Brazil is the fifth most densely populated country in the world2 and among the biggest in terms of territory. These facts speak for themselves, making Brazil one of the most promising insurance markets globally, especially given the percentage of the national gross domestic product (GDP) accounted for by the Brazilian insurance market (close to 4 per cent, according to recent surveys conducted by the Brazilian Private Insurance Authority (SUSEP)).3

Hence, there is plenty of room for growth when compared to other markets. In addition to the above, new legislation enacted by the National Congress, such as the Brazilian Data Protection Law (BDPL),4 the Brazilian Code of Civil Procedure of 2015 (the Code of Civil Procedure),5 Bill of Law No. 29/2017 (designated the New Brazilian Insurance Law by market experts and scholars) and Provisional Measure No. 881/2019, certainly anticipate significant changes in the manner in which local and foreign accredited players in the Brazilian insurance market do business.


i Sources of insurance law and regulation

Unlike some other countries in Latin America, Brazil has a highly regulated insurance sector. Basic insurance legislation is composed of several laws, as well as regulations enacted by the following federal authorities: the National Council of Private Insurance (CNSP) and SUSEP.

Decree-Law No. 73/1966, known as the Brazilian Insurance Law, created the Brazilian Private Insurance System (SNSP), which is formed by CNSP, SUSEP, accredited reinsurance and insurance companies, open private pension entities and capitalisation entities, as well as insurance and reinsurance brokers. Open private pension entities are subject to the provisions of Supplementary Law No. 109/2001, whereas capitalisation entities are governed by Decree-Law No. 261/1967.

The SNSP is composed of two governmental authorities, both of which are part of the Ministry of Finance. While CNSP has the authority to set out the general guidelines and rules of the Brazilian local insurance and reinsurance market, SUSEP has oversight over the activities of all players in this market, monitoring their respective businesses and, when applicable, giving prior approval to certain transactions involving regulated entities.

Reinsurers are classified into: (1) local (headquartered in Brazil), such as IRB Brasil Resseguros SA (IRB); (2) admitted (headquartered abroad but with a representative office in Brazil); and (3) occasional (headquartered abroad, without any representative office in Brazil). Insurance companies must be duly authorised to operate by SUSEP.

Insurance and reinsurance brokers must be duly enrolled as such with SUSEP before intermediating the sale of any insurance policy or conducting the intermediation of reinsurance treaties or contracts. In addition, reinsurance brokers’ corporate purpose must be exclusive, meaning that they cannot conduct any activity other than acting as a reinsurance broker.

It is also worth stressing the following laws, which – in one way or another – either apply directly to the entities that are part of the SNSP or otherwise have an impact on them:

  1. Supplementary Law No. 126/2007, which dismantled the IRB’s monopoly in the reinsurance market, sets out the ground rules that must be met by each type of reinsurer (as previously explained), and rules for residents in Brazil and companies headquartered in the country taking out insurance abroad.
  2. the Brazilian Civil Code (BCC),6 which dedicates an entire chapter to insurance contracts and the main principles that regulate the insured–insurer relationship;
  3. the Brazilian Consumer Protection Code,7 since the insured is considered a ‘consumer’ for legal purposes;
  4. The Code of Civil Procedure, which attempts to make litigation less time-consuming by developing and enhancing the rules related to alternative dispute resolution mechanisms (especially arbitration and mediation), rendering former court decisions by the superior courts binding and making a decision in a single case the model or precedent for other similar cases. Its rules are starting to be tested now, since it only became effective in March 2016.
  5. The BDPL, which regulates the commercial use of personal data by legal entities, adopting similar regulatory standards to those set by the European General Data Protection Regulation. In July 2019, the National Congress enacted an amendment to the BDPL to create the National Data Protection Authority, in charge of supervising and regulating the enforcement of the terms and conditions of the BDPL. The Authority will have powers to, among others, (1) request information regarding the processing of personal data by companies; (2) receive and process data breach notifications; and (3) impose administrative penalties for violations of the BDPL. Penalties or fines arising from breaches to the BDPL might reach 50 million Brazilian reais per violation.
  6. Bill of Law No. 29/2017, which sets out a whole new legal framework for SNSP players, triggering the need for new legislation to be enacted by the CNSP and SUSEP. Scrutiny of this bill by the National Congress continues during this year. (See Section V.iii.)
  7. Provisional Measure No. 881/2019, which significantly reduces bureaucracy for setting up businesses in Brazil, as well as state interference in this process. Experts understand that, whenever this provisional measure is converted into law, the relationship between market players and regulators and governmental authorities will change dramatically, improving the environment for doing business in Brazil. (See Section V.iv.)
  8. Bill of Law No. 1292/1995, which changes public procurement in Brazil and directly affects performance bonds in public works. (See Section V.v.)

