Private Insurance Superintendence - SUSEP Circular Letter on Clauses on Embargoes and Sanctions
On 8/7/2019, SUSEP issued SUSEP/DIR2/CGCOM Circular Letter no. 6 that explains the clauses of insurance contracts providing for violation of laws or rules on embargoes or economic or commercial sanctions and their consequences.
The extraterritoriality of the rules on embargoes and sanctions is a problem and has been discussed in many jurisdictions. In Brazil, however, this issue acquires specific contours that call for even more care on the part of insurers and reinsurers.
SUSEP, considering (i) that many insurers are including, among the contractual conditions of their products, a clause on loss of rights, coverage limitations and/or exclusions from coverage deriving from violation of laws or rules on embargoes or economic and commercial sanctions, (ii) that the language of the clauses is, many times, comprehensive and addresses several different situations, and (iii) the number of inquiries of insureds and insurers about the legality and lawfulness of the Clause, explained:
"The prevention measures taken by the insurers as to aspects of their activities that may have a connection with the elements of prevention and fight against terrorism, money laundering, and other types of wrongs in Brazil and abroad are legitimate.
On the occasion of the risk underwriting, the insurer is expected to analyze if there are or not limitations for the coverage to be granted. If there are limitations, the proposal must be refused.
The situations of loss of rights or exclusion from coverage, whichever they may be, must be clearly and objectively described, without generic references.
The situations of loss of rights or exclusion from coverage arising from a violation of the laws or rules on embargoes or economic or commercial sanctions may be provided only in case of an intentional act of the insured or the insured's representative, with a causal relation with the event that generated the loss.
The situations of loss of rights or exclusion from the coverage cannot be based on international laws or rules, except for international agreements ratified by the Brazilian Parliament.
An event occurred subsequently to the issuance of the policy and that contravenes a Brazilian law or rule, or a law or rule incorporated into the Brazilian legislation, does not automatically entail exclusion from the coverage or the insured's loss of rights, and the insurer must comply with the law or rule and/or wait for the court decision.
In the case of sanction of freezing of assets, under Law no. 13810, of 2019, the insurer must suspend all types of payments arising from the insurance contract to the insured or the sanctioned beneficiary, according to said law. The suspension of payment is not characterized as loss of rights or exclusion from the coverage.
The insurer's possible exposure to sanctions, prohibitions or restrictions due to violation of laws or rules on embargoes or economic or commercial sanctions is not a justification for structuring the clause in disagreement with this Circular Letter.
The use of a certain clause in reinsurance and/or retrocession contracts is not a justification for the insurers to structure said clause, in disagreement with this Circular Letter, in the respective insurance contracts.
The use of a certain clause in insurance contracts does not exempt the insurer from evaluating the need to provide information as established in Law no. 13810/2019 and SUSEP Circular, which regulates Law no. 9613/1998."
Some aspects of the Circular Letter must be highlighted.
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