The Insurance and Reinsurance Law Review: Brazil
The Brazilian insurance market is the largest insurance market in Latin America and one of the largest insurance markets in the world. It has 122 general insurance companies (life and non-life),2 130 reinsurance companies, 960 active healthcare operators,3 13 entities operating open-ended private pension funds and over 104,000 insurance and reinsurance brokers.4 These companies include both multinational group members and locally based insurers and providers.
As of November 2021, Brazilian insurers had a turnover of approximately 81 billion reais in non-life insurance, 181.7 billion reais in life insurance and 22.2 billion reais in capitalisation bonds, totalling 275.4 billion reais – an increase of 13.2 per cent compared with the same period in 2020. For the same period, the healthcare and insurance sectors accounted for approximately 6.7 per cent of the total Brazilian gross domestic product.5 Although insurance penetration remains very low when compared to more developed insurance markets, the Brazilian Private Insurance Authority (SUSEP) has been taking active steps to increase uptake in the sector and to facilitate the entry of new market participants.
i Financial regulation
In Brazil, there is no unified financial regulator with authority over insurance, banking, securities and pension funds. Financial regulation has long been organised at the federal level along functional lines with different regulators for each sector.
The national financial system regulation is commonly divided into three components: policy boards, supervisory entities and operators.
Policy boards set general guidelines to the financial system, but do not have executive functions. When deciding on an issue, the boards generally use the technical structures provided by supervisors. After a policy board sets guidelines, the relevant supervisory entities issue their own regulations thereof and become responsible for their enforcement. There are currently three policy boards (the National Monetary Council; the National Private Insurance Council (CNSP) and the National Complementary Pension Council (CNPC)) and four supervisory entities – the Central Bank of Brazil, the Securities and Exchange Commission (CVM), SUSEP and the National Complementary Pension Authority (PREVIC).
Finally, operators include other public or private institutions directly or indirectly involved in obtaining, intermediating between, or investing resources within the national financial system. It is quite common to subdivide them into monetary institutions, official entities, other financial institutions, other financial intermediaries, supplementary institutions and insurance or pension institutions.
ii Insurance regulators
Authority for the oversight and regulation of the Brazilian insurance market is even more fragmented:
- CNSP and SUSEP regulate the National Private Insurance System (SNSP), which comprises insurance and reinsurance companies, entities operating open-ended private pension funds, capitalisation companies and insurance and reinsurance brokers (see Section II.ix on intermediaries and the role of the broker);
- CNPC, together with PREVIC, regulates and oversees entities operating private closed pension funds; and
- the National Regulatory Agency for Private Health Insurance and Plans (ANS) regulates the health insurance and healthcare industries.
CNSP and SUSEP
CNSP and SUSEP are governmental entities under the Ministry of Economy, responsible for regulating the insurance sector (life and non-life, excluding health).
CNSP is a public body entitled to issue directives and rules on private insurance and reinsurance in Brazil. Latterly, open-ended private pension funds also fell within its purview. CNSP's responsibilities include:
- setting general policies and guidelines for private insurance and reinsurance;
- regulating the constitution, organisation, functioning, enforcement and sanctioning of those who operate under the SNSP;
- setting the basic features of insurance and reinsurance, private pension and capitalisation contracts; and
- setting criteria for the incorporation of insurance and reinsurance companies and for open-end pension and capitalisation firms determining technical and legal limits of their operations; and regulating insurance intermediaries.
SUSEP further details the rules enacted by CNSP and supervises the entities of SNSP through routine inspections and disciplinary proceedings in the administrative sphere. SUSEP's main responsibilities are:
- executing CNSP policies by inspecting the incorporation, organisation, functioning and operation of insurance and reinsurance companies, capitalisation companies and entities operating open-end private pension funds;
- ensuring that the entities within those markets are liquid and solvent; and
- protecting the rights of the insured persons.
Although this chapter focuses on insurance companies carrying out life and non-life insurance activities regulated by CNSP and SUSEP, below is a summary of the roles of the other governmental authorities that regulate other Brazilian insurance industry products (e.g., closed-end pension funds and health insurance).
