Brazil: New Reinsurance Rules – A Change In Course

Last Updated: 2 September 2015
Article by João Marcelo dos Santos

When regulatory environments progress, they do so with uncertainty taking some steps forward, some back, and having periods of silence. The publication of National Council of Private Insurance (CNSP) Resolutions N. 321 and 322 (the last one was replaced by the CNSP Resolution No. 325) seem to duly fit this scenario.

In this context, to understand the impacts of the new rules and their relevance, we will make some comments about the Brazilian reinsurance regulation, including a brief historical introduction to the reinsurance activity in Brazil and information about the most important events since the opening of the Brazilian reinsurance market.

I. The Reinsurance Monopoly

The first major watershed for the Brazilian insurance market was the creation of the former Reinsurance Institute of Brazil (IRB) in 1939. That was a very important time for the country's economy in which strong industrialization and modernization of social relationships demanded a larger supply of insurance and reinsurance as instruments of protection.

Within this context, the IRB's operation as a regulator and monopolistic reinsurer was fundamental for the Brazilian insurance market and for strengthening the companies that operated on it. This occurred through the channeling of the state's efforts to encourage and direct insurance activities.

In 1967 an independent government agency was created whose function was to regulate and supervise the Brazilian insurance market, named SUSEP (in Portuguese "Superintendência de Seguros Privados"), the Private Insurance Oversight Office, while regulation of the reinsurance market remained with the IRB. Separation began between the functions of economic agent and those of regulatory agent and supervisor of private enterprise, though SUSEP had actually integrated into a structure in which state administration predominated.

By the 1980s, it became evident that change was necessary, because Brazilian society only had access to expensive products that were strictly regulated, even in terms of pricing. The negative effects were clearly felt of a closed insurance market both for the participation of foreign capital and for direct contact with the international reinsurance market.

At the end of the 1980s, the regulation underwent two major transformations. There was first a surge of deregulation (with the freeing up of premium charges and brokerage commissions, among other measures), SUSEP increased in importance, and the growing modernization of the insurance business became more evident (i) the archaic vision in which regulation was confused with state planning of economic activities, and (ii) the inadequacy of a reinsurance monopoly.

In fact, the legal framework and existence of a self-regulating monopolistic IRB represented an artifact from the time in which the state "was" the economy and occasionally allowed private agents to operate in partnerships and under its close supervision.

In this context, transformations accelerated the following changes:

  • 1997 – foreign capital was allowed on the insurance market;
  • 1999 – the first, unsuccessful, attempt to privatize IRB Brasil Resseguros SA, with the passage of Law 9932;
  • 2003 – the start of an intense process to adopt international regulatory and supervision standards, which ended with the passage of new rules for capital in 2006;
  • 2005 – a bill of law was sent to Congress to open the reinsurance market;
  • 2007 – Supplementary Law 126 was passed and its regulation finalized the first part of the history of an insurance market that was (i) strictly regulated, and (ii) closed off to foreign capital and to the international reinsurance market.

In 2008, finally the insurance market included the reinsurance business.

II. Opening of the Market

The opening of the Brazilian reinsurance market was based on the Supplementary Law No. 126/2007 and the legislation arising therefrom. Such rules, though not perfect, did the job of creating an environment reliable and attractive to international investments, and capable, to some extent, of fostering the local reinsurance market.

The structure established at that time was of Brazilian companies (local reinsurers) and foreign companies (admitted and occasional) operating in the same market. Under the rules published, local companies had the advantage of preferential offering (initially 60% of the risks ceded, currently 40%), while cessions to occasional reinsurers were limited. This resulted in a model that both attracted international groups to the local market and opened the doors for the reinsurance market to effectively became the driving force behind the development of the Brazilian insurance market.

Three years after the opening, naturally, imperfections and need for changes arose, and the response to it, which came up incorrect in its form, content and strength, was the enactment of CNSP Resolutions No.s 225 and 232.

Aiming at protecting the local reinsurance market, rules on market reserve (in replacement of the preference rules) were created and some strict limits were put to intra-group operations.