ii Insurable risk

Section 757 of the BCC defines insurable risk as the legitimate interest of the insured in protecting a given asset, object or right against predetermined risks.

The legitimate interest must: (1) be licit, since the BCC prohibits any transaction concerning illicit purposes (including, but not limited to, agreements of any nature);8 (2) be economic, since a given value must be attributed to the object of the insurance coverage by the person retaining insurance, either limited to the sum of the value of the insured object, asset or right (when dealing with non-life insurance), or freely established pursuant to the will of the insured (when dealing with life insurance);9 and (3) precede the contract and remain effective throughout its term of effectiveness.10

As a result of the requirements pending over the legitimate interest, illicit activities are not insurable and, as such, wilful misconduct or unlawful enrichment are standard excluded risks to all life and non-life products (BCC, Section 762). Regarding liability insurance, there is no concept of punitive damages in Brazil, since the BCC limits compensation in tort to the extent of actual damages inflicted on the victim (BCC, Section 944).

In terms of the regulation of insurable risk, in spite of legislation prohibiting coverage for illicit purposes, SUSEP allows coverage of civil and administrative sanctions in directors and officers (D&O) insurance (SUSEP Circular No. 553/2017). The term ‘civil and administrative sanctions’ means any penalty except for those arising from criminal offences (such as imprisonment). In this type of insurance, there is no restriction on anticipating defence costs, given that litigation in criminal cases is common and widely used. SUSEP has also stated that coverage for ransoms does not breach applicable law, as long as the insurance product has previously been approved by SUSEP (pursuant to SUSEP DETEC Letter No. 07/2008).

iii Fora and dispute resolution mechanisms

Insurance disputes in Brazil are heard before ordinary courts of the judiciary system or arbitration courts.

The judiciary system is divided into specialised courts and ordinary courts. Specialised courts include military, electoral and labour courts, while ordinary courts have jurisdiction to adjudicate all other issues. Since specialised courts do not exist for insurance matters, ordinary courts have jurisdiction over insurance disputes.

The ordinary courts are subdivided into federal and state courts. The jurisdiction to hear insurance disputes depends on the parties involved: federal courts have jurisdiction to hear cases involving the government and government-controlled corporations, and state courts adjudicate cases that do not fall within the jurisdiction of federal courts.

It is important to consider that both federal and state courts have two levels: (1) trial, where cases are filed and ruled by a single judge; and (2) appellate, where appeals are taken by panels usually comprising up to three justices, who are free to assess matters of fact and law.

Trial judges take office after passing a public examination. Justices are appointed to appellate courts based on criteria such as merit and length of service. One-fifth of appellate court seats are mandatorily fulfilled by members of the public prosecutor’s office and practising attorneys.

There are 27 state appellate courts (one for each state and the federal district) and five federal appellate courts in Brazil. Appeals against appellate court decisions may be filed with the Superior Court of Justice or the Federal Supreme Court, or both. If an appellate court decision arguably violates the federal law or the Federal Constitution, it may be challenged by appeals filed before the Superior Court of Justice or the Supreme Court.

The Superior Court of Justice is restricted to evaluating matters of law and it rules appeals against appellate court decisions that have arguably violated federal law or have given federal law an interpretation that differs from that handed down by another appellate court.

The Superior Court of Justice comprises 33 justices who are appointed by the President upon approval by the Senate, observing the following rules: (1) one-third of the justices must come from federal appellate courts; (2) one-third of the justices must come from state appellate courts; and (3) one-third of the justices must be private practitioners or public prosecutors.

