Key changes introduced by the new CNPS regulation on reinsurance, coinsurance, foreign-currency transactions, and the placement of insurance abroad

The main points are as follows: 

1. Formation of the reinsurance contract through the reinsurer’s acceptance or mere silence after 20 days.

There have been no changes to the 20 day period, following which it is deemed that a reinsurer is deemed to have accepted the risk. The changes though relate to: 

• Superintendência de Seguros Privados ("SUSEP") may establish a longer period where a technical need for doing so is demonstrated
• Acceptance by silence does not apply to endorsements
• A reinsurance proposal is defined as a “document formally recording a cedant’s intention to enter into reinsurance with the reinsurer(s) identified therein and containing information on the proposed risk for assessment and acceptance or rejection by the reinsurer(s)”

It is important to note that the SUSEP still have to publish further regulations on questions of minimum requirements applicable to reinsurance proposals, and we will issue a new alert once this becomes available. 

2. The local insurer remains solely responsible for claims decisions and is prohibited from transferring its obligations to reinsurers.

The text of the Resolution confirms that, despite earlier indications, there is no express prohibition on claims cooperation/control clauses. What also seems clear is that the local insurer remains solely responsible for claims decisions and is prohibited from transferring its obligations to reinsurers. This is important as the following wordings will have to be carefully considered/drafted to comply with the Brazilian regulations: 

• Claims Control Clauses/Claims Cooperation Clauses
• Consent to settle Clauses
• Prior approval of settlements agreements
• Wordings involving reinsurers' participation in the claims adjustment process

3. Confirmation on the broader scope of the reinsured interest, affecting the Follow the Fortunes and Follow the Settlements - which will apply by default.

It is therefore important to note that, unless otherwise agreed in the contract, the reinsurance will cover the entirety of the reinsured interest, including, within the agreed limits (i) the consequences of the cedant’s delay in performing the underlying contracts; (ii) loss prevention and salvage expenses; and (iii) claims adjustment and settlement expenses relating to covered claims or events.

Should the parties intend to exclude or limit any of these components, express language should be added to guard against this risk. This does not mean, however, that there is unlimited cover as any agreed limits and other contractual terms remain applicable. 

4. Advance payment of reinsurance recoveries.

The reinsurance contract may provide for advance payments by the reinsurer. Where an advance relates to an indemnity or benefit payable under the underlying insurance contract, the amount must immediately be applied towards the corresponding payment. 

5. Brazilian law and forum for certain court proceedings and arbitrations in Brazil.

This is perhaps the most controversial point of the Resolution. Reinsurance and retrocession contracts relating to risks situated in Brazil must provide for the application of Brazilian law and Brazilian jurisdiction. 

It is important to make the following comments: 

• This change would exceed the CNSP’s regulatory authority as these are matters falling under the Government's legislative power. A likely area of debate is whether a CNSP/SUSEP resolution can legitimately restrict the parties' freedom of contract in international reinsurance agreements, particularly given that Brazil's Arbitration Act (Law No. 9,307/1996) broadly recognises the parties' autonomy to choose an arbitral seat outside Brazil.
• Decree-Law No. 73/1966, Complementary Law No. 126/2007 or Law No. 15,040/2024 stipulate that all reinsurance contracts must be governed by Brazilian law, only on the basis that the underlying risk is situated in Brazil
• On the question of jurisdiction, Article 131, sole paragraph, of Law No. 15,040/2024 expressly establishes Brazil as the forum for certain disputes affecting the underlying insurance contract. The text of the Resolution effectively means that all disputes between insurers, reinsurers, and retrocessionaires that may directly interfere with the performance of insurance contracts will have to be brought or seated in Brazil, especially in circumstances where: (i) the insured or proposer is domiciled in Brazil; or (ii) the insured interests are situated in Brazil.

This is indeed a significant departure from the established position in Brazil, where reinsurers could agree to have the dispute in a seat outside Brazil. 

6. Time for enforcement of the Resolution.

It is important to note that Resolution No. 494/2026 will come into force on January 2, 2027, thus allowing the market to readjust to the new changes. However, it is worth noting that: 

• All contracts entered before the Resolution comes into force must be brought into compliance upon renewal
• All contracts entered into on or after its effective date must comply fully with the new framework from the outset

The CNSP Resolution No. 494/2026, as issued by the local regulator, provides further clarity on certain reinsurance questions and it should provide the reinsurance market with a basis to commence their review of their wordings. It does indeed path the way for material changes on questions of contract formation and some key principles underpinning reinsurance contracts. 

A further alert will be issued in the coming months as matters develop in Brazil.