CNPC and PREVIC
CNPC regulates complementary pension funds operated by entities managing closed-end pension funds. CNPC is composed of (1) the Social Security Minister (who acts as CNPC's chairperson) and representatives of (2) PREVIC, the Special Secretariat for Pension Policies under the Chief of Staff at Ministerial Level, (3) the Ministry of Economy, as well as (4) delegates from pension funds, pension fund sponsors and pension fund beneficiaries. PREVIC is a governmental agency under the Ministry of Social Security, responsible for supervising and inspecting closed-end complementary pension entities (pension funds) and for executing the policies set for complementary pensions.
The ANS is an agency established by the Brazilian government under the Ministry of Health that operates nationwide to regulate, standardise, control and inspect the private health insurance and plans sector in Brazil, including private health insurance, health management organisation, self-insured plans, medical cooperatives, non-profit health organisations and dental assistance.
iii Insurance offered by foreign entities
Brazilian laws and regulations provide that the following insurances should be exclusively contracted in Brazil: (1) mandatory insurance; and (2) non-mandatory insurance related to risks in Brazil taken out by individuals resident in Brazil or by legal entities (of any kind) domiciled in the Brazilian territory. In other words, as a rule, only local accredited insurance companies can underwrite this type of risk in Brazil. This does not mean that foreign insurers cannot underwrite local risks for Brazilian residents and legal entities headquartered in Brazil through policies issued abroad, but this practice is restricted to a narrow list of circumstances (e.g., whenever there is no local insurer interested in underwriting the local risks or whenever foreign corporations may take out worldwide coverage abroad, including in Brazil, but this coverage is not provoked, requested, funded or caused by the Brazilian insured).
Companies underwriting insurance in Brazil without authorisation or in cases not included in the exceptions above, or both, are subject to fines of up to 3 million reais and their shareholders, directors and officers could be held jointly liable for the fine and may be indicted and face criminal prosecution in some cases.
iv Authorisation to operate as an insurance company
Authorisation to operate as a Brazilian insurance company is granted according to the business segment and the regions of the country where the entity seeking to do business will distribute its products. The authorisation procedure is divided into three major steps: prior approval and ratification.
A prior approval request must first be submitted to SUSEP by the entities that intend to control the insurance company. This request must be made prior to undertaking any organisational corporate acts. The prior approval phase focuses on the financial and operational capacity of the shareholders in relation to the types of insurance segments in which they intend to operate (life, non-life, private pension funds etc.). Together with the prior approval request, an applicant also needs to submit a business plan to SUSEP detailing the estimated projections of the insurance company's business for a time span of at least three years.
Once SUSEP grants approval of the project, applicants must undertake the relevant corporate acts for organising the insurance company, evidence of which is subsequently submitted to SUSEP for ratification purposes. Through the documents submitted to SUSEP at this stage, the ratification phase seeks to confirm whether the organisational structure described in the prior approval phase was duly implemented by the insurer's controlling shareholders; and to check whether the minimum capital requirements (which vary according to the types and number of products the insurance company intends to offer to the public at large and the regions of the country in which it wishes to operate) have duly been met.
Although the procedure above is similar for all insurers, since 4 January 2021 insurance companies have been divided into four segments (S1, S2, S3 and S4). Companies characterised as S4 are subject to reduced capital and prudential requirements because they are deemed to offer less risk to the market. Such requirements gradually become stricter as the company grows and moves to higher segments. Finally, there are recently enacted simplified approval procedures to support SUSEP's regulatory sandbox programme, whereby approved insurtech companies are allowed to offer innovative insurance products under a temporary licence (36 months), while subject to reduced regulatory requirements. The new regulation for the authorisation of insurance companies (Resolution CNSP No 422/2021) created a fast-track process for companies in SUSEP's sandbox to obtain a definitive licence. This process requires a new business plan and the evidence that the company or its controlling shareholders have the necessary capital requirements to have a definitive licence.
