Update on Argentinean Legal Framework for Payment of Reinsurance Premium
As part of the economic policies adopted by the Argentinean government, since 2021 the Argentinean Central Bank restricted the access to foreign currency in an attempt to contain the dwindling of their reserves and concerning devaluation levels. Such measures implemented in 2021 had of course an impact to the access of foreign currency for the payment of premiums in USD to international reinsurers that were actively undertaking Argentinean risks in reinsurance and retrocessions. In view of these economic policies, the process to have access to foreign currency needed to pay reinsurance and retrocession premium has been heavily backloaded.
Motivated by the delay and in an effort to improve access to international reinsurance markets, local players of the Argentinean insurance sector worked together with the SSN on finding alternatives to facilitate the process of payment of reinsurance and retrocession premium and secure the financial back up given to the local insurance companies by the international reinsurers doing business in the country. As a result of these efforts, last Friday 3rd February, the Superintendence of Insurance issued Resolution 2023-63-APN-SSN# (the Resolution) which will become effective from 15 February 2023.
The Resolution approves a new procedure (SINENSUP REASEGUROS) to submit reinsurance contracts and processing authorization for the payment of reinsurance premium with the SSN. Some of the highlights of the Resolution are as follows:
- The local insurance company must have the coverage notes duly signed by the reinsurer or retrocessionaire.
- The due date for the payment of reinsurance premium cannot be older than 90 days from the date of the submission.
- The request must be accompanied by a special report prepared by an independent auditor registered with the SSN.
- The independent auditor must: (i) verify that the reinsurer or retrocessionaire is admitted with the SSN; (ii) confirm that the amount of the request is in accordance to the terms of the contracts; (iii) check that the information arising from the contract with those shown are in line with the amounts shown in the accounting records of the insurance company; (iv) confirm that the due date of the premium; (v) validate that the funds available in bank accounts held by the insurance company abroad are sufficient to make the requested payment; (vi) report the viability of set offs of debts and credits; (vii) confirm that the amount to be paid is net of commissions and taxes.
- The SSN will inform the local insurance company about their decision on the request after the analysis of the submission is made. The Resolution does not clarify the timeframe for the SSN to decide on the request.
It is expected that this new procedure will improve the process of obtaining the authorization for the payment of reinsurance and retrocession premium. Having the information submitted certified by an independent auditor and previously approved by the SSN should facilitate the Central Bank approving foreign currency requests from cedants destined for reinsurance premium payments. Although there is no guarantee that by completing this prior approval with the SSN the local insurance companies will have access to foreign currency to comply with their obligations with their reinsurance counterparties, the efforts of the Argentinean insurance sector working together with the SSN in trying to find ways to solve the delays in the payment of premium is commendable.