In late 2016, the Argentine Insurance Regulator (SSN by its Spanish initials) made official its modifications to reinsurance regulations, which have had a significant impact in the local reinsurance market and has opened doors for international reinsurers.
Since the previous government, Argentina’s policies have made it tough for international players to penetrate the market and survive local competition. However, in 2016 a new regulation that allows local insurers to cede their risk, was enacted including retrocession agreements that insurers may have entered into, to an international reinsurance company that is registered with the SSN.
Additionally, the new 2016 regulation has enabled registered reinsurers, to enter into reinsurance contracts for risks larger than US$50 million, which has made the reinsurance business in Argentina more feasible for international players.
Decision SSN-40163/2016
The SSN enacted on 11 November 2016, established new requirements for local cedent and retrocession operations with registered and admitted reinsurers. Therefore, as of 1 January 2017, local reinsurers may cede in retrocession a maximum of 10% of their premiums, and this formula will be increased by 10% every year until it reaches 80% in 2024.
Article 1 of the regulation provides the following schedule:
In addition, the gross amount of ceded premiums will be considered for all commissions; therefore the gross amount will include both, passive reinsurance and insurance company´s eventual retrocession operations.
Furthermore, the regulator has established that registered and admitted reinsurance companies may underwrite reinsurance contracts for individual risks above US$50 million and that these contracts will not be included in the premium caps, above mentioned.
Minimum capital
The new regulation provides that reinsurance companies must accredit a minimum capital of 300 million pesos (approximately US$19,237,000) as opposed to the 30 million pesos (approximately US$1,923,700) required prior to this new regulation. In order to accredit this required minimum capital, the regulator has issued a “Minimum capital gradual adjustment regime”, which consists in proving the required capital in the following schedule:
Due to retrocession restrictions and higher minimum capital requirements, this new regulation has put local reinsurers in a bad spot, and consequently many of them are disappearing this year.
Although this new regulation is a hard hit to some smaller local reinsurers and retrocessionaires, these regulatory modifications open doors for international players registered and admitted with the regulator, due to less local competition and because international players may now reinsure risks larger than US$50 million.