This new regulation also allows the supervised company to evidence economic capacity instead of the controlling shareholders.
v Transactions and corporate reorganisations
Transactions (including mergers and acquisitions, and portfolio acquisitions) and corporate reorganisations involving local entities that make up the SNSP are, in most cases, subject to ratification proceedings and prior approval from SUSEP, depending on the characteristics of the parties involved and the project. Transactions subject to prior approval require a pre-closing procedure conducted by SUSEP, while simplified ratification proceedings require post-closing or implementation procedures.
vi Product regulation
After modernisations provided by SUSEP Circular 621 and CNSP Resolution 407, insurers are now able to file their damage insurance products automatically, with no prior review from SUSEP. For insurance of big risks (e.g., with a limit of liability of 15 million reais), CNSP Resolution 407/2021 allows insurers to forego the registration process completely, which incentivises the creation of 'built-to-suit' products.
vii Other regulatory requirements of insurance companies
There are other restrictions inherent in insurance and reinsurance activities, most of which seek to protect insured parties by preventing insurers from engaging in several types of transactions, especially with assets and funds of the technical provisions of each product. A good example of this is the rule that forbids entities regulated by SUSEP from granting any type of guarantee or security and from granting any loans to any third party.
Brazilian insurance companies are not subject to the insolvency and bankruptcy laws applicable to non-regulated entities. If an insurance company is in a dire financial situation, it will be subject to the following specific procedures, originally created to target financial institutions: intervention, extrajudicial liquidation and the temporary special management regime. SUSEP is entitled to check the solvency situation of all entities accredited to do business within the SNSP and, if necessary, implement the above proceedings. This authority may also place insurance companies under a fiscal management regime,6 which is essentially a measure whereby SUSEP allocates one of its agents to supervise all activities of the regulated entity that are not meeting applicable solvency requirements. The supervisor agent has broad powers to conduct, jointly with the entity's management, the latter's business and must keep SUSEP informed about all the company's activities.
As a rule, insurance companies are not subject to bankruptcy. They can, however, be adjudicated bankrupt under two specific circumstances: if a filing for extrajudicial liquidation is issued, but the assets are not enough to settle its liabilities with at least half of its unsecured creditors; or if there is sufficient evidence of bankruptcy crime.
viii Reinsurance and retrocession
Reinsurance and retrocession activities can be carried out in Brazil by the following types of reinsurers, all of which need to be accredited as such by SUSEP prior to engaging in any related activities:
- Local reinsurers must be organised as joint-stock companies headquartered in Brazil. Such entities must engage exclusively in reinsurance and retrocession activities (with exclusive corporate purpose). The proceedings to obtain a prior authorisation to operate, transfer control and elect officers and directors, as well as the minimum capital rules, are the same as those applicable to local insurers. Because these rules are more stringent, there are fewer local reinsurers than admitted or occasional reinsurers doing business in Brazil. On the other hand, Brazilian insurance companies must give preference (right of first refusal) to local reinsurers to underwrite at least 40 per cent of the reinsured risks in each treaty or facultative agreement.
- Admitted reinsurers may be headquartered abroad but must have a representative office in Brazil. The representative office must be organised either as a joint-stock or limited liability company but must have as its exclusive corporate purpose the representation of the offshore admitted reinsurer in reinsurance and retrocession transactions. There are some eligibility requirements that must be met by this type of reinsurer for purposes of accreditation, in particular the requirements to open a local bank account and to keep at all times a balance of US$5 million in that account. The representative office's management must follow the same ratification rules applicable to local insurers upon the election, appointment or replacement of its officers, director or both of these.
- Occasional reinsurers are in many ways very similar to admitted reinsurers, with the relevance difference that they do not need to have a representative office in Brazil. For this reason, eligibility requirements for purposes of accreditation by SUSEP are more restrictive than those applicable to admitted reinsurers.
ix Mandatory insurance
Most insurance sold in Brazil is optional, but there are also several types of mandatory insurance, such as occupational accident insurance; business fire insurance; insurance for death and permanent incapacity in the event of a car accident; and export credit insurance, among others.
Failure to contract mandatory insurance, without prejudice to other legal sanctions, is subject to fines: (1) twice the amount of the premium, when it is defined in the applicable legislation; and (2) in other cases, whichever is the greater of 10 per cent of the insurable amount and 1,000 reais.
