New Amendment to Valuation of Judicial Proceedings and Liabilities in Civil Liability and Motor Lines

Resolution No. 40512/2017 of the National Superintendence of Insurance (“SSN”, after its acronym in Spanish), published on June 5, 2017, amended the General Regulation on Insurance Activity (“RGAA”, after its acronym in Spanish), regarding the valuation criteria for judicial proceedings for a determined amount and liabilities, applicable to Civil Liability and Motor lines.

The Resolution replaced the rules on the “Valuation Criterion for Judicial Proceedings for a Determined Amount on Civil Liability” and on the “Liabilities According to the Amount of the Updated Claim” which had been established by Resolution SSN No. 40273/2017 (see “The Reserves Regime Provided by the General Resolution on the Insurance Activity Was Amended” in Insurance News No. 1 dated February 15, 2017).

In the case of the rules on the “Valuation Criterion for Judicial Proceedings for a Determined Amount on Civil Liability”, the table for the valuation of judicial proceedings was reduced to comprise three ranges of amounts of updated claims (previously four) and the respective liabilities, establishing the percentage of the lawsuit and the minimum amount in each case. Below are the differences introduced by the Resolution, compared with the previous one:

The amount of updated lawsuits was reduced from AR$3 million to AR$2 million, any amount exceeding such claims should be valued on the basis of reports of lawyer and actuary.

With regard to the rules on the “Liabilities According to the Amount of the Updated Claim”, the minimum amount of the liabilities in the case of updated lawsuits for more than AR$4 million, is AR$800,000 (before it was AR$1 million).

The reports to be prepared by the lawyer will not be quarterly (as required before), but every six months. At the close of the financial statements corresponding to June 30 and December 31 of each year, the lawyer must produce a report taking into account the amount determined in the report of the actuary - if applicable. This amount must be updated in accordance in item 33.3.1.3, subparagraph (b), of the RGAA.

In addition, the Resolution incorporated new rules applicable to the criterion of calculation of the liability for incurred but not reported (IBNR) losses to June 30, 2017, indicating calculations of outstanding claims relating to liability and motor lines. In the event of an increase in the respective reserves, insurers may choose among the options provided by the norm, either to expose the differences in the financial statements or by choosing between one of the two amortization schemes, subject to the guidelines and conditions set forth by the Resolution.

The SSN also indicated that, by the 2018/2019 period, it aims to introduce a system of accounting adjustments to achieve international standards of solvency.