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18 January 2018

Brazilian insurance regulator opens local market for foreign reinsurers

The Brazilian Private Insurance National Board, so-called CNSP, issued Regulation No. 353/2017 (Regulation 353) (20 December 2017), which eliminates limitations established under Regulation No. 168/2007 (Regulation 168) to cede risks to foreign reinsurers. According to CNSP, the elimination looks to enhance the Brazilian reinsurance regulatory framework with an eye on global reinsurance best practices.

Before Regulation 353, Regulation 168 allowed Brazilian insurance and reinsurance companies to transfer risks to foreign related companies or members of the same financial conglomerate, subject to premium thresholds for each contract as shown below:

Maximum ceded to foreign related reinsurers

Period

20%

Until 31 December 2016

30%

Until 31 December 2017

45%

Until 31 December 2018

60%

Until 31 December 2019

75%

1 January 2020 and onwards

Also, before Regulation 353, Brazilian insurance companies, under Regulation 168, were required to cede reinsurance to Brazilian reinsurance companies for each contract as shown below:

Minimum ceded to foreign related reinsurers

Period

40%

Until 31 December 2016

30%

Until 31 December 2017

25%

Until 31 December 2018

20%

Until 31 December 2019

15%

1 January 2020 and onwards

Through Regulation 353, CNSP eliminated both: (1) the cap applicable to the cession of reinsurance to foreign-related reinsurers; and (2) the minimum threshold that protected Brazilian reinsurers. Regulation 353 introduces, however, a right of first refusal under which Brazilian reinsurance companies have to be offered at least 40% of a Brazilian insurance company's reinsurance cession and the Brazilian reinsurance company's exercise of that right must be made under the same conditions offered and/or accepted in the international market (i.e., the right of first refusal must guarantee equal treatment to all reinsurance companies).

These eliminations are welcome news, as they are expected to result in an expansion of the Brazilian reinsurance market and the development and launch of additional products.

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CONTACTS

For additional information with respect to this Alert, please contact the following:

Ernst & Young Serviços Tributários SP Ltda, São Paulo

  • Ana Luiza Lourenco
    analuiza.lourenco@br.ey.com
  • Diego Sanchez Vargas
    diego.vargas@br.ey.com

Ernst & Young LLP, Financial Services International Tax Desks - Brazil, New York

  • Marcus Paulo Segnini
    marcus.segnini1@ey.com

Ernst & Young LLP, Latin American Business Center, New York

  • Marcelo F. Lira
    marcelo.lira@ey.com
  • Ana Mingramm
    ana.mingramm@ey.com
  • Enrique Perez Grovas
    enrique.perezgrovas@ey.com
  • Pablo Wejcman
    pablo.wejcman@ey.com

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ATTACHMENT

PDF version of this Tax Alert

Document ID: 2018-5159

 
 

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