Novelties in the Reinsurance Regulatory Framework

Since February 2011 the SSN has enacted certain regulations that have significantly modified the reinsurance regulatory framework. The last few weeks were not the exception. You may find below a summary of the new regulations enacted by the SSN.

1. Resolution No 36,859

On June 11, 2012, the SSN enacted Resolution No 36,859, which restricts retrocessions from of insurers who also underwrite reinsurance business.

Resolution No 36,859 sets forth that insurers who underwrite reinsurance business up to 10% of premiums of direct insurance (calculated at the end of each fiscal year) can only place their retrocessions with Argentine reinsurance companies or with Argentine subsidiaries or branches of foreign companies (“Local Reinsurers”).

Consequently, these insurers may not place retrocessions with “Admitted Reinsurers”.

2. Resolution No 36,908

On June 29, 2012, the SSN enacted Resolution No 36,908, which establishes an identification code (the “Reinsurance Operation Code” or “CORE” after its acronym in Spanish) for each reinsurance and retrocession contract of the local market within the framework of the SISUPRE (“Sistema de Supervisión de Reaseguros”) system.

The aim of the recently created Reinsurance Supervision System (“SISUPRE” after its acronym in Spanish) is allowing the SSN to have online information on reinsurance contracts and retrocessions, assessing whether they conform with the regulations in force, and improving the efficiency of the payment system of premiums abroad.

Resolution No 36,908 establishes that reinsurance contracts and retrocessions placed by insurance companies and “Local Reinsurers”, incepting from July 1, 2012 should be identified with a CORE.

The CORE must be requested to the SSN through the online SISUPRE system.

Each contract must have its own CORE (even in cases where the contract covers more than one line of business). If the coverage includes more than one layer, and each layer is placed with different underwriters, only one CORE would be used for all the participants. In the event of combination of contracts covering the same risks, one CORE should be allocated to each contract (for instance, if the retention of a quota share is covered with an excess of loss contract).

The CORE should be placed on the upper right front of the first sheet of the special conditions of each contract. As this Resolution was issued on June 29, 2012 –one day before the expiration of most treaties– this requirement resulted in the temporary suspension of the renewals, until the CORE had been obtained. Nevertheless, this situation did not affect the issue of the Coverage Notes. Consequently, in general coverage was not affected.

3. Regulation No 510

On July 4, 2012, the SSN enacted Regulation No 510, which establishes certain rules for the filing of the financial statements of “Local Reinsurers”, in line with similar obligations applicable to insurers.

According to this Regulation “Local Reinsurers” must file their annual financial statements with the SSN, and the fiscal year will end on June 30 of each year. The fiscal year of branches of foreign companies will end on the same date as of that of their parent company, although they may choose to have the local fiscal year end on June 30. This requirement is similar to that applicable to insurance companies (Section 38 of the Insurance Companies Law).

“Local Reinsurers” must also file financial statements quarterly, as of the last day of the third, the sixth and ninth month of each fiscal year. This is in line with the insurers’ obligation to file quarterly financial statements (Section 39.8.1 General Regulatory Framework of the Insurance Activity).

Similar to the legal regime applicable to insurers, the annual and quarterly financial statements of the “Local Reinsurers” must be filed with the SSN within 45 days following the end of the corresponding period. However, as an exception and until the SSN fixes a new term, financial statements must be filed within 60 days following the end of the corresponding period.

Finally, the Regulation No 510 sets forth that financial statements must be filed starting with the fiscal year ended on June 30, 2012.