The Supreme Court rules appeals against appellate court decisions that have arguably violated the Federal Constitution and to be given leave to appeal the appellant is required to provide evidence that the constitutional issues addressed in the appeal would have widespread repercussions.

The Supreme Court comprises 11 justices appointed by the President upon approval by the Senate.

It should be noted that Brazilian civil courts do not hold jury trials, as juries are only permitted in specific criminal proceedings, so insurance disputes are not subject to juries. Insurance disputes may be also subject to arbitration procedures, as they involve rights that can be the object of a transaction (see Section 1 of the Brazilian Arbitration Law).

The Brazilian Arbitration Law was inspired by the UNCITRAL Model Law, adopting a regime favourable to arbitration and following international standards, such as the separability of the arbitration agreement, the Kompetenz-Kompetenz principle and the impossibility of reviewing the arbitral award on the merits. Also, Brazilian courts have been very supportive to arbitration, offering a safe and favourable environment to its adoption. Domestic arbitral awards are considered final and binding on the parties and do not require recognition or confirmation by a court to be immediately enforced by the parties.

The annulment of domestic awards may be sought under very limited circumstances, within 90 days of the receipt of an award or a decision clarifying the award. Among the reasons for annulment or setting aside an arbitral award, we highlight the following:

  1. the arbitration agreement is null and void;
  2. the award was rendered by a biased arbitrator;
  3. the award exceeds the limits of the arbitration agreement;
  4. the award was rendered under nonfeasance, extortion or corruption;
  5. the award was rendered after the time limit; and
  6. due process was not observed during the arbitral proceedings.

Therefore, arbitration has been increasingly adopted in Brazil as a dispute resolution method compatible with insurance disputes.

Besides the judicial claims, there are administrative insurance disputes pending before regulatory agencies, such as SUSEP, the Consumer Protection Office (PROCON) and the National Supplementary Health Agency (ANS), which is the regulatory agency for private health insurance and private health plans. These agencies are responsible for reviewing administrative procedures concerning breaches of their respective regulations by insurers, reinsurers and brokers, triggering the imposition of penalties and other sanctions, as the case may be.


One of the most relevant recent insurance disputes in Brazil involves (1) the attachment of the shares of a major airline company to guarantee the reimbursement of a hefty indemnification, and (2) the debate about the subrogation of the insurer to the arbitration clause in the insured’s contract.

A performance bond was issued to insure the losses arising from the failure of a company in complying with its obligations under shipbuilding contracts. After the payment of the indemnification, the insurers filed a collection lawsuit with the State Court of São Paulo against the principal and guarantors, who are the shareholders of a famous airline company.

Owing to the proof of commingling of assets and misuse of legal entities, the State Court of São Paulo granted a request to pierce the guarantors’ corporate veil and for the provisional attachment of their respective assets to ensure the reimbursement of the indemnification. As a result, around 200 million shares of the famous airline were attached.

In response to the attachment, the guarantors argued that the State Court of São Paulo lacked jurisdiction to adjudicate the dispute between the insurers, principals and guarantors owing to the parties’ subrogation in the arbitration clause, established only in the secured contracts entered into between the policyholder and the insured.

According to the guarantors, the insurers were subrogated to all obligations provided in the agreement entered into by the insured. As a result, the insurers would be obligated to comply with all clauses established in the contracts between the policyholder and the insured, including the arbitration clause.

Furthermore, in order to defend this argument, the guarantors brought an action before the State Court of Rio de Janeiro requesting a provisional injunction to revoke the attachment order granted by the State Court of São Paulo, based on the latter’s lack of jurisdiction. Subsequently, the guarantors filed a statement of claim requiring the commencement of arbitration based on the arbitration clause established solely in the secured contracts between the policyholder and the insured.

The injunction was granted by the State Court of Rio de Janeiro and, subsequently, the guarantors raised a conflict-of-jurisdiction lawsuit before the Superior Court of Justice. However, in a preliminary decision, the Superior Court of Justice recognised that the insurers were not subject to the arbitration clause and, therefore, the State Court of São Paulo maintained jurisdiction to decide the case. Although a final and binding decision has not yet been issued, the state courts and the judge-rapporteur for the proceedings have issued statements recognising that under Section 786 of the Brazilian Civil Code the insurer’s subrogation is limited to the right of reimbursement and is not subject to procedural issues such as the arbitration clause or the forum-selection clause of the agreements entered into by and between the parties. Therefore, unless there is a specific provision in the insurance bond subjecting the principal policyholder, guarantors and insurers to arbitration, conflicts between the parties must be ruled on by the judiciary system.

