Argentina: Important Amendments To The Argentine Reinsurance Regulatory Framework

The Superintendence of Insurance amended the Argentine reinsurance regulatory framework: (i) allowing more placement of risks with foreign admitted reinsurers; (ii) eliminating the requirement that they register as permanent representation in accordance with article 118 et seq. of the Argentine Companies Law No. 19550; (iii) updating the minimum capital required from local reinsurers; (iv) extending deadlines to prove such capital; and (v) establishing an alternative restructuring plan, among other changes.

On May 4, 2017 the Resolution No. 40422-E/2017 of the National Superintendence of Insurance ("SSN", after its acronym in Spanish) was published, substantially amending the regulatory framework of the reinsurance regime. Some of the main changes are mentioned below.

Minimum Capital to Operate in Reinsurance

The minimum capital required from local reinsurers and insurers licensed to operate in reinsurance as of July 31, 2016 was increased from AR$300 million (approximately USD 20 million) to AR$350 (approximately USD 22.5 million).

The deadlines provided under the regime on Gradual Adequacy of Minimum Capital of such reinsurers and insurers (see "Insurance and Reinsurance: Extension of intermediate deadlines to prove the minimum capital to operate", published in Insurance News No. 2 of March 20, 2017) were extended, with the exception of the first that expired on March 31, 2017, date on which evidence of having reached a capital of AR$60 million must have been provided. The following three deadlines will be December 31, 2017 (instead of June 30, 2017) to provide evidence of having a capital of AR$130 million, December 31, 2018 (instead of September 30, 2017) to evidence AR$250 million (the previous value for this stage was AR$200 million) and, finally, December 31, 2019 (instead of June 30, 2018) to prove a total capital of AR$350 million (the previous total value was AR$300 million).

Dates Minimum Capital
According to previous regulation According to current regulation
March 31, 2017 AR$60 million AR$60 million
June 30, 2017 AR$130 million -
September 30, 2017 AR$200 million -
December 31, 2017 - AR$130 million
June 30, 2018 AR$300 million -
December 31, 2018 - AR$250 million
December 31, 2019 - AR$350 million

Entities that adhered to the regime on Gradual Adequacy of Minimum Capital shall submit certified documentation proving such decision, adopted by its management, together with their financial statements as of March 31, 2017, along with an auditors' report.

In case of not having adhered to the mentioned regime on Gradual Adequacy of Minimum Capital, or not having provided evidence of the minimum capital required, such local reinsurers and insurers with reinsurance operations may submit a Restructuring Plan. This decision must be proved in the same way as that to adhere to the regime on Gradual Adequacy of Minimum Capital. The Restructuring Plan is subject to the prior authorization by the SSN.

The Restructuring Plan must be presented within 60 calendar days counted from the expiration of the term to submit the financial statements as of March 31, 2017, together with the commitment of the shareholders to make capital contributions for the entity to afford all expenses and operating costs. The use of resources or assets of the entity that is not to satisfy and cancel commitments with cedants and/or retrocessionaires is prohibited.

The alternatives admitted under a Restructuring Plan are merger by absorption, portfolio transfer, assignment of rights and cut-off agreements, although other proposals may be submitted to the consideration of the SSN. In all cases the conformity of each cedant and retrocessionnaire must be evidenced.

Cessions to Admitted Reinsurers

Reinsurance and retrocessions may be placed both with local reinsurers and with admitted reinsurers.

Insurers may place reinsurance, in all lines, with admitted reinsurers subject to the following regime:

  • Contract incepting from July 1, 2017, up to a maximum of 50% of premiums ceded under the contract.
  • Contract incepting from July 1, 2018, up to a maximum of 60% of premiums ceded under the contract.
  • Contract incepting from July 1, 2019, up to a maximum of 75% of premium ceded under the contract.

Facultative reinsurance contracts for individual and catastrophe risks for sums equal or higher than USD35 million incepting from July 1, 2017, may be fully placed with admitted reinsurers.

Intragroup Cessions

The limit up to which local reinsurers may retrocede within a same economic group was increased. Local reinsurers shall not transfer to companies located abroad related or belonging to the same financial conglomerate more than 75% of written premiums, net of annulments (previously, 40%), calculated as of the end of each fiscal year. Such limit may only be exceeded with the SSN's prior authorization.

Requirements for the Registration of Admitted Reinsurers

In relation to admitted reinsurers, the required net worth for their registration with the SSN was increased from USD30 million to USD100 million. In addition, new requirements were included, such as providing evidence of credit ratings for the past 3 years by certain international rating companies.

Also, the requirement that foreign reinsurance companies authorized as such in their countries of origin be registered with the Public Registry of Commerce in Argentina as a permanent representation in the terms of article 118 et seq. of the Argentine Companies' Law No. 19550 was lifted.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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