On December 10, the National Private Insurance Council - CNSP published Resolutions Nos. 224 and 225, among others. On account of their content and the deadline for their coming into effect, the impact of these new rules could not have been worse for Brazil's image in the local insurance and reinsurance market.

CNSP Resolution No. 224 prohibited the undertaking of any transaction between associate companies when the assignee is domiciled abroad, while CNSP Resolution No. 225 abolished the system of preferential offering to local reinsurers and effectively established a market reserve of 40% of all risks ceded in reinsurance.

Far more than a contradiction to a system that had been carefully discussed and designed, the new rules affected the positive image which the Brazilian insurance regulation authorities were then building up and made room to a number of more serious problems. We may mention, but not limited to, the costs with a complex structure of risk placement (known as "triangulations") and the discouragement towards long-term investments based mainly on reliability.

Brazilian regulation underwent troubled times with some positive and negative initiatives and, in all cases, with a very deficient communication that aggravated the feeling of lack of direction accentuated by the enactment of CNSP Resolutions No.s 225 and 232.

It is important to mention that, at this moment, there are 16 local, 36 admitted and 74 occasional reinsurers operating in Brazil.

III. CNSP Resolution No. 322/15 and CNSP Resolution No. 325/2015

Publication of CNSP Resolution No. 322 (replaced by CNSP Resolution No. 325) may be considered as an attempt to have SUSEP back reaching out for some rationality and safety in its actions.

Firstly, the intragroup risk placements will be progressively increased. Until December 31st, 2016, the limit of 20% of each cession will be maintained. This limit will be increased to 30% from January 1st, 2017, 45% from January 1st, 2018; 60% from January 1st, 2019 and 75% from January 1st, 2020.

Further, the market reserve was replaced by a dual system of (i) a preferential offer of 40% of the contracts to the local reinsurers and (ii) a progressive reduction of the market reserve (40% until December 31st , 2016, 30% until December 31st , 2017; 25% until December 31st , 2018; 20% until December 31st , 2019; 15% until December 31st , 2020.

The progressive reduction of the restriction to intra-group operations is worthy of praise. The 20% limit of operations between related companies was contrary to the market expectations. In fact, the regulation had been structured on the assumption that local subsidiaries could do business in Brazil supported, also with regard to capital and subscription capacity, by their parent companies.

The criticism to be made to the new rule is that keeping the restriction in the long run - even at a much lower percentage but still applicable to every coverage – forces the ceding companies to keep complex structures of risk placement.

The same can be said as to the reduction of the market reserve. If the regulation authority believes that the market reserve is not positive, notwithstanding the fact that some of the worst effects thereof were mitigated by publication of CNSP Resolution No. 241 (that regulates the lack of capacity or interest of the local market in each risk), then the ideal would be to annul it. Keeping market reserve along with the preference rule sets an additional control, among many others, to be kept by Brazilian ceding companies. The costs associated with such controls are not insignificant, both regarding their implementation as well as their maintenance.

The CNSP made a mistake. The Resolution CNSP No. 232 was revoked, but the Resolution CNSP 225 was the one supposed to be revoked. The express revalidation of the preferential offer rules was also necessary. The result is unclear interpretation of the rule and the revocation of the list of insurance lines not subject to the intragroup limitations, with important negative impacts.

In this regard, at least part of this mistake was fixed, with the publication of CNSP Resolution No. 325, which "confirmed the CNSP Resolution No. 322 with amendments", revoking the CNSP Resolution No. 232 and expressly maintaining the validity of CNSP Resolution No. 232.

It is important to mention that the same CNSP Resolution No. 322 created a Consulting Commission within the scope of CNSP in order to propose measures oriented to adopt the best world practices. Regardless of its practical results, it is clear the regulation authority's intent to listen to the market and its institutions, particularly the National Federation of Reinsurance Companies.

IV. Conclusion

Among some positive and negative aspects and doubts, the enactment of CNSP Resolution No. 322 indicates that SUSEP is willing to adjust the legislation, correcting mistakes and making progress in the implementation of reinsurance market rules compatible with international practice.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions