Application Requirements for Reinsurance Exemption

In February 2011 the Argentine Superintendence of Insurance (“SSN” after its acronym in Spanish) issued resolution No. 35,615, which drastically changed the reinsurance regulatory framework (see Insurance News #1 – “Changes in reinsurance regulatory framework”). The SSN afterwards complemented this regulation with Resolutions No. 35,726, No. 35,794 and No. 36,266 (see Insurance News #3 – “Reinsurance Legal Framework – Reinsurance Contracts”, Insurance News #4 – “Further Changes to Reinsurance Regulations” and Insurance News #8 – “Changes to the Reinsurance Brokers’ Legal Framework”).

With a few exceptions, Resolution No. 35,615 prohibits reinsurance with companies not established in Argentina. These exceptions are provided under article 19 of the new Reinsurance Regulatory Framework, pursuant to which Argentine insurers may reinsure with certain foreign reinsurers admitted by the SSN when due to the importance and type of risk involved there is no local capacity, but subject to the approval of the SSN, to be granted case by case.

Now, by Resolution No. 36,332, the SSN set forth the basic application requirements for insurance companies to be authorized to enter into reinsurance contracts with admitted foreign reinsurance companies not established in Argentina.

In order to process the exemption application, insurance companies must report in detail the importance and type of risk to be ceded. The application must be accompanied by an opinion from an independent actuarial registered with the SSN as to the technical grounds supporting the exemption application.

In addition, the application must include, at least, the following information: (i) the insured amount; (ii) line of insurance business involved; (iii) a description of the risks with reference to factors such as physical features, industrial processes, reasons justifying the novelty of the risk in the local market, risk increase factors compared to similar risks, and any other reason deemed appropriate by the insurance company to merit the application; (iv) the name of the insured; and (v) the term of coverage.

If a reinsurance proposal is available, the application must also include the following information: (i) type of contract; (ii) limit or capacity; (iii) retention; (iv) base coverage; (v) reinsurance premiums and commissions; (vi) full name of the participating intermediaries and their SSN registration number; and (vii) full name of the participating reinsurers, SSN registration number and the country of origin of the reinsurers, with their participation percentages.

The application must include sufficient evidence of the placement rejection by local reinsurers.

Without SSN’s prior approval of the exemption application, the insurance company may not grant coverage for the risks involved on penalty of incurring in an irregular exercise of the insurance business, and being made liable to sanctions such as an alert, a warning, a fine, up to three months of suspension to operate in one or more lines of business, or the revocation of the authorization to operate as an insurer.