The Argentine Insurance Superintendency increases the limit on investments in real estate and permitted credits

By Resolution No 31,335, published in the Official Gazette on September 14, 2006, the National Insurance Superintendency (NSI) amended its General Rules for Regulation of the Insurance Business to increase the percentage that insurance companies may invest in real estate and permitted credits, which percentage is used to calculate certain mandatory technical ratios.

The intended purpose of the new regime is to allow the greater participation of insurance companies in construction projects, in accordance with the policies in this area announced by the government.

Under the amendments introduced by the NSI, the percentage that insurance companies may invest in real estate and permitted credits and which may be taken into account to assess if an insurer complies with certain technical ratios regarding its payment obligations toward it’s insureds (“Situación de Cobertura” and “Estado de cobertura de compromisos exigibles y siniestros liquidados a pagar”) is increased to a total of 70% of its technical reserves, reserves for losses outstanding, and debts with reinsurers, net of freely disposable liquid assets and reserves withheld by reinsurers. Investments in real estate may extend to 60% while investments in permitted credits may not exceed 45%.

Under the previous regime –imposed by Resolution No 29,211 of April 22, 2003– the maximum percentage was fixed at a total of 60% and investments in each area (i.e. real estate, on the one hand, and permitted credits, on the other) could not exceed 45%. In addition, for entities underwriting retirement insurance, the previous regime provided that those investments could not exceed 50%. The current regime does not impose such a limitation.