New Reinsurance Regulations

Some important regulations relating to the reinsurancemarket will take effect on 1st July 2020.

Resolução CNSP Nº 387 waspublished on 9th June 2020, revoking Section 14 and its soleparagraph of Exhibit I of Resolução CNSP Nº 330, dated 9thDecember 2015.

Section 14 of Resolução CNSP Nº 330/15regulated Lloyd’s status and performance in Brazil, which was authorised tocarry out business in the country exclusively as an admitted reinsurer.

Circular SUSEP No. 606 was issued on 22ndJuly to amend two sections of Circular SUSEP No. 527, dated 25thFebruary 2016, that regulates foreign reinsurers in Brazil:

  • Added the 4th paragraph of Section 8 to permit admitted reinsurers to request the conversion of their licenses to become occasional reinsurers (“downgrade of license”).

This new paragraph is welcome within the regulation aspreviously there was no wording in this regard as to this possibility, unlikein the case of an “upgrade” of license (conversion from occasional reinsurer toadmitted reinsurer), which was set forth in the sole paragraph of section 5 ofthe same Circular.

  • Permit the licensing of Lloyd’s as admitted or occasional reinsurer.

Although reference to Lloyd’s has been removed from ResoluçãoCNSP Nº 330/15, Circular SUSEP No. 606/20 added section 14-A to Circular SUSEPNo. 527/16, in order to allow the registration of Lloyd’s as either an admittedor occasional reinsurer. Nevertheless, the idea has been preserved that Lloyd’smembers are considered a single entity and that Lloyd’s should provide SUSEPwith an updated list of its members annually, as well as manage the funds thatwould be used for the purpose of guaranteeing the solvency of its members. Thenew wording of section 14-A maintains the permission for such fund to be usedas the minimum net equity requirement that all foreign reinsurers must observe.

The above-mentioned new regulations allow all foreignreinsurers operating in Brazil as admitted reinsurers to convert their licensesto occasional reinsurer, including Lloyd’s, which has less requirements to beregistered as a reinsurer in Brazil, including no requirement to maintain anaccount with foreign funds in the country to serve as collateral or arepresentative office in Brazil.

The occasional reinsurer status became a moreattractive option since December 2019, when the Decree 10.167 was published,increasing the annual cession limits for occasional reinsurers from 5% to 95%of premiums annually ceded.

Note, however, that such conversion from admittedreinsurer to occasional reinsurer is still not possible for admitted reinsurersheaded in so-called tax haven jurisdictions.

We remain at your disposal for any clarification.