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Originally published in MARVAL, O'FARRELL & MAIRAL
Insurance News No 4.
Since February 2011 the Argentine Superintendence of Insurance
has been enacting regulations that are significantly reshaping the
reinsurance regulatory framework.
Traditionally, Argentine cedants could reinsure with: (i)
foreign reinsurers registered with the Argentine Superintendence of
Insurance ("ASI") ; (ii) unregistered foreign reinsurers,
when a reinsurance broker registered with the ASI intermediated in
the reinsurance contract; or (iii) other Argentine insurance
companies, up to certain small limits. As a consequence of
resolution 35,615 enacted in February, from September 1, 2011 most
cross-border reinsurance operations will be prohibited (see "Changes in reinsurance regulatory framework"
in our Insurance News # 1).
Some clarifications to these regulations were enacted on April
26 (by resolution 35,726), allowing for some reinsurance
protections placed with foreign reinsurers to be kept in force
beyond September 1 (see "Reinsurance Legal Framework – Reinsurance
Contracts" in our Insurance News # 3).
On May 26 new regulations were officially published (resolution
35,794), which have introduced some degree of relaxation to these
new measures. We will comment in this article some of the main
aspects of the regulations recently introduced by resolution
35,794.
Local and Admitted Reinsurers
Pursuant to the new regulations, from September 1, 2011, cedants
would only be allowed to enter into reinsurance contracts with
Local Reinsurers, i.e., with Argentine reinsurance
companies or Argentine subsidiaries or branches of foreign
companies, with a local capital of at least AR$ 20,000,000
(i.e., approximately US$ 5,000,000), subsequently
increased on the basis of the volume of written premiums.
Argentine cedants would still be able to reinsure with some
foreign reinsurers when due to the importance and type of risk to
be ceded there is no local capacity, but subject to the approval of
the ASI, to be granted case by case. Such foreign reinsurers, which
must be registered with the ASI and must have a local
representative registered with the Public Registry of Commerce in
Argentina –with an established local domicile–,
are now referred to by the regulations as "Admitted
Reinsurers" (as opposed to Local Reinsurers).
Resolution 35,794 has now established that where an individual
risk exceeds US$ 50 million, the excess may be reinsured with
Admitted Reinsurers, without the need to obtain the ASI's prior
approval.
Reinsurers from other Mercosur Countries
The Superintendent of Insurance had anticipated that it was his
intention to allow reinsurers from other Mercosur countries
(i.e., from Brazil, Paraguay or Uruguay) to qualify as
Local Reinsurers. Unfortunately this is not clearly reflected in
the text of resolution 35,794.
Resolution 35,794 mentions Argentine branches of companies
incorporated in other Mercosur countries to establish how to
calculate the maximum retention per individual risk, but it does
not clearly allow reinsurers from other Mercosur countries to
qualify as Local Reinsurers. Some clarification on this is to be
expected.
Retentions
Resolution 35,794 has introduced some provisions on minimum and
maximum retentions by Local Reinsurers.
Local Reinsurers will not be allowed to retain for an individual
or for an accumulation of risks more than 10% of their capital,
calculated as of the closing date of their latest financial
statements.
Local Reinsurers will retain at least 15% of written premiums,
calculated annually on the basis of their total portfolio.
Retrocessions
Before resolution 35,794 was passed it was unclear whether or
not retrocession contracts fall within the scope of the new
regulations and, thus, whether Local Reinsurers could retrocede
abroad and how.
Resolution 35,794 has confirmed that Local Reinsurers may
retrocede, but only to Local Reinsurers or Admitted Reinsurers.
Nevertheless, Local Reinsurers may not cede to affiliated
companies or companies belonging to the same group more than 40% of
the premiums of each fiscal year. This limit may be exceptionally
exceeded, with the prior approval of the ASI, with evidence that it
is not possible to obtain cover through other market players.
No retrocession will be admitted for group life or burial
coverages.
Books of Account
Local and Admitted Reinsurers will keep certain books in
Argentina to register the reinsurance they write and place.
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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