New Foreign Currency Clause Governs Insurance Plans

On November 5, 2020, the Argentine Superintendence of Insurance (the “SSN” after its acronym in Spanish), issued Resolution No. 401 (the “Resolution”), with the purpose of providing greater legal certainty for the insured when taking out coverage in currencies other than the legal currency. 

The Resolution approves three alternative boilerplate clauses that establish different payment methods, at the discretion of insurers: (1) payment exclusively in foreign currency, allowing conversion to Pesos only when access to the exchange market is prohibited or restricted; (2) payment in foreign currency, allowing the insured or insurer to agree to cancel it in legal tender; and (3) contracting in foreign currency and payment in legal currency in all cases.

In the current context, due to the restrictions in force for the acquisition of foreign currency, the payment in local currency might be applicable in all three cases provided in the Resolution. Although it established the application of the sellers’ exchange rate of the Argentina’s Banco de la Nación, the parties are free to agree the particular conditions on the exchange rate to be used (wholesale or retail).

The three clauses indicate that, due to exchange rate variations between the billing date and the effective date of receipt of the funds by the insurer, a credit or debit note that contemplates that difference “may be” generated.

The clauses will be used, where applicable, in order to determine the sums insured, premiums, deductibles, surrender values and other values established in the policy. The Resolution therefore applies to all the authorized insurance plans and to those to be authorized “that provide commercialization in foreign currency,” regardless of the line of insurance to which they belong.

The only exception is insurance contracts entered into under the Large Risks regime, according to which the parties can freely agree on the wording of the Foreign Exchange Clause.

It is expressly provided that “the commercialization currency(ies) type” must be included in the technical notes submitted. Additionally, in plans that have already been submitted which stipulate commercialization in foreign currency, if the currency in which it will be commercialized is not included in the technical note, this requirement will also be considered fulfilled.

Finally, the provisions of the regulation will be of mandatory application to all insurance contracts entered into on or after January 1, ^, 2021.