At the end of last year, the Conselho Nacional de Seguros Privados1 (CNSP) reformulated important rules regarding the intragroup reinsurance ceding and the preferential offer to local reinsurers through Resolution CNSP no. 353, dated December 20th, 2017.
The resolution's purpose was to amend Articles 14 and 15 of Resolution CNSP no. 168/07, which regulates reinsurance and retrocession operations since the opening of the reinsurance market, that subsidizes Complementary Law no. 126/2007.
Article 14 establishes the rules of an excess placement in intragroup reinsurance. As of Resolution CNSP no. 353/17, the cedent is allowed to transfer the risk to reinsurers and retrocessionaires that are member of the same economic group, even when based abroad, without any percentage limitations.
In a timeline, the permission for intragroup ceding to companies based abroad was vetoed by the Resolution CNSP no. 224/10. As of Resolution CNSP No. 232/11, the cedents were allowed to transfer up to 20% of the risk, with the exception of risks related to the surety, export credit, rural, domestic credit and nuclear risks. The restriction was maintained until 2015, when Resolution CNSP no. 322/15 was slightly softened this restriction by means of a progressive rating, starting at a percentage of 20% from 2016 and with a projection to reach 75% in 2020, as long as the reinsurers were registered in Brazil as occasional or admitted reinsurers2.
As of Resolution CNSP 353/17, intragroup ceding became possible in a more flexible manner, provided that the cedent (i) inform the risk transfer to Susep (§1); (ii) report when concentrating the risk in a single occasional or admitted reinsurer (§3); (iii) guarantees the effective risk transfer between the parties (§9) and (iv) guarantees balanced competition conditions (§10).
Resolution CNSP No. 232/11 established that members of the same economic group signifies "a set of legal entities related, directly or indirectly, by shares of 10% (ten percent) or more in the capital, or by operational control, characterized by common management, or by operating in the market under the same brand or commercial name."
With regard to article 15, the...