Insurance and reinsurance law
i Sources of law
Brazil's legal system is based on civil law, therefore its framework is composed of numerous laws and legal codes. For this reason, the Brazilian insurance market is not regulated by a single law or code, but is governed by several different types of legal documents, including the following:
- the Civil Code,7 which dedicates an entire chapter to insurance contracts and the main principles that must govern the relationship between insured and insurer;
- Decree-Law 73/1966, which is still in full force and effect and which allows the regulation of this specific activity and market through regulations enacted by CNSP and SUSEP; and
- Supplementary Law 126/2007, which sets out the main rules for reinsurance and retrocession transactions in Brazil following the dismantling of the Brazilian Reinsurance Institute's monopoly in this area.
Notwithstanding the above, given the adhesive nature of most insurance policies (there is no arm's-length negotiation of their terms and conditions), the interpretation of insurance agreements by the courts tends to protect insureds. This tendency for protection is generally more pronounced in cases where the insured is a consumer (especially under the Consumer Protection Code).8
ii Making the contract
The formation of an insurance agreement is preceded by a written proposal sent by an insured person or an insurance broker. Local regulation, however, allows the contracting of policies through digital channels, provided that certain conditions are met.
Insurance contracts must contain the identification of the parties (insurance company, policyholder, insured parties, beneficiaries), term of effectiveness, limit of liability, covered risks, applicable premium, details of the obligation to indemnify (claim notification and regulation rules) among other information. The insurance company must provide very clear and objective information to the insured parties regarding the specific terms of the coverage being taken out, especially the events that are excluded from coverage, limits to the right to indemnification (maximum indemnification limits, deductibles etc.) and the claim regulation procedures to be carried out in the event that a covered claim takes place.
During the covid-19 pandemic, the commercialisation of insurance in digital channels gained significant importance, accelerating a process already in course. Resolution 294/2013 allows the commercialisation of insurance through remote systems using elements capable of authenticating and guaranteeing the integrity of the required documents and identifying the date and time of issuance of the contract. The insurer still needs to provide hard copies of the agreement when requested by the insured and the necessary information regarding the policy must be available online through individualised access credentials during the coverage period and must be printable by the insured.
At the time of placement, the applicable law and regulations demand the exchange of certain information between the insured parties and the insurance company. The insured parties must comply with the duty of utmost good faith, disclosing all material facts and acting honestly towards the insurance companies, in such a way that the insurance company has sufficient information about the circumstances involving the risk and coverage. Should the insured party fail to provide the requested information (or omit relevant data), the insurance company may (1) increase the premium, if the omission was not in bad faith; or (2) refuse to cover any claims that would otherwise be covered under the terms and conditions of the policy issued to the insured party if the omission was in bad faith. Brazilian courts require more than a showing of mere negligence to support a bad faith claim – as a rule, the insured party must have engaged in intentional wrongdoing.
iii Interpreting the contract
The interpreting of insurance contracts must abide by the general rules for interpretation of private contracts under Brazilian law.
The Civil Code establishes the general rules for interpretation of private transactions. In this sense, the interpretation of any contract between private parties should seek and comply with the genuine intention of the parties when entering into the transaction; the uses and customs or traditions of the place where it took place; and the principle of good faith of the contracting parties (which is stricter in insurance contracts).
Following the entry into effect of the Declaration of Rights of Economic Freedom,9 where an insurance policy is a civil or corporate contract (i.e., signed by parties of equal standing and not a consumer contract), a presumption of parity applies, meaning that interpretations of the contract must consider the parties to have equal capacity and understanding of the terms and conditions agreed. This legislation was a guideline for actions taken and regulations issued by SUSEP in 2021, including SUSEP Circular 621 and CNSP Resolution 407/2021, regarding all risks insurance policies, that favour the freedom of the parties over the historically limited possibility of negotiation between insurers and insureds. The new regulation also provides for an automatic registration of new products (i.e., products no longer need to be previously authorised by SUSEP to be offered to the market)
In addition to this general rule, the interpretation of insurance contracts may also be subject to the rules of interpretation for adhesion contracts (set out by the Civil Code and the Consumer Protection Code, as the case may be), which stipulate that where provisions are ambiguous or contradictory, the contract must be interpreted in favour of the party who adhered to the contract.
iv Intermediaries and the role of the broker
The distribution of insurance contracts may be carried out directly by the insurance company, by insurance agents, by policyholders or by insurance brokers and their agents.
