Latin America regulatory update

2017 was a notable year for the Latin American market, not only due to natural events that tested solvency and the ability to deliver on claims, but also because of regulatory developments in key markets. These are exciting times for the region, which is adopting higher and more competitive market standards and establishing trends set to continue into 2018 and beyond.


The political upgrade in Argentina brought about significant improvements to the insurance industry. The market – the third in premium size after Brazil and Mexico – was opened up to international players following the passing of Resolution 40,613 in November 2016. The Resolution allows admitted reinsurers access to the insurance market, who are now able to directly accept risks ceded by local insurance companies without the need for local reinsurers in the middle as before.

On 3 May 2017, when Resolution 40,422 came into effect, the market widened further with an increase of the risk percentage that can now be ceded to admitted reinsurers by local insurance companies. In July 2017 it was hiked from 10% to 50% and will rise incrementally until it reaches the 75% limit in July 2019.

Resolution 40,422 also had an important impact on the local market. The minimum capital requirements for local insurers and reinsurers licensed to operate in reinsurance rose from ARS300 million (c. US$15 million) to ARS350 million (c. US$17 million). This new prerequisite challenged the solvency of the local market and many insurance companies decided to file a reconversion plan (Plan de Reconversión) to meet the new demands. These plans included mergers, transfers of business and settlement agreements.

These changes, however, have opened up new opportunities for the international reinsurance market, especially taking into account the extensive infrastructure projects that President Macri has promised to complete in 2018.


The trend started by Argentina reverberated in Brazil. By the end of 2017 the country had ended restrictions on risk transfer operations involving companies in the same financial group. The minimal compulsory retention of local reinsurers was also repealed.

Resolution CNSP 353/2017 eliminated the maximum percentage of risk cessions allowed within the same economic group, which was formerly set at 30% and was expected to increase to 75% in 2020. Under the new regime, intragroup reinsurance and retrocession transactions are allowed with no restrictions. As long as the Superintendence of Private Insurance (SUSEP) is notified about the risk transfer, the cedant reports the instances of risk concentration in a single occasional or admitted reinsurer. Further, the auditing departments of local insurers and SUSEP are allowed to verify that an effective risk transfer took place, under balanced competitive terms. SUSEP is therefore not letting go entirely just yet.

Similarly, the Resolution also ended the requirement of compulsory cession to local reinsurers and the percentage limitations previously imposed. However, direct insurers will still be required to offer the local market at least 40% of its reinsurance cession on each automatic or facultative contract, but only be required to bind the risk with local reinsurers if they match the terms of the international market. The Resolution also establishes that unfair practices will invalidate the reinsurance contract and the cedant may be subject to penalties to be determined by SUSEP.

Another development that may have an important impact on the activity of admitted reinsurers in Brazil is Ruling 62/2017 issued by the Brazilian tax authority (Receita Federal). The Ruling established that the activities carried out by a representative office of an admitted reinsurer are equivalent to the activities of a local reinsurer for the purposes of corporate income tax of 45%, 11 percentage points higher than the previous 34% rate that admitted reinsurers enjoyed. Although Ruling 62/2017 is already applicable, meetings between the Receita and the Federação Nacional das Empresas de Resseguros-FENABER are taking place to try and find an appropriate tax regime that both can live with[1].

With these important changes, the current administration is leaving behind a decade s long trend of very slow and protectionist opening and now seems keen to truly promote competition between international and local carriers.


This year new regulations are expected to be passed in Panama that will affect foreign reinsurers and reinsurance brokers doing business in this vibrant jurisdiction. In January 2018, the Superintendence of Insurance issued a draft regulation that will repeal Agreement No 4 of 2012 that regulates the registration of reinsurers and reinsurance brokers not established in Panama. The draft was under consultation with the industry until 27 January 2018 but the final wording and date of implementation is yet to be announced.

Some of the important changes expected from the new regulation include a double rating requirement for foreign reinsurers, and the imposition of a 60 day timeframe to file the operating license renewal application. If the double rating requirement is approved it may limit access to the Panamanian insurance market for some foreign players.

For reinsurance brokers, on the other hand, the new regulation will require issuance of a US$250,000 bond on behalf of the Superintendence of Insurance of Panama in case of any penalty imposed for breach of the broker’s obligations. Under the current regime, the obligation is to purchase a policy to cover errors and omissions with an indemnity limit of at least US$150,000.


Towards the end of 2017, Peru passed a new regulation[2] establishing guidelines and limitations to local insurance companies ceding risk in outward reinsurance and when providing cover as co-insurers.

One of the most relevant changes resulting from this new regulation is the rise of the ratings that non-admitted foreign reinsurers must meet in order to underwrite business from Peruvian cedants.

Although there is still no mandatory registration, foreign reinsurers are required to hold the minimum required rating[3]. In practice, local cedants tend to prefer ceding risk to reinsurers already registered with the regulator to facilitate their reporting obligations.

Another important change incorporated by this new regulation is that in cases of pure fronting with 100% of the risk ceded, the parties can agree that the payment of claims indemnities will be owed by the fronting company only after the funds have been received from the reinsurer. This last provision is already raising some eyebrows of cedants and reinsurers alike, and may result in risk managers having an even keener interest in knowing their reinsurers.

  1. Admitted reinsurers would also be subject to social security contributions at a rate of 4.65% on gross premiums less claims paid Programa de Integração Social (PIS) and Contribuição para Financiamento da Seguridade Social (COFINS).
  2. Resolution SBS 4706-2017.
  3. Under the new rules, acceptable ratings are: Standard & Poor’s BBB; Moody’s Baa2; Fitch Ratings BBB and AM Best B+.