Evolving D&O landscape in Brazil
SUSEP regulation 553/2017
On 23 April 2017, SUSEP, the Brazilian insurance authority, issued its suspension of Regulation 541/2016--its most recent regulations on D&O insurance.
In its stead, SUSEP issued Regulation 553/2017, which aims to re-establish minimum requirements that D&O wordings in Brazil must comply with, effectively replacing the requirements issued under 541/2016. We view this new regulation as SUSEP’s much-needed response to the lack of appropriate and specific regulations on the topic.
Regulation 553/2017 expressly states, under Article 4, that individuals are now entitled to purchase D&O policies directly. Purchasing D&O policies used to be an exclusive right of legal entities who would purchase the policies as policyholders while their directors and officers were designated as the insured. How (re)insurers and D&O wordings will adapt to this new reality is yet to be answered. We also note that this new policy catered directly to individuals must have its wording approved by SUSEP.
Regulation 553/2017 also holds that insurers are able to offer a broader definition of Insured Person, to be taken out as additional coverage, so as to encompass service providers hired by the policyholder and/or the insured, e.g. lawyers, accountants, etc. There is also the possibility to broaden the definition of Insured Person to provide coverage for depositaries, liquidators, and other administrative intermediaries.
The regulation also establishes new rules related to Side B cover. D&O insurance is typically offered via three coverages—Side A, Side B, and Side C:
- Side A coverage reimburses individual D&Os (insureds) for any indemnifiable covered losses they have incurred personally.
- Side B is an additional coverage that is taken out to reimburse the entity (policyholder) for indemnifiable financial losses it has incurred on behalf of the insured.
- Side C coverage is an additional coverage that is taken out by the entity itself that reimburses the entity for any indemnifiable financial losses it has suffered as a result of a securities action brought against the entity.