According to a 2006 KPMG report, an agenda for structural changes in the insurance industry in Brazil is being discussed in various segments, some already in Congress, aiming at increasing the size of the market by breaking the monopoly on reinsurance operations, privatizing work accident insurance and reducing the tax burden on certain types of insurance, especially life insurance. Also, creating a new insurance sector regulatory agency, similar to those in Canada, Japan and Scandinavia, is being studied. The new agency would combine the Superintendency of Private Insurance (Superintendencia de Seguros Privados, or SUSEP), the Securities and Exchange Commission of Brazil (Comissão de Valores Mobiliários, or CVM), and part of the Finance Ministry that oversees pension fund administration. As of 2006, the Brazilian insurance market faced innumerable challenges, such as, for example, the levels of fraud in claims and the increase in the level of competition. However, there is no publicly available information regarding Brazil's compliance with the Insurance Core Principles (ICPs) promulgated by the International Association of Insurance Supervisors (IAIS).

General Overview

According to a 2006 KPMG report, an agenda for structural changes in insurance industry in Brazil is being discussed in various segments, some already in Congress, aiming at increasing the size of the market by breaking the monopoly on reinsurance operations, privatizing work accident insurance and reducing the tax burden on certain types of insurance, especially life insurance. Also, creating a new insurance sector regulatory agency, similar to those in Canada, Japan and Scandinavia, is being studied. The new agency would combine the Superintendency of Private Insurance (Superintendencia de Seguros Privados, or SUSEP), the Securities and Exchange Commission of Brazil (Comissão de Valores Mobiliários, or CVM), and part of the Finance Ministry that oversees pension fund administration. As of 2006, the Brazilian insurance market faces innumerable challenges, such as, for example, the levels of fraud in claims and the increase in the level of competition. (KPMG 2006, p. 137; U.S. DoC 2006, p. 20)

The SUSEP is the regulatory and inspection agency for the insurance, capitalization and open private pension market, and is responsible for the authorization of, inspection of and intervention in companies in the event of the malfunctioning of any component of the market. It is also responsible for authorization for opening insurance companies, private open pension entities and capitalization companies, for the regulation of insurance operations, approval of insurance plans that are placed on the market and inspection of the insurance brokers, who should be duly accredited by the SUSEP. (KPMG 2006, p. 139)

The National Council of Private Insurance (Conselho Nacional De Seguros Privados, or CNSP) is responsible for defining the guidelines and rules for private insurance. The president of the CNSP is the Minister of Finance and he is supported by representatives from the Ministry of Justice (Ministério da Justiça, or MoJ), the Ministry of Social Welfare (Ministério da Previdência Social, or MPS), the SUSEP, the Central Bank of Brazil (Banco Central do Brasil, or BCB), and the CVM. The CNSP is also the agency that decides on the loose ends in the field of insurance in the last instance, regulates the compulsory insurances and establishes the limits for insurance operations in Brazil. (KPMG 2006, pp. 138, 139)

Reinsurance activities in Brazