At the trial session held on March 14, 2012, the Administrative Council for Economic Defense ("CADE") reviewed and approved, with restrictions, the agreement between BB Seguros and Mapfre Group for the formation of two holding companies that will be active in the insurance market. 

In addition to determining the divestiture of the agricultural insurance portfolio of Mapfre to an independent insurer, CADE recommended that the Secretariat of Economic Law ("SDE") opens investigations into allegedly antitrust infringements allegedly committed by banks, insurers and reinsurers. 

According to the Reporting Commissioner of the BB Seguros/Mapfre Group proceeding, Banco do Brasil (the banking arm of the same financial conglomerate to which BB Seguros belongs) has been allegedly tying the sale of credit and insurance products to agricultural businesses. The Reporting Commissioner argued that this conduct would be rather common in the insurance market. 

Another issue to be investigated concerns the alleged breach of certain reinsurance regulations that would also amount to an antitrust infringement according to the Reporting Commissioner. By way of example, the Commissioner quoted the triangulation of cessions among insurers and reinsurers of different economic groups as a means to avoid rules that establish limits for cross-border intra-group cessions. 

Another example was the alleged abuse by reinsurers in negotiating certain provisions of reinsurance agreements with direct insurers, in particular claims control provisions and fronting arrangements. The Reporting Commissioner argued that such abusive behaviour could generate substantial distortions in the prices of insurance products, among other potentially negative consequences. 

The last point to be investigated is the alleged improper collection of brokerage commissions in the sale of mandatory insurance products, as it is the case of DPVAT. The Reporting Commissioner claimed that brokerage commissions should not be charged when the insurance being sold is mandatory by virtue of law. 

It remains to be seen how SDE will react to CADE′s recommendations. It seems likely that SDE will open a preliminary investigation, by means of which it will try to gather facts and information concerning the alleged practices.

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