Newsletter Insurance – Important Regulatory Changes to the Insurance and Healthcare Sectors
Purchase of insurance in foreign currency and operational rules for contracting insurance abroad
Resolution of the National Counsel of Private Insurance (“CNSP”) No 379, of 4 March 2020, brought changes to article 2 of Resolution CNSP No 197, of 16 December 2008, that establishes the provisions for purchase of insurance in foreign currency and the rules to purchase insurance abroad.
The new regulation has lifted the restrictions which were previously set out by Resolution CNSP No 197/2008. Pursuant to the old rule, only certain lines of business could be issued in foreign currency. Now, according to new provision, which will become effective as of 1st April 2020, the insurance companies and insureds can mutually agree to the policy to be issued in foreign currency, except for circumstances which regulations may establish otherwise.
In addition to the above, the Private Insurance Superintendence (“SUSEP”) has made available, on 6 March 2020, a public consultation of a draft of Circular setting out changes to the operational procedures for purchase of insurance abroad (“Public Consultation”).
The provisions suggested under the Public Consultation are very similar to those currently set out under Circular SUSEP No 392/2009. Nonetheless, the main changes are highlighted below:
1. The consultation to the insurance market has decreased to 5 insurers to prove that there is no coverage offered by the Brazilian entities to the risks to be insured abroad. The current regulation requires that 10 insurers must be consulted;
2. The requirement to have an official sworn translation of the offer made to the international market has been removed in the current draft;
3. The possibility of requesting a statement issued by associations representing insurers in Brazil confirming that no coverage is offered by Brazilian insurers has been removed in the current draft; and
4. A provision stating that consultation must be made (i) before the purchase of the insurance abroad; and (ii) to insurers that have issued premium related to the consulted line of business within the last twelve (12) months. Consultations in breach of this provision will not be accepted.
Resolution CNSP No 380/2020 – Amendments to Resolution CNSP No 168/2007
Resolution CNSP No 380, of 4 March 2020, brings changes to Resolution CNSP No 168/2007, which regulates Resolution CNSP No. 126/2007, in order to include open private pension entities (“EAPC”), closed private pension entities (“EFPC”) and private healthcare plans entities as cedants for the purpose of contracting reinsurance.
In this context, with the inclusion of the EFPC and the private healthcare plans entities as cedants of reinsurance risks, paragraph 3 of article 2 of Resolution CNSP No. 168/2007 provided attribution to SUSEP of supervision of those operations in which said entities are listed as cedants only, as they are regulated and supervised by other authorities.
Resolution CNSP No. 380/2020 becomes effective on 1 April 2020.
However, this change is brought at a regulation level. Therefore, we have explored below certain aspects of Brazilian law on the matter.
Federal Law No 9,656/1998, which regulates private healthcare plans entities, plans and insurance coverage, establishes, in its article 35-M, that private healthcare providers entities are authorized to contract reinsurance with authorized reinsurers.
Furthermore, Complementary Law No 109/2001, which regulates private pension entities, both open and closed, also es tablishes that such entities can reinsure with authorized reinsurers in Brazil.
However, Complementary Law No 126/2007, which regulates reinsurance operations, defines cedants as “the insurance company that places in reinsurance or the reinsurer that places in retrocession”. The Complementary Law also states that cooperative insurance companies are also considered as cedants.
Therefore, the legal definition of cedant is set out in a law of 2007, which was enacted after Federal Law No 9,656/1998 and Complementary Law No 109/2001, and such definition is silent in respect to EAPC, EFPC and private healthcare providers.
We understand that the change brought by Resolution CNSP No 380/2020 is positive to all sectors – private pension, private healthcare and reinsurance. However, based on the principle of rule of law under the Brazilian Constitution, we understand that the legality of the changes brought at regulatory level can be questioned, unless the definition of cedant is amended under Complementary Law No 126/2007.
Therefore, we strongly recommend that entities looking to reinsurer such risks should seek appropriate legal advice to navigate complexities posed by the operations and legal risks relating thereto.
Finally, Resolution CNSP No 380/2020 revokes several provisions of Resolution CNSP No 168/2007:
- Paragraphs 1 and 3 of article 14, which established the requirement to inform SUSEP of (a) intra-group reinsurance; and (b) whenever reinsurance is placed with a single admitted or occasional reinsurer in certain percentages established by the regulation;
- Paragraph 5 of article 15, which established the requirement for audit committee of insurance companies and their independent auditors to prepare a detailed report on compliance with the right of first refusal to local reinsurers;
- Sole paragraph of article 17, which established an exception to life insurance, existing or offered in conjunction with life insurance plans for survival or pension plan, to comply with the rule of mandatory offer to the local reinsurance market; and
- Articles 21 to 26, which established issues related to guarantees and provisions related to local insurers and reinsurers, which is due, in our view, to the rules already covered by the other rules in force on the subject (notably Resolution CNSP No 321/2015 and Circular SUSEP No 517/2015).