In addition, the State Court of Rio de Janeiro granted an interlocutory appeal filed by the insurers, overcoming the injunction that had been granted and dismissing the argument that the State Court of Rio de Janeiro had jurisdiction. In turn, the arbitral court dismissed the guarantors’ claim for lack of jurisdiction, meaning that the judiciary system has the jurisdiction to decide the case.

Although there has been no final decision by the Superior Court of Justice on the conflict of jurisdiction, all the courts involved have already decided that the insurers are not subject to the arbitration clause.

Another recent relevant dispute involves the discussion concerning judicial bonds and judicial reorganisation. Judicial bonds were issued on behalf of one of the largest telecommunication operators in Brazil to insure the payment of labour and civil debts collected in court. In the course of these lawsuits, the policyholder filed for a judicial reorganisation before a bankruptcy court and, under the Brazilian Bankruptcy Law,11 the enforcement procedures against the telecommunication company for collection of the debts were immediately stayed for 180 days (tax credits are not subject to these procedures).

Furthermore, the bankruptcy court issued an order suspending any payment under the judicial bonds presented in labour and civil lawsuits, as the credits would be paid according to the company’s reorganisation plan. However, the bankruptcy court decision was not taken into consideration and the courts in charge of the enforcement procedures determined that payment of the indemnities was in order.

Because of the conflicting decisions, the insurer filed for proceedings before the Superior Court of Justice to decide the conflict of jurisdiction between the labour and civil courts, and the bankruptcy court. The Supreme Court of Justice has not decided the conflict of jurisdiction yet, but the judge-rapporteur for the proceedings granted a preliminary order recognising the bankruptcy court’s jurisdiction to decide on the payment of the bonds until a final decision is rendered.

The issues under discussion may be summarised as follows: (1) after the approval of the reorganisation plan the debts are novated and the judicial bonds cannot be enforced, as the creditors must be paid under the reorganisation plan terms; and (2) the judicial bonds are a distinct payment obligation and are not subject to the novation effects, and as a result they cannot be enforced and must be terminated.

The judge-rapporteur ratified the preliminary injunction and no further appeal was filed. Therefore, this decision has become res judicata. Despite the fact that there are still two jurisdiction conflict lawsuits to be decided by the Superior Court of Justice, which can be analysed by the judge-rapporteur or a panel of justices, it is unlikely that a different outcome could be expected.


Two main issues stand out in the international arena: (1) the application of foreign law to insurance disputes in Brazil and (2) the enforcement of foreign arbitral awards in Brazil.

i Application of foreign law to insurance disputes in Brazil

First, it is worth stressing that Brazilian insurance law and regulation have a very paternalistic approach when it comes to the possibility of residents in Brazil or companies headquartered in the country reaching out to the international insurance market for the purposes of taking out insurance products. The general tendency was to restrict this practice as much as possible to prevent the local market being overrun by foreign competitors.

This was the principal justification for IRB’s monopoly in the reinsurance market between 1939 and 2007. Even though this monopoly ceased to exist upon the enactment of Supplementary Law No. 126/2007, there still are numerous restrictions on taking out insurance abroad, which ultimately significantly reduce the chances of any controversy regarding the application of foreign law to insurance disputes that take place in Brazil, since insurance policies issued locally are governed by Brazilian law.

This matter becomes more debatable in relation to reinsurance agreements and treaties. According to the Law of Introduction to the Norms of Brazilian Law,12 the main statute on conflicts of laws, obligations to be met in Brazil are subject to Brazilian law and therefore reinsurance obligations would be subject to Brazilian law. On the other hand, CNSP Resolution No. 168/2007 provides that reinsurance contracts related to risks in Brazil must establish a clause granting jurisdiction to Brazilian courts to decide disputes under Brazilian law, except when the parties to the contract agree to submit the dispute to arbitration.

