Regulatory Update Latam: “New Practices, New Laws-the year of Globalization”

2021 was a very busy year in terms of regulatory updates within many of the Latin American insurance legal systems as reported in our previous article published last November. As technology advances and communication is ever more rapid, many countries in Latin America are trending towards the globalization of their (re)insurance markets by way of promoting clearer legal frameworks and inclusion of wider and more international market practices into their local Insurance and Reinsurance regulations. All this with the intent to open up their doors to international market participants, liberalize their systems and become a relevant competitor in the ever evolving (re)insurance industry. Such is the case of Argentina, Brazil and Honduras who have recently issued key pieces of legislation that  affect and impact the (re) insurance sector. Below we summarize the recent developments in each of these jurisdictions.    


Regarding the recently approved “Sanction limitation and exclusion clause” for property insurance contracts in Argentina, the SSN issued Circular IF-2021-90202729-APN-SSN on 23 September, 2021 adding and including a framework and guidelines for this exclusion clause for reinsurance contracts. In that sense, (re)insurers are allowed to use this clause in their (re) insurance contracts; however, if they do, they must use it with the SSN suggested wording which includes some very ample “carve-back” exceptions. Thus, the suggested wording states that the Sanction limitation and exclusion clause will not be applied in the following cases:

  1. When the Republic of Argentina has expressly rejected the provision on which it is based;
  2. In cases where it may affect the private interests of persons unrelated to the reasons for the sanction and when it is based exclusively on the beneficiary’s nationality;
  3. When it violates the legal system in force in the Republic of Argentina.

The Exclusion clause was initially approved for the purposes of its exclusive application in Property Insurance contracts by Resolution No. 2021-275-APN-SSN (issued on 22 March 2021). However, after a series of market inquiries, the SSN noticed a need to establish guidelines for this type of exclusion clauses when included in reinsurance contracts and thus, as a result, they issued the above mentioned Circular. Nevertheless, despite the new wording restriction, (re) insurers can request the SSN for authorization to use a different wording and the SSN will consider it on an case by case basis.


Brazil is one of the countries in Latam where we are seeing the most significant changes in terms of regulatory updates. This is aligned with the country’s gradual process to implement the Economic Freedom Law (Federal Law No. 13,874/2019) that the Brazilian Federal Government  enacted with the objective of consolidating scarce regulations, retracting outdated rules and promoting more contractual/economic freedom to businesses in general and specifically to the Brazilian (re)insurance market.

In that sense, the Brazilian Insurance Regulators-The National Council of Private Insurance (CNSP) and the Superintendence of Private Insurance (SUSEP) have been enacting several revolutionary reforms that are causing a big impact in the (re) insurance industry by allowing ample space for the globalization and modernization of these sectors as well as other SUSEP-regulated entities.   

CNSP No. 407/2020 on policy wordings

Among the game changing rules, it is worth revisiting Resolution No. 407/2020 (issued on 31st March 2021) which we briefly mentioned in our previous article published last November (see article here: This new rule has changed SUSEP’s approach to mandatory policy wordings and has (finally) opened the road for more freedom of policy negotiation between underwriters and buyers, especially on the so-called “Large-Risks” policies which include risks in segments like oil and gas, global banking, aerospace, maritime, nuclear energy and imports and exports, among others.  

This familiar “market practice” was long overdue in the Brazilian legal system which, previous to all these progressive reforms, was characterized as an interventionist state monopolized by the State-owned reinsurer (IRB) who would take all risks ceded by Brazilian insurers and transfer them to global markets via retrocession contracts. This new law thus constitutes a revolutionary change in the Brazilian (re) insurance industry, placing Brazil in a strong and competitive position in Latam.  

As a summary, the law defines a “Large Risk” as one that requires more than R$15M (USD$2.8M) of capacity of which is offered to an insurer by a company with an annual turnover of more than R$57m (USD10.9M). In the past, the policy and negotiation process of these types of risks was overly complicated and technical due to the fact that wordings had to mandatorily be standardized for most lines of business with only minor amendments being allowed. Such amendments needed to be endorsed by SUSEP through a rigorous approval process. Under the new law, wordings of "Large Risks" contracts can now be freely agreed between the parties with the exception of a few “minimum characteristics of contract” clauses like geographical scope, premium payment, covered and excluded risks, loss of rights, policy periods, renewal procedures, documents required for notification and loss adjustment, deductibles, excesses and reinstatements, maximum limits of indemnity and guarantee and dispute resolution mechanisms. In short, with the new law, if the buyer agrees with the conditions offered by the Insurer, there is no need for SUSEP to be involved.

Apart from Large Risks policies, the new law also provides more flexibility and freedom with respect to retail/mass contracts which used to be equated to and treated with the same rigor as Large Risks by SUSEP. With this law, mass/retail contracts are differentiated from Large Risks and can now be negotiated without much intervention by SUSEP as well.

These practices have been carried out for many years by many jurisdictions in the global (re)insurance industry, therefore, it was important for Brazil, being one of the biggest players in the market, to adapt their regulatory framework in this direction. We are sure this will cause a big impact in the Brazilian (re)insurance market.

CNSP No. 422/2021 on corporate regulation

Another major reform for the Brazil’s (re)insurance sector is Resolution CNSP No. 422/2021 issued by the Superintendence of Private Insurance (SUSEP) on 11 November, 2021. This resolution aims to simplify the rules and procedures related to the registration and licensing of Brazilian insurers, capitalization entities, local and foreign reinsurers, as well as reinsurance brokers. The draft of the resolution had been published for public consultation by SUSEP through its Public Call no. 30/2021. It was later issued in November 2021 and has been enforceable from 3rd January, 2022.

In summary, the new regulation implements different levels of control and supervision over the SUSEP-regulated entities depending on the risks and regulatory importance of their operations. Thus, Brazilian insurers and local reinsurers will be required to obtain a pre-authorization and approval from SUSEP for various corporate acts such as dissolution or change of corporate purpose, transfer of corporate control, transformation, merger, acquisitions, capital reduction, transfer of portfolio, among others, While, on the other hand, “less regulated” entities like foreign reinsurers and reinsurance brokers need only to communicate these acts to SUSEP.

Regarding non local reinsurers, which used to be classified as Admitted and Occasional and have slightly different regulatory requirements, they are now to be referred both as “Foreign Reinsurers” and share the same regulatory requirements such as minimum solvency rate required, minimum corporate equity, minimum amount of years in operation, among others. In that sense, the minimum solvency rate required for any applicant for a Foreign Reinsurer license is now Standard & Poors: BBB, Fitch: BBB, Moodys Baa2 and AM BEST B++.

Additionally, the Resolution has opened up to allowing applicant companies to present consolidated group solvency reports for the foreign reinsurer as long as the individual rating can be identified but has added restrictions to prevent a new application for registration by a foreign reinsurer that has had its registration canceled ex-officio in the preceding 5 years.

As per the requirement regarding applicant's minimum corporate equity, certified by an auditing company, which used to be USD 100 million for Admitted and USD 150 million for Occasional Reinsurers, the new regulation sets out (Article 36, item I) that for any kind of Foreign Reinsurer to operate in Brazil, it must prove it has at least USD 150 million of capital.

A significant change brought by the resolution is that it has eliminated the requirement to maintain an assistant local representative in Brazil for Foreign Reinsurers, requiring only to have a local representative at the time of registration.  Instead, foreign reinsurers may outsource their representation with a third-party company, provided that such company is not based in a tax heaven.

Another relevant proposed change concerns to the need to make a technical presentation to SUSEP even before the necessary documents for the application are filed. With this new rule, CNSP intends to facilitate discussion between the applicants' lawyers/representatives and SUSEP's personnel, making the process swifter and somewhat more personal.

As for the suspension and cancellation of the authorization for operation and registration of foreign reinsurers, the cases of voluntary and ex-officio cancellation were included.

All these changes bring a favorable outlook for a more open and globalized market in the country as it attracts international players by providing more legal stability, reducing regulatory barriers and costs and more legal freedom for foreign participants.


The National Banking and Insurance Commission of Honduras (CNBS) has taken a similar approach than that of Brazil with its recently issued Circular No. CNBS 022/2021 amending the provisions on the previous Circular CNBS 286/2010 which contained the regulation of reinsurance operation and registry of foreign reinsurers and reinsurance brokers.

The new regulation is meant to adapt and adjust its provisions to the current market conditions and the country’s insurance system as well as to make the transition from a documentary registry to an electronic one, in relation to the registration, renewal, suspension and cancellation processes for foreign reinsurance companies and local and foreign reinsurance brokers registered in the CNBS registry.

In that sense, the new law now requires local insurance companies and branches of foreign insurance companies to use the services of reinsurers, reinsurance brokers, branches or representative offices of reinsurers and coverholders who are registered in the foreign reinsurer and reinsurance broker registry maintained by the CNBS.

The term “coverholder” and “binding authority” are now added to the list of definitions to include “authorized underwriter” or underwriting agency (“suscriptor facultado”) as another way of contracting reinsurance contracts by local insurance companies.

As per authorization requirements for foreign reinsurance companies, the new law provides that foreign reinsurers should hold a minimum rating of BBB or equivalent with one of the 4 main rating companies as follows: Standard & Poors BBB-, Fitch BBB-, Moodys Baa3, AM Best B+.  Additionally, it has eliminated the requirement to provide Financial Statements and Annual Reports both for initial registration and renewals. The registration is now carried out through the new online portal (PDRP) which must be handled by the local representative of the reinsurer or the local representative of the insurance company doing business with the reinsurer.   

In terms of due diligence, insurance companies are required to have systems for evaluating the various risks linked with their reinsurers and branches and are also required to send reinsurance contracts to the CNBS within 15 business days after the closing of each semester through electronic channels. Reinsurance contracts must comply with national and international market practices and contracts must be translated to Spanish.

For the contracting and management of reinsurance, insurers must have information systems that assist the identification of total risk. Non-proportional reinsurance contracts on catastrophic risks must provide at least 100% reinstatement of the contract limit, with an interval of 72-hour from one catastrophe to another.

In terms of compliance, registered reinsurers, branches, representative offices and reinsurance brokers must report any significant change to the CNBS within the quarter following the date the changes were made. These include changes in corporate name or domicile, merger, acquisitions, conversion or any other significant corporate change that may affect the registration.

This article was co-authored by Veronica Moreno, Miami LAC hub team member.

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