New Brazilian insurance law approved by Brazilian parliament

Marcella Hill, Jaqueline Suryan and Mariana Jardim

 

The long-anticipated Brazilian Insurance Law, initially introduced as Bill No. 3,555/2004 in the House of Representatives and later amended by the Federal Senate as Bill No. 29/2017, has now been approved under Bill No. 2597/2024. Following its passage in the House of Representatives on 5 November, the Bill is now poised for presidential sanction as the final step before enactment. This new law will regulate the Brazilian insurance market (and consequently reflecting on reinsurance) and fully replace the insurance provisions of the Brazilian Civil Code (Law No. 10,406/2002).

As previously noted¹, this Bill faces significant formal issues, notably that it should have been introduced as a Complementary Law rather than an ordinary law. This procedural oversight exposes the legislation to potential constitutional challenges in court, though any legal scrutiny is likely to take years, creating ongoing uncertainty for the (re)insurance sector.

Despite certain amendments made during the legislative process, we believe that this Bill, drafted over two decades ago, does not fully reflect the substantial developments that have shaped the modern regulatory and commercial environment for insurance in Brazil and globally. Nonetheless, it is reasonable to expect that President Lula will sanction the Bill shortly.

The new law will impose considerable constraints on the growth of the Brazilian (re)insurance market. Primarily focused on protecting insureds, the law does not adequately differentiate between individual microinsurance buyers and large corporate insureds with substantial balance sheets, which could significantly impact the large risks insurance market. The law’s heavy emphasis on protecting insureds overlooks their obligations within the insurance relationship, such as duties of disclosure, notification, and risk management, potentially undermining the principle of mutuality. Additionally, the Bill fails to address the technological advancements and new insurance products that have emerged, particularly with the rise of insurtech and artificial intelligence.

For the reinsurance sector, the law introduces new requirements, such as tacit approval for reinsurance risks, broader application of Brazilian law, and altered rules on payments under reinsurance contracts, expense coverage, cut-through provisions, insurer insolvency, and statutes of limitation.

If sanctioned, the law will require significant contractual and operational adjustments across the market.

The vacatio legis (i.e., the period before the law takes effect) is set at one year from its publication in the Brazilian Official Gazette.

Our team is well-equipped to assist (re)insurance participants in navigating this new regulatory landscape and adapting to the forthcoming legal framework.

 

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^[1] Please see JARDIM, Mariana Cavalcanti; HILL, Marcella; SURYAN, Jaqueline. A inconstitucionalidade formal do Projeto de Lei nº 29/2017. São Paulo: Roncarati. 12 de março de 2024. Disponível em: https://www.editoraroncarati.com.br/v2/Colunistas/Jaqueline-Suryan-Marcela-Hill-e-Mariana-Jardim/A-inconstitucionalidade-formal-do-Projeto-de-Lei-n%C2%BA-29-2017.