The Bureau of Private Insurance (Susep) has put up for public consultation a draft of the Resolution of the National Board of Private Insurance (CNSP) that governs the operations of assignment and acceptance of reinsurance and retrocession operations and their brokerage, coinsurance, operations in foreign currency, and insurance contracts abroad.

The draft consolidates several regulations that deal with these topics, modernizes the provisions, and makes them compatible with the regulations recently issued by CNSP and SUSEP.

According to the explanatory memorandum, the drafting process was accompanied by discussions with representatives of the regulated market. Also taken into consideration were international references on the subject, and the recommendations of the International Association of Insurance Supervisors (IAIS).

The big news concerns the change in the global assignment limit rule. This rule provides for that insurers and local reinsurers may not assign in reinsurance and retrocession more than 50% of the premiums written for the risks they have underwritten, considering the totality of their operations, in each calendar year. Some classes are not taken into consideration for the calculation of the limit (for example, performance bonds, rural insurance, and credit insurance).

The draft regulation proposes the following relaxation:

• for insurers, extinguishment of the global assignment limit; and
• for local reinsurers, enlargement of the percentage for retrocession assignments up to 70% of the premiums written (without exception per line of business).

On the other hand, the text requires that insurers present a technical justification, by March 31 of the subsequent calendar year, for the adoption of a reinsurance assignment percentage higher than 90%, considering the totality of their operations, per calendar year. According to Susep, this rule is a precautionary measure, also adopted by other reference jurisdictions, to monitor and curb distortions in the use of reinsurance.

Susep also clarified that maintenance of a limit for local reinsurers is justified, insofar as it is in the nature of their operation to retain high risks. In addition, as a rule, these players do not need retrocession to make business possible, unlike insurance companies. In the general context, their portfolios are suited to the current operational limit (which is 50%).

In parallel, the draft regulation inserts a principle command, providing that insurers and local reinsurers adequately manage their reinsurance and retrocession operations, through the development and implementation of a risk transfer policy (which will complement the risk management policy provided for in CNSP Resolution 416/21).

The draft regulation establishes the minimum guidelines that must included in the policies for retention and assignment of risks in reinsurance and retrocession. The deadline for insurers and local reinsurers to prepare their risk transfer policies will be 180 days from the resolution's entry into force.

The new commands, according to Susep, establish a less prescriptive approach, based on the business strategy of the regulated companies themselves, with an emphasis on the structuring of reinsurance programs.

The measures will especially benefit companies that operate in high-risk lines of business that involve large sums insured and demand intensive use of reinsurance. Companies entering certain lines of business will also benefit, because the support and expertise of the reinsurer is usually fundamental in this scenario to make the operation viable.

The draft also ceases to make reference to the percentage of the preferential offer of reinsurance assignment to local reinsurers, instead referring to the applicable legislation (today, 40%, according to article 11, subsection II, of Complementary Law 126/07). The text is prepared for possible legislative change (studies of which are underway, as reported by Insurance Europe - see Country fact sheet of June 2022).

Public Consultation 9/22 will be open until August 18, 2022, and suggestions may be received via the e-mail address This email address is being protected from spambots. You need JavaScript enabled to view it., accompanied by a specific standardized table for comments or proposals, available on Susep's website.