Under Brazilian law, it is difficult to defend large and complex insurance claims. Among other arguments available, policyholders frequently assert that they are 'consumers' in the context of the Consumer Defence Code and, as such, can take advantage of consumer insurance law, even though they may be multinationals. Alternatively, policyholders often argue that their insurance policy represents a 'contract of adhesion' (ie, it is not freely negotiated), so any ambiguities should be interpreted in their favour. Disputes commonly arise because the parties have contracted on standard Superintendence of Private Insurance (SUSEP) wordings, when their business requires a bespoke wording.
In a welcome move to distinguish large risks from 'seguros massificados' (ie, mass insurance), SUSEP has proposed changes to the regulation of large risks through the issuance of the Draft Resolution for Public Consultation 18/2020, dated 21 August 2020. This project is overseen by the head of SUSEP, Solange Vieira, along with other SUSEP directors, including SUSEP's Chief Coordinator for Large Risks and Reinsurance Diogo Ornellas. The general consensus is that the current large-risks regulatory regime is excessively prescriptive and, in an effort to simplify a scattered array of rules, SUSEP intends to unify the general rules for large risks into one statute, to apply only to large risks.
The draft resolution defines the following types of insurance coverage as 'large risks':
- petroleum risks;
- named perils and operational risks;
- aero;
- nuclear;
- directors' and officers' liability;
- global bank insurance;
- stop loss; and
- ports and terminals.
Other types of coverage (eg, property damage and bodily injury) may fall within the definition of 'large risks' if one or more of the following characteristics applies:
- there is a maximum limit on the guarantee of more than R20 million (approximately $3.56 million);
- the assured's total assets are more than R27 million (approximately $4.8 million); or
- the assured's annual gross revenue is more than R57 million (approximately $10.14 million).
The draft resolution provides that insurance contracts for large risks will be governed by the terms and conditions freely agreed between the parties, which will take precedence over existing regulatory requirements, by reference to the following minimum criteria:
- a free market approach;
- good faith;
- a clear and objective exchange of information;
- equal treatment between the parties;
- the encouragement of alternative dispute resolution (ie, mediation and arbitration); and
- a subsidiary and exceptional state intervention in the formation of products and freedom of contract.
The draft resolution requires insurance policies to use clear and objective language and for obligations and restrictions on the assured to be set out in bold. Large-risks insurance policies, which can be signed electronically, will not be subject to submission or approval by SUSEP; however, they must be available for analysis and supervision by SUSEP, if required. For the purposes of 'contract certainty', they must also contain the following provisions:
- geographical scope;
- payment of premium;
- covered and excluded risks;
- period clauses;
- details of the renewal process;
- alteration and updating of values;
- communication, adjustment and settlement of claims;
- termination; and
- deductibles and obligatory participation.
The draft resolution is consistent with Brazil's Charter of Economic Freedom, which was enacted under Federal Law 13,847/2019 (for further details please see "Regulatory changes for reinsurers"). The consultation period ended in early October 2020 and it is now hoped that the National Council for Private Insurance (the body responsible for enacting the new rules) will proceed to approve the resolution. The draft resolution represents an important potential turning point in the Brazilian insurance and reinsurance landscape, correcting an imbalance in favour of policyholders, at least to some degree. If approved, it should lead to innovation in the use of large-risks insurance, foreign investment and increased insurance penetration.