Insurance agents represent insurance companies in the distribution of certain types of insurance to the public at large. As a result of certain regulatory restrictions, this model is generally used by retailers to distribute extended warranty insurance. SUSEP has also directed this model for the use by MGAs (managing general agents), allowing agents to act in a broad scope of activities.
Policyholders, on the other hand, represent insured groups – the policyholder model is extensively used in bancassurance to distribute group insurance.
Insurance brokers are the primary legally authorised intermediaries for the distribution and promotion of insurance contracts, policies and plans. Insurance brokers may be individuals or companies. Although the insurance broker is generally viewed as representing the interests of the insurer party, the law doesn't qualify the broker as a representative of any of the parties. To maintain the independence and autonomy of the brokerage, Law 4594/1964 prohibits the employment of brokers in legal person under public law and in insurance companies.
To conduct insurance brokerage activities, insurance brokers are required to be accredited as brokers by SUSEP, in a procedure conducted through a simple online registration system.
The registration procedure requires evidence that the insurance broker has duly complied with the eligibility requirements necessary for accreditation purposes, such as the following:
- the brokers must be organised in accordance with Brazilian law;
- they must be headquartered in Brazil;
- they must include the expression 'insurance brokerage' as part of their own corporate name;
- they must include insurance brokerage services among the activities that constitute their corporate purpose; and
- they must have an officer responsible for insurance brokerage who is duly registered with SUSEP as an insurance broker.
Once an applicant firm is accredited as a brokerage company, it must keep SUSEP updated about any changes relating to its corporate documents and governance or its organisational structure. Insurance brokers may also intermediate the distribution of insurance contracts through their own agents.
CNSP Resolution 382/2020 establishes rules that insurers and intermediaries must follow when distributing insurance.
Claim regulation procedures for payment of indemnifications by the insurer are generally triggered by the remittance of a claim notice by the insured or beneficiary to the insurer as soon as the insured or beneficiary becomes aware of a potentially covered event (i.e., the claim).
Upon receipt of the claim notice, the insurance company will start procedures to verify the information provided by the insured party, whether the claim is covered by the policy and the amount of the sum to be paid as indemnification. This procedure is known as claim adjustment or regulation. SUSEP establishes a maximum term for claim adjustment proceedings, which varies according to the type of insurance product. In general, the term is 30 days, counted from the date on which all documents requested from the insured or beneficiary for claim regulation purposes are forwarded by the latter to the insurer (SUSEP allows an insurance company to make one request for additional documents and information during the above-mentioned term, the counting of which is suspended until this additional request is met by the insured or beneficiary). Some complex claims adjustments tend to last longer – reaching six to 12 months.
i Jurisdiction, choice of law and arbitration clauses
Although the Brazilian insurance market has grown consistently over the years, there are no relevant court precedents or specialised courts for insurance and reinsurance matters. The lack of familiarity of judges (especially those at lower instances) with the laws and regulations applicable to insurance and the time-consuming nature of judicial proceedings (i.e., some proceedings may last more than 10 years) have caused complex insurance-related disputes to end up being decided in arbitration courts with experience in this field of law.
The basic principles of private international law were incorporated into Brazilian law by the Law of Introduction to the Rules of Brazilian Law.10 The Law provides guidance on the effectivity, applicability and interpretation of Brazilian law and sets out conflict of laws rules. It also provides that agreements should be governed by the law of the country where they were entered into, but this legal provision does not exclude the contractual freedom of the parties to elect the law that will govern their rights and obligations under international agreements. This contractual freedom is more limited if the dispute is subject to Brazilian courts, and the right of the parties to choose the governing law of agreements would depend on the existence of a link between chosen governing law and the underlying transaction. It is broader if the dispute is subject to arbitration because arbitration law expressly allows parties to freely choose the governing law and rules.
The Brazilian litigation system has three instances:
- first instance composed of state and federal lower court;
- second instance composed of regional federal court or state high courts; and
- superior instance (it was called third instance in the past) composed of the Superior Court of Justice and the Supreme Federal Court.
Insurance disputes may be time-consuming if the parties refuse to accept the first instance judgment.