It is worth mentioning that if Bill of Law No. 29/2017 is enacted, the insurance market in Brazil will be governed by a new law requiring the application of Brazilian law to all contracts (including, but not limited to, reinsurance contracts) and disputes (in the judiciary system or arbitration courts) related to insurance in Brazil.

Many scholars and experts argue that reinsurance agreements or treaties have to be governed by Brazilian law, since all undertakings set out in such agreements are bound to insurance policies or bonds issued by a local accredited insurer and governed by local law. The scale of this debacle will only increase upon the enactment of Bill of Law No. 29/2017, the progress of which is being closely followed by many reinsurers that do business in Brazil.

ii Enforcement of foreign arbitral awards

Regarding the enforcement of foreign arbitral awards, the Brazilian Arbitration Law distinguishes between two types of arbitral awards: domestic and foreign.

Foreign arbitral awards are those rendered outside Brazil that require recognition before enforcement in Brazil. Domestic arbitral awards are those rendered in Brazil that can be enforced as a domestic court judgment without any need for court confirmation. Therefore, for the purposes of recognition of foreign awards, the seat of arbitration plays an important role in defining where the award is rendered and whether it needs confirmation before enforcement.

To enforce a foreign arbitral award in Brazil, it must first be submitted to a recognition procedure before the Superior Court of Justice. Furthermore, the applicant must present evidence that the award:

  1. was issued by a competent authority;
  2. was issued only after the parties to the proceedings had been duly summoned, or with proof that a default judgment was the only option; and
  3. has become final and definitive, and not subject to any appeal.

Brazilian law limits the grounds that can be raised by a respondent against whom recognition is sought. The respondent will only be able to raise a limited range of defence arguments to object recognition and prevent it from being granted.

The defence arguments that can be raised do not include whether the merits of the arbitral award are correct. The Superior Court of Justice will not discuss whether the arbitral tribunal has reached an adequate decision on matters of law and facts. In fact, the Superior Court of Justice has been very careful in not making an analysis or revision of the merits of the decision.

Therefore, the arbitral award may be challenged only if:

  1. there is a lack of standing of the parties to the arbitration agreement;
  2. the arbitration agreement is not valid;
  3. the respondent was not given notice of the appointment of the arbitrator or of the arbitral proceedings;
  4. the respondent was not able to present its case;
  5. the award deals with a dispute outside the scope agreed by the parties;
  6. the arbitral tribunal was not composed according to the parties’ agreement or the applicable law;
  7. the arbitral procedure did not observe the parties’ agreement or the applicable law;
  8. the arbitral award is not binding on the parties, or it was set aside or suspended;
  9. the subject matter of the dispute cannot be resolved by arbitration under Brazilian law; or
  10. recognition or enforcement of the arbitral award is contrary to national sovereignty, human dignity or Brazilian public policy.

If the application for recognition is presented with all the required documents and no objection is raised, the recognition procedure should take from six months to a year. If an objection is raised, or there are missing documents, this could be expanded to more than two years, depending on the complexity of the case and the Superior Court of Justice’s agenda.

Once recognised by the Superior Court of Justice, the award becomes a judgment with enforceable title in Brazil. After that, any party may seek enforcement with the competent federal court, which, as a general rule, is the court with jurisdiction over the place where the award debtor has its place of business.

An enforcement procedure typically takes up to two years if there is opposition to it. This may vary a great deal depending on the difficulties in summoning the debtor and finding enough assets to satisfy the debt if the debtor does not respond immediately.


Among the trends of the local insurance market, we highlight the following.

i D&O demand and increasing loss ratios

Law No. 13506, enacted on 13 November 2017, significantly increased the limit of the sum of fines that may be applied by the Central Bank of Brazil (BCB) and the Securities and Exchange Commission (CVM). Now the BCB may impose fines of up to 2 billion reais on financial institutions (and their officers and directors), and the CVM may impose fines of up to 50 million reais on publicly held companies (and other entities the CVM regulates, and their respective officers and directors).

This automatically triggered a steep increase in the demand for D&O coverage (taking out such coverage has become, in some cases, a condition for individuals being invested as directors and officers of certain companies), since local products of this nature can cover the payments of fines imposed on directors and officers by governmental authorities, with due regard to the limitations set out by each insurer offering such coverage.

