannot be covered by the local market, and authorization is required from the SSN on a case by case basis before entering into such contracts. As a small concession to foreign companies, Resolution 35,794 provides that for risks exceeding US$50 million, this excess amount may be ceded to Admitted reinsurers without the need for prior authorization from the SSN (though the first US$50 million must be placed with Local reinsurers). Admitted reinsurers must be registered with the SSN and have a representative office registered with the local commercial registry.
In response to the new reinsurance resolutions, a coalition of 12 international insurance bodies, including the European Insurance and Reinsurance Federation (CEA) and the American Council on Life Insurance (ACLI), have written to the SSN reiterating their "deep concern" about the new framework.