New legal framework for foreign reinsurers and intermediaries in Ecuador
On Friday February 24, 2023, the Superintendence of Companies, Securities, and Insurance (SCVS) issued new provisions on the requirements that foreign reinsurers and reinsurance intermediaries must meet in order to obtain or maintain their license to do business in Ecuador from abroad.
The new legal framework, among other issues, increases the minimum rating required from international reinsurers. This change comes as no surprise since, at the end of January this year, the General Regulations to the Organic Law of the National Public Procurement System were modified to require the Ecuadorean public sector-before contracting their insurance and surety bonds- to demand from their insurers that their international reinsurers have a risk rating of at least “A”. This shows how the regulator is more focused in the need of reviewing the financial solvency requirements of international reinsurers doing business in Ecuador, particularly, after the process of liquidation of Seguros Sucre started.
The more relevant changes in the new provisions in respect of the registration of foreign reinsurers are the need to submit the full rating report issued by an internationally recognized rating agency-before, a simple letter confirming the rating was sufficient- and the increase of the minimum rating levels which a reinsurer must meet in order to be eligible for the license to operate locally. This, in addition to the new requirement to submit audited financial statements and annual reports, evidences how the regulator will scrutinize, even more, the solvency of the entities underwriting reinsurance business in Ecuador from abroad.
For those that are currently registered to do business in Ecuador as foreign reinsurers and who do not meet with the minimum rating levels established by the new provisions, their registrations will be valid until their expiration. The new provisions further clarify that for those local insurance companies with business ceded to foreign reinsurers that do not meet the new minimum rating levels required, such reinsurance placements will remain valid until their expiration.
With respect to the registration of foreign reinsurance intermediaries, the new provisions simplify the requirement to submit evidence of the existence of the company and their authority to act as reinsurance intermediary.
We at Kennedys, together with our associated office in Ecuador, are ready to assist in your further queries with respect to this new set of provisions and their implementation by the SCVS.
This article was co-authored by René De Sola, partner at Tobar ZVS, Kennedys associate office in Ecuador.