In recent years, D&O insurance claims have risen as a result of a significant increase in federal investigations scrutinising public contracts, which led to an unprecedented increase in the public auditing of public administration activities and tenders. Most of the large corporations operating in energy, civil construction and engineering in Brazil have been retained in public bids to deliver infrastructure works in recent events such as the 2014 FIFA World Cup, the 2016 Summer Olympics in Rio de Janeiro, besides regular projected works in all administration levels (federal, state and municipal).

Public contracts are scrutinised by federal and state audit courts, the Public Prosecutor’s Office and civil associations, which may bring claims against the private counterparties involved in the bids in respect of any irregularities. As a result of large federal probes over corruption in public bids (among which, Operation Car Wash is the most prominent), D&O insurance claims amounted to over 500 million reais in 2017, and these claims stemmed from matters ranging from investigations by public bodies to judicial claims associated with securities litigation, tax debts, corporate disputes, contractual breaches and bankruptcy law.

ii Surety bond demand and increasing loss ratios

The Code of Civil Procedure has expressly established the right to offer judicial bonds to secure payments of judicial debts. As a result, judicial bonds have become widely accepted by courts and the market is experiencing a vertiginous expansion. Consequently, some local insurance businesses are totally dedicated to surety and judicial bonds.

The surety business has also been a frequent source of claims owing to the economic recession Brazil has experienced since late 2015, which has led to the suspension of many public contracts. Payments in these contracts were stalled while corruption and money laundering investigations were carried out, ensuing a steep increase in the number of claims associated with performance bonds.

Petrobras, the Brazilian state-owned oil giant, was at the centre of the corruption investigations of Operation Car Wash and the interruption of payments within its contracts triggered low liquidity in construction and oil sectors, leading many contractors to submit requests for judicial reorganisation or even bankruptcy. This in turn resulted in numerous claims in the sureties market for breach of contract, contributing to the demand for performance bonds and construction-related insurance.

iii Bill of Law No. 29/2017

Intended to become the ‘New Brazilian Insurance Law’, Bill of Law No. 29/2017 introduced various innovations that will significantly alter the way insurers do business, leading to adaptations to operational aspects (e.g., the requirement to obtain the insureds’ prior consent to implement certain transactions, such as portfolio transfers), changes in the wording of insurance policies and modification of loss adjustment procedures. In February 2019, the Bill of Law was submitted for scrutiny by the Senate’s Constitution, Justice and Citizenship Committee.

iv Provisional Measure No. 881/2019

On 30 April 2019, the Brazilian President executed and published Provisional Measure No. 881/2019, also dubbed the ‘Provisional Measure of Economic Freedom’. Applicable to entrepreneurs who do (or would like to do) business in Brazil, and in relation to contracts and civil and business obligations, the Provisional Measure establishes principles and general guidelines that are mandatory for the government regarding economic activities, namely (1) the presumption of freedom in the exercise of economic activities; (2) the presumption of good faith on the part of private enterprises; (3) subsidiary, minimum and exceptional intervention of the state in the exercise of economic activities; and (4) vulnerability of people before the state. As regards its impact in the insurance sector, this Provisional Measure (1) ensures equal treatment by public administration bodies; (2) reinforces the prevalence of the free will of the parties and the principle of venire contra factum proprium; (3) encourages innovation if regulation is outdated in relation to technology being used in the market; (4) forbids governmental authorities from adopting contradictory approaches on issues or with different players in the same regulated markets, ensuring equal treatment for local and foreign players; (5) sets forth a fixed term for public authorities to approve or deny a specific request made by private parties (whenever law or regulation has not already established a fixed term) and that such request will be deemed approved if the public authority has not positioned itself within such term; and (6) allows digital storage of documents. The Provisional Measure was approved, with some amendments thereto, by the National Congress and was sanctioned by the President on 20 September 2019, becoming Law No. 13874/2019.

v Bill of Law No. 1292/1995

Currently, in Brazil, performance bond limits range from 5 per cent to 10 per cent of the contract amount and there is lack of a legal framework for step-in rights, in view of a scenario where more than 14,000 public works are paralysed. If approved, this Bill of Law, regarded as the ‘New Public Procurement Law’, would change the guarantee limits as follows:

  1. public works, services and supply contracts of up to 100 million reais (guarantees are not mandatory): a guarantee limit of 5 per cent of the initial contract amount, which may be increased to a maximum of 10 per cent depending on the complexity of the project and the risks involved;
  2. public works, services and supply contracts above 100 million reais (guarantees are not mandatory): a guarantee limit of 10 per cent of the initial contract amount, which may be increased to a maximum of 20 per cent depending on the complexity of the project and the risks involved;
  3. engineering contracts ranging in value from 100 million to 200 million reais (guarantees are mandatory): a guarantee limit of 10 per cent of the initial contract amount, which may be increased to a maximum of 20 per cent depending on the complexity of the project and the risks involved; and
  4. engineering contracts of over 200 million reais, or ‘contratos de grande vulto’ (major contracts) (performance bonds are mandatory): a guarantee limit of 30 per cent of the initial contract amount, which may be reduced to a minimum of 10 per cent (as a minimum mandatory percentage) if the 30 per cent requirement (1) unreasonably restricts the competitiveness of the bid, (2) leads to an unjustified increase in the constructor’s profit, or (3) allows the constructor to abuse its dominant market position.

If the bidding documents establish that in the event of default the insurer must take over and finish the project (step-in obligation), the insurer shall execute the underlying contract and relevant amendments, as intervening party, and will be able to:

  1. freely access the construction facilities;
  2. supervise the performance of the underlying contract;
  3. have access to technical and accounting audits; and
  4. request clarifications from the technical team responsible for the works.

In the event of breach by the principal (triggering the bond), the following alternatives will be available for the insurer:

  1. the insurer may step in, exempted from the obligation to indemnify losses and penalties arising from the principal’s default; or
  2. the insurer may decide not to step in, and will have to (1) pay contractual penalties of up to 15 per cent of the contract’s value, and (2) pay for losses and damages or excess costs (overcharges) resulting from the contracting of a new player, provided, however, that the sum of items (1) and (2) above is capped at the policy limit.

In the step-in scenario, the insurer will be able to subcontract, in whole or in part, third parties to finish the works.

The Bill of Law is currently under scrutiny by the National Congress and does not apply to concessions of public services. The next steps are approval by the House of Representatives (Câmara dos Deputados) and subsequently ratification by the Senate (Senado); following approval by the Senate, the Bill of Law may be enacted by the President, who has the power to veto provisions.

vi Regulatory flexibility

In March 2019, SUSEP’s chairman and main internal decision-making team were replaced by more business-oriented individuals who seek to make the regulatory environment less bureaucratic and time-consuming, to harmonise legislation with technological advances, and to stimulate growth of the insurance, reinsurance, private pensions and capitalisation market and its participation in the Brazilian GDP. This new administration is working together with the BCB and the CVM to innovate within the securities market, and an example is the Special Committee on Innovation and Insurtech. The federal government has already stated its intention to merge SUSEP with the Brazilian Public Pension Plan Authority (PREVIC), which regulates closed-end pension plans. Nevertheless, to date, no specific bill of law or provisional measure has been issued in this regard.


1 Cassio Amaral and Thomaz Kastrup are partners and Anthony Novaes, Thais Arza and Thales Dominguez are associates at Mattos Filho, Veiga Filho, Marrey Jr and Quiroga Advogados.

2 US Census Bureau, 2018.

3 6th Analysis and Monitoring of Supervised Markets Report, SUSEP, 2018.

4 Law No. 13709/18.

5 Law No. 13105/2015.

6 Law No. 10406/2002.

7 Law No. 8078/1990.

8 Brazilian Civil Code, Article 104: ‘The requirements for the validity of a legal transaction are: I – a capable agent; II – a licit, possible and determined or determinable object; III – a form that is prescribed (or not prohibited) by law.’

9 Tzirulnik, Ernesto. The Insurance Contract According to the Brazilian Civil Code. 3rd Edition. São Paulo. Roncarati, 2016, p. 53.

10 Franco, Vera Helena de Mello. Contracts: Civil and Corporate Law. 5th Edition. São Paulo. Revista dos Tribunais. 2014, p. 340.

11 Law No. 11101/2005.

12 Decree-Law No. 4657/1942.