The New Civil Procedure Code, which became effective in March 2016, attempts to make litigation less time-consuming by developing and enhancing the rules concerning alternative dispute resolution mechanisms (especially arbitration and mediation); rendering certain decisions by the superior courts binding and making a decision in a single case the model for court decisions in cases that are similar (similar to precedents in the United States). The New Civil Procedure Code's incentive for conciliation and mediation is clear, as judges, upon receiving any petition, shall establish a conciliation or mediation hearing to be carried out by experts in the matter who will try to resolve the situation by consensus.
The parties may agree to submit insurance disputes to arbitration. Court decisions have consistently recognised the validity of clauses providing for mandatory arbitration in civil and commercial matters; however, courts have also decided that such clauses shall only bind consumers if they expressly agree to it.
Arbitration is becoming an increasingly popular alternative dispute resolution mechanism in Brazil for the following reasons:
- it is, usually, faster than procedures in Brazilian courts;
- arbitrators are chosen by the parties and may be more experienced on specific technical questions (as is the case regarding insurance and reinsurance matters);
- parties may choose the applicable law;
- parties may establish that the existence of the dispute and the decision will be confidential;
- the procedure is more flexible; and
- arbitration decisions may be enforced by courts.
These characteristics make arbitration procedures more attractive than regular court procedures, especially considering that insurance matters are highly specific and complex. In fact, SUSEP encourages those entities that belong to the SNSP and manage large-risk portfolios to include specific arbitration clauses in the general terms and conditions for this type of product.
iv Alternative dispute resolution
In Brazil, disputes regarding insurance coverage can be addressed in national litigation proceedings, in an ordinary lawsuit and arbitration, when there is a complex relation sub judice. Arbitration is the most popular alternative dispute resolution method for relevant amount matters, subject to prior express acceptance in insurance-related matters.
Consensual extrajudicial mediation may also be agreed by the parties, and specific legislation has been enacted on the subject, even though it has not yet gained as much momentum when compared to what happened to Arbitration (Law 13,140 of 2015).
The New Civil Procedure Code and the Judiciary (CNJ Resolution 125 of 2010) have made relevant developments in the use of alternative dispute resolution methods, such as mediation and conciliation. According to the New Civil Procedure Code, a mandatory conciliation or mediation hearing shall be scheduled prior to the presentation of the defendant's answer. Judges are encouraged to try to make the parties reach an agreement, and additional mediation or conciliation hearings may be held during the course of proceedings, including on appeal.
Year in review
In 2021, SUSEP implemented relevant changes to the regulation, updating and consolidating its rules. The regulatory agenda for 2021 was focused on:
- continuing to implement the System for Registry of Operations (SRO);
- setting forth a regulation on cybersecurity; and
- creating and regulating the Open Insurance System.
SUSEP also implemented several regulations that were submitted for public consultation in 2020.
On the heels of the successful previous edition, on 26 July 2021, SUSEP released the second edition of the Regulatory Sandbox, with 21 new projects preliminarily approved and undergoing the process for final approval. The programme's intention is to foster innovation and competition to enhance customer experience and increase marked penetration, reducing insurance prices. If all the 21 entities approved in the second sandbox are authorised to operate, there will be an increase of more than 20 per cent in the number of insurers operating in Brazil, considering the results of both sandbox editions.
Alongside that, CNSP Resolution 422/2021 created a new regulation for the authorisation of insurance companies. The new rule created a fast-track process for obtaining definitive licence by companies in SUSEP's Sandbox.
As previously mentioned, in February SUSEP Circular 621 and CNSP Resolution 407/2021 removed outdated and redundant requirements embedded in previous regulation and began to take shape as a mechanism to modernise, simplify and enhance damages insurance. This gives the parties greater freedom of contract, provided certain good practices guidelines are maintained. The new regulation grants the registration of new products automatically (i.e., products no longer go through a prior analysis of SUSEP). Additionally, CNSP Resolution 407/2021, issued in March, allows insurance companies to forego the registration process completely for underwriting big risks (e.g., policies with a coverage of at least 15 million reais). SUSEP is shifting its regulation perspective to penalising bad behaviour and expects the market to respond to this new flexibility.
