On July 16, the Brazilian Private Insurance Authority (Superintendência de Seguros Privados - Susep) published the Susep Electronic Notice 2/24 in order to select interested parties to participate in the third edition of its Regulatory Sandbox.
Susep's Regulatory Sandbox is a program that offers the opportunity to companies focused on innovation within the insurance sector (insurtechs) to start their operations in an experimental regulatory environment, in which the application of certain rules and requirements is more flexible.
In such environment, it is possible to temporarily test new products, services, and business models under Susep's supervision. Among the objectives of the program, the search for innovation in the insurance business, the promotion of free enterprise, and the creation of benefits for the end consumer stand out.
Unlike other editions, the Eletronic Notice does not sets forth a deadline for project submissions or a limit on vacancies for entry into the Sandbox. The concept is to maintain an always-open selection proceeding without a set end date, mirroring the model implemented by the Financial Conduct Authority (FCA) in the United Kingdom since August 2021.
This new structure allows companies to have access to the program at any time of the year and can present their projects to regulatory authority acknowledged and agreed with their own development schedule.
The notice replicates the procedure of the selection process of the last edition and establishes two stages:
- Selection process, which requires a score equal to or greater than 70, acknowledged and agreed with the evaluation criteria of the notice; and
- Granting of temporary authorization, acknowledged and agreed with the provisions of the applicable regulatory rules.
The analysis of projects within the scope of the selection process will respect the order of filing the applicable request. For those selected, Susep will grant a temporary authorization for a period up to 36 months.
Another great novelty of the public notice is the prioritization of projects focused on sustainability or technological innovations. Consequently, innovative projects qualified as sustainable[1] or technological,[2] will have a preference in the order of the analysis conducted by Susep and will benefit from a higher score in the selection process (with 20 points for each of these criteria).
Who can participate
Unlike the previous edition, the Electronic Notice excluded adherence to Open Insurance as a scoring discretion under the selection proceeding. There was no change in the eligibility requirements for participation in Susep's Regulatory Sandbox, which remain identical to those of the second edition and are provided for in item 3 of the Electronic Notice.[3]
There is also no news regarding the insurance lines that can participate in the Sandbox. Susep repeated the branches and coverages described in the notice launched in 2021. Initiatives aimed at products classified as financial lines and coverage with long-tail characteristics remain excluded (ie. engineering risks, extended warranty, disability, lender, international travel, agricultural for production cycles longer than six months, among others).
Due to the high inflation of recent years, the maximum coverage limits were readjusted. They became BRL 180,000.00 for hulls, BRL 200,000.00 for agricultural insurance and BRL 120,000.00 thousand for other coverages.
Applications for submitting projects can now be made format electronically, through a request in the Electronic Information System (SEI). Susep will analyze the projects in the order of filing, with enhanced priority given to projects classified by the proponents as sustainable or technological.
Since the creation of The Sandbox in 2020, 21 projects have received temporary authorization to operate in the experimental regulatory environment. Of these 21, two companies have already received a definitive license to operate as traditional insurers in Brazil.
Machado Meyer's Insurance, Reinsurance and Private Pension practice has been following the development of Susep’s Regulatory Sandbox since its first editions and can provide more details on the matter.
[1]It is the project aligned with the rules of Susep and the National Council of Private Insurance (CNSP) related to the theme and the Ecological Transformation Plan of the federal government. The project must be capable of generating climate, physical or transitional, environmental or social benefits to the insured, beneficiaries or civil company.
[2]It is the project that promotes the development of innovative technologies, through the introduction of technological novelty or technological improvement in products, services, business dealings or processes, which adds new functionalities or characteristics and can result in improvements and actual gain in quality.
[3] "3. ELIGIBILITY
3.1. The requirements for participation in the Regulatory Sandbox are:
I - present a product and/or service that fits the concept of an innovative project;
II - to use remote ways and means in operations related to its insurance plans, in the format provided for in the specific regulation;
III - present how the technology used in the product and/or service is innovative or how it is being used in an innovative way;
IV - present a product and, when applicable, a service, in a stage of development compatible jointly with expectation granting of the temporary authorization;
V - present a business dealings plan, with the requirements described in this Notice; and
VI - to present an analysis of the main risks associated with its performance, including those related to cybersecurity, and the plan to mitigate any damages caused to customers."
