SUSEP amends the rules of Surety Bond Insurance

Published 20 July 2022

The Superintendence of Private Insurance (“SUSEP”) published SUSEP Circular nº 662/2022 on April 2022, providing new rules applicable to the commercialization of  Surety Bond Insurance, revoking SUSEP Circulars 477/2013 and 577/2018.

Different from SUSEP Circular 477/2013, the new norm does not contain standard clauses to be adopted in the Policy wordings. In addition to that, the most relevant amendments regarding surety bond insurance are highlighted below:

• Possibility of limiting the guarantee to certain obligations of the main contract;

• Provisions of deductibles and/or grace period in the Policy are now authorized;

• Possibility of third parties being included in the Policy as beneficiaries;

• If the expectation of a loss is foreseen by Insured, the contractual conditions must clearly describe the act or fact that defines the loss and criteria to formalize its communication, if mandatory; and

• Inclusion of the possibility for the Insurance Company to (i) follow up and/or monitor the main purpose of the guaranteed Contract; (ii) act as mediator in the event of default or of any conflict between the Insured and the policyholder; and (iii) provide assistance to the policyholder.

This Circular became effective on May 2, 2022, but only as of January 1, 2023, the Insurers will no longer be able to commercialize Surety Bond Insurance in disagreement with the new rules established by SUSEP.

Therefore, Surety Bond Insurance plans registered at SUSEP before this Circular must be reviewed and adapted by January 01, 2023. On the other hand, the Surety Bond Insurance contracts in force and not in compliance with the provisions of the new Circular, and which have their expiration date (i) before January 01, 2023, may be renewed only once for, at most, the same originally agreed term; or (ii) after January 01, 2023, may be in force only until the end of their validity period.