SUSEP also simplified and improved liability products (D&O, E&O, ELI, Cyber Insurance and GLI) to repeal obsolete rules about standard clauses.
In addition, SUSEP Circular 639/2021 has emerged as a comprehensive and clear legal framework towards substantial progress in reforming the regulatory environment of car insurance products.
Perhaps the most radical change made by SUSEP in 2021 was the creation of the Open Insurance System in July, through CNSP Resolution 415. Although we still have a long way to go before the system is completely operational, SUSEP expects that this system will allow for an increase in competition, incentivise the creation of new products and, overall, increase the quality of the services provided to Brazilian consumers.
In November 2021, CNSP issued Resolution 422/2021, which modernised the authorisation process of insurers, providing more clarity on how entities can comply with capital requirements applicable to the controlling shareholders and creating a fast-track process for converting sandbox licences into full and definitive licences to operate. This resolution brings an important innovation for the capital requirements of the controlling shareholder, allowing for more flexibility to evidence the economic capacity through the supervised entity itself.
Also in November, the regulatory body established requirements for the accreditation and operation of data aggregators within the scope of the Open Insurance System, focused on accessing and sharing of personal and non-personal insurance-related data that can be used for innovation in products and services, looking at them from a supervisory and commercial angle (see CNSP Resolution 429/2021).
In the same month, the supervisor updated the regulation on insurance agents (ie, representatives of the insurers). CNSP Resolution 431/2021 approximates the insurance agents to the managing general agent (MGA), increasing the scope of activities that can be performed by such agents. SUSEP expects to cut the red tape in insurance distributor channels to overcome old regulatory barriers to insurance representatives, who now can act in all types of insurance products.
In addition, CNSP published CNSP Resolution 434/2021 that regulates insurance policyholders. This Resolution has been in force since 2 March 2022.
Outlook and conclusions
Consistently with other initiatives throughout the past year, SUSEP has sought to promote competition through promoting the entry of new market participants and simplification of the requirements for offering insurance products, along with preserving free competition and respect to the consumer.
SUSEP went through a management change in the beginning of 2022 and, depending on the election results of 2022, SUSEP's management is likely to change again.
With new management, in 2022, SUSEP's perspective is to continue simplifying the regulation of the insurance sector, reducing its complexity and costs. SUSEP also intends to subscribe to international best practices, to stimulate the development of the insurance market and to adopt a less prescriptive, more principled approach.
At the forefront of SUSEP's priorities is the revision of the standards regarding reinsurance, co-insurance and retrocession operations, as well as operations in foreign currency and contracting insurance policies abroad. The authority also intends to continue to implement the SRO.
Life and survival coverage offered in life insurance and open-ended supplementary private pension funds may also be subject to revision, with the intention to encourage the annuity market and provide the development of products that better meet consumers' needs.
1 Diógenes Gonçalves and Carlos Eduardo Azevedo are partners, Raíssa Lilavati Barbosa Abbas Campelo is a senior associate and Mariana Magalhães Lobato is an associate at Pinheiro Neto Advogados. The firm would like to thank Victoria Vertematti Guimarães and Hellen Cristina Leite for their contribution to the chapter.
2 SUSEP's regulatory sandbox programme approved 11 insurtechs in its first edition and 21 in the second. Such insurtechs are not included in the 122 number. When or if operational, the approved insurtechs will be authorised to underwrite risk under a temporary licence, as further detailed in Section II.iv.
3 General data – Beneficiaries of private health care plan, classified by coverage (Brazil – 2011–2021):
4 9th Analysis Report and Monitoring of the Regulated Markets: http://www.susep.gov.br/menuestatistica/SES/relat-acomp-mercado-2021.pdf.
5 Statistics of the Insurance Market (2021): https://cnseg.org.br/analises-e-estatisticas/panorama-estatistico-8A8AA8A37A39FA6A017AC49227594A3A.html.
6 As provided in Decree-Law 73/1966 and in Decree 60,459/1967.
7 Enacted by Law 10,406/2001.
8 Enacted by Law 8,078/1990.
9 Law 13,874/2019.
10 Decree-Law 4,657 of 4 September 1942.