Pesification of retirement and life annuity insurance contracts

In the case “Benedetti, Estela Sara c/ PEN Ley 25.561, Decreto 1570 y 214/02 s/amparo Ley 16.986” the plaintiff initiated summary proceeding serving to guarantee constitutional rights against the Federal Executive Power and against Siembra Seguros de Retiro S.A. requesting a declaration of unconstitutionality for the emergency regulations and to order the availability in cash and dollars of the sums contributed under a life annuity insurance contract. The judge from the first instance court rejected the complaint. Room V of the Court of Appeals on Administrative Federal Litigation revoked the decision of the first instance and approved the summary proceeding, declaring the unconstitutionality of the emergency regulations. Siembra interposed an extraordinary appeal against the decision.

The General Attorney analyzed the matter and recommended that the Supreme Court revoke the decision of Room V and declare the constitutionality of the emergency regulations and the applicability of the pesification for retirement and life annuity insurance contracts. The General Attorney understood that the emergency regulations were reasonable for two principal reasons; (i) the effective emergency that the country was going through, and (ii) equity, which demanded sacrifices to all social sectors for the general well-being.

The decision analyzes the specific case of retirement insurance companies. The obligations undertaken by insurance companies are funded with the premiums paid by all policyholders and with the financial profits that the insurers obtain in conformity to the applicable rules. Insurance regulations require that for every insurance contract entered into in a foreign currency, the insurer must constitute its reserves in the currency of the contract in the way determined by the Superintendencia de Seguros de la Nación (Argentine Superintendence of Insurance). When the emergency rules were passed, the insurers had to invest a substantial part of their technical reserves in local assets. This is the reason why a significant part of the assets that support the insurers’ reserves were in Argentina and were pesified due to the questioned emergency regulations.

The General Attorney highlighted the equity of the emergency regulation on having established the existence of mechanisms to adapt the each party’s considerations in case of imbalances provoked by the pesification. The National Superintendence of Insurance’s resolutions that regulated the pesification of life annuity insurances converted the payment obligations that were in foreign currency into pesos and they also established a transitory factor of valuation equivalent to 1.40 per dollar and an adjustment index called Coeficiente de Estabilización de Referencia (Coefficient of Stabilization of Reference (see “Devaluation, Pesification and other emergency measures” in Marval News # 4, February 8, 2002). The General Attorney clarified that if, even with the above-mentioned adjustments, each party’s considerations are still inequitable then by virtue of article 11 of Law No 25,561 the parties can request their readjustment to a competent court and question whether the insurer could have foreseen future financial events. But the search for the economic balance of each party’s obligations demands a major debate and evidence that cannot be produced in summary proceedings. For this reason, the Attorney General stated that summary proceedings are not an appropriate arena to discuss the fairness of the insurers’ obligations.

The Attorney General’s opinion is that pesification regulations are to be applied to retirement and life annuity insurance contracts as he understands that the legislator did not make any exception on this matter. Even more, the Executive Power, by means of Decrees No 214/02 and No 320/02, clarified that all the obligations to give sums of money of any cause or origin, judicial or extrajudicial, expressed in foreign currency existing to the sanction of the Law No 25,561 will be changed into pesos. This clearly includes insurance contracts.

Finally, bearing in mind the jurisprudence which establishes that the emergency regulations are not applicable to retirement insurance contracts based on the theory that unforeseen events should not be invoked in an insurance contract for being fortuitous (see “Pesification and Insurances of Retirement” in Marval News # 12, November 29, 2002), the General Attorney understands that it is a forced interpretation, since the emergency regulations do not make any distinction between this type of contracts; the exceptions legally foreseen do not exclude the fortuitous contracts from the pesification.

It remains to be seen if the Supreme Court shares the opinion of the General Attorney and confirms that the emergency regulations are constitutional and applicable for life annuity and retirement insurance contracts and that summary proceedings serving to guarantee constitutional rights are not the appropriate forum to debate questions related to the pesification of this type of contracts.