Resolution CNSP No 381/2020 – Regulatory Sandbox
On 4 March 2020, Resolution CNSP No 381/2020 was enacted, setting out rules for the authorization and setting-up of insurance companies to take part in the experimental regulatory environment for a determined period (“Sandbox”). Under this regime, the insurers will be permitted to develop innovative projects, based on eligibility, limits and other applicable rules. Resolution CNSP No 381/2020 was further regulated by Circular SUSEP No 598, dated 19 March 2020.
Insurers will be required to enter SUSEP’s bid, requiring a temporary authorization under the Sandbox. SUSEP will inform on its website the companies which have been granted the authorization within forty-five (45) days of the end of the bid process.
The purpose of the Sandbox is to enable discussions between the regulator and supervised entities, offering a space to further develop the use of new technology for innovation and encourage economic growth.
In the Sandbox, supervised entities can benefit from lighter touch regulation in a safe environment to test, in real time and smaller scale, how innovation can affect their business model. Nonetheless, on 30 March 2020 SUSEP published on its website that deadlines related to the sandbox bid are suspended due to Coronavirus COVID-19 pandemic.
Resolution CNSP No 382/2020 – Mystery Shopping
Resolution CNSP No 382/2020 establishes the principles to be followed by supervised entities in respect to their relationship with the client, the use of mystery shopping as a mechanism of supervision by SUSEP. For purpose of this rule, supervised entities are insurance companies, capitalization companies, private pension entities and intermediaries.
The Resolution also establishes that mystery shopping can conduct research, simulate and test, in person or remotely, the underwriting, distribution, intermediation, promotion, marketing and information of products, services and other transactions related to insurance, pension and capitalization, to verify if conduct practices are in line with the regulation.
SUSEP is not required to inform the supervised entity or the intermediary of the activity of the mystery shopping.
Additionally, pursuant to the 3rd paragraph of article 3 of the Resolution, supervised entities must follow these principles as part of their business conduct: ethical, responsibility, transparency, diligence, loyalty, probity, honesty, strict good faith, free initiative and free competition. Supervised entities must also treat customers fairly to ensure trustworthiness to the private insurance system.
According to the new regulation, supervised entities are also required to adopt a conduct policy which includes strategic purpose and company values, to guide their business activities.
Resolution CNSP No 383/2020 – Registration of operations
Resolution CNSP No 383/2020 determines that Brazilian supervised entities register their insurance, open private pension, capitalization and reinsurance operations in registration systems previously approved by SUSEP and managed by registrars licensed by SUSEP.
The new rule provides that the registration must be made within a term compatible with the complexity, risk and nature of the registered event or transaction. However, SUSEP is authorized to establish that the registration must be made within 30 days.
The new rule allows that conciliation procedures are used to maintain accurate information in the registration systems but does not further regulate how it can be done.
Finally, the new rule establishes that transfer of portfolio, mergers and spin-off transactions, among others, will have specific procedures in the system for their registration.
Normative Resolution No 449 and Normative Instruction No 1 – Regulatory Revision
Both normative rules issued by the Brazilian Healthcare Regulator (Agência Nacional de Saúde Suplementar – “ANS”) aim into revoking previous normative rules which are no longer in use or that have been altered by later rules.
Such measures are part of the regulatory management program instituted by ANS. The ANS aims at revising, updating, simplifying and consolidating the applicable rules which regulate the private healthcare plan’s sector, improving its efficiency and contributing for the development of the supplementary healthcare market in Brazil.
Normative Resolution No 449 and Normative Instruction No 1 revoke a total of 147 regulations, following the recently issued Decree No 10,139/2019, which has determined deadlines and schedules to all regulatory authorities to provide for a study of all regulations tacitly revoked, no longer in use, or encompassed within different rules.
Federal Decree No 10,278, from 18 March 2020 – Validity of Scanned Documents
The Federal Decree No 10,278, published on 18 March 2020, sets out the minimum technical requirements for digital documents to be accepted as originals, between private parties and between private parties and public authorities.
Among other rules, the Decree provides grounds for ensuring the authenticity documents and the liability of the issuers vis-à-vis public authorities, complementing Law No 13,874/2019 and Law No 12,682/2012.
Pursuant to article 5 of the Decree 10,278/2020, all documents to be presented to public authorities must (i) contain a digital signature; (ii) comply with minimum technical standards set out in Schedule I of the Decree; (iii) contain specific meta-data, as set out in Schedule II of the Decree.
The Decree No 10,278/2020 can be relevant to the insurance industry, especially in relation to the receipt of underwriting documents and for claims handling and can also influence in the administrative process between the (re)insurers and public authorities, such as SUSEP.
Additionally, this Decree is in line with SUSEP Guidance No 230, of 12 November 2019, which sets out rules for electronic filing. The Decree No 10,278 includes additional parameters to be followed when filing electronic documents with SUSEP, for such documents to be considered valid.
Our team, specialised in Insurance, Reinsurance, Pension Plans and Healthcare plans, is up to date with all the aforementioned matters and is available to answer to any additional queries related to them.
Marcella Hill
Partner
T: + 55 11 96913 2871
+ 44 7478 568 672
E: marcella.hill@cmalaw.com
Jaqueline Suryan
Partner
T: +55 11 3077 3524
E: jaqueline.suryan@cmalaw.com
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