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Memorandum - Insurance, Reinsurance and Pensions | SUSEP Circular No. 545, of January 27, 2017

Insurance, Reinsurance and Pensions

At the time of the opening of the Brazilian reinsurance market, Complementary Law No. 126, dated January 15, 2007, created a 60% preferential offer regime in favor of Brazilian local reinsurers, which percentage automatically decreased to 40% as of January 16, 2010. During that period, Article 15 of CNSP Resolution No. 168, dated December 17, 2007, provided the rules that regulated such preferential offer.  

In 2010, CNSP Resolution No. 225, dated December 6, 2010, replaced the concept of preferential offer with the concept of a mandatory offer and, therefore, revoked all rules related to the former offer, as originally stated in Article 15 of CNSP Resolution No. 168/2007.     

Subsequently, as reported in our Newsletter dated July 21, 2015, CNSP Resolution No. 322, dated July 20, 20151, reintroduced, as of January 1st, 2017, the concept of preferential offer, which was to coexist with the mandatory offer. Accordingly, as of the beginning of 2017, there are two concurrent regimes for the offer of reinsurance to Brazilian local reinsurers, one mandatory, initially of 30%, and the other preferential, initially of 10%2. 

In view of this, the Brazilian Superintendence of Private Insurance (SUSEP) recently enacted Circular No. 545, of January 27, 2017, which reintroduced, for the most part, the rules that regulated the preferential offer in 2007. 

In short, in order to comply with the preferential offer rules, the insurer must send a written consultation to one or more local reinsurers of its choice, who will have 5 (five) business days, in the case of facultative agreements, and 10 (ten) business days, in the case of treaties3, to totally or partially accept the offer. 

Failure to reply within such deadlines shall be construed as being a definitive rejection. Pursuant to the new regulations, the refusal of the risk by the local reinsurer, irrespective of subsequent changes to the terms and conditions of the offer, shall also be considered to be a definitive rejection. In any case of definitive rejection by a given local reinsurer, the insurance company will be exempted from the obligation to re-offer that risk to the same reinsurer.    

Finally, under the new rules, the insurer will have complied with the preferential offer requirement whenever (a) the required percentage of preferential offer is placed with local reinsurers; (b) all local reinsurers have totally or partially refused the preferential offer and any remaining percentage was accepted under the same terms and conditions by other registered non-local reinsurers; or (c) admitted and/or occasional reinsurers have accepted the risk under the terms and conditions rejected by the local market under the preferential offer regime.

Attorneys of the Insurance, Reinsurance and Pensions practice

1 As amended and restated by Resolução CNSP No. 325, dated July 30, 2015.

2 The preferential offer regime is subject to a progressive annual increase, as the percentage of the mandatory cession decreases, capped, however, to 25%.

3 Local reinsurers may request additional documents and/or information, which request will suspend the lapse of such deadlines. In the case of facultative agreements, such request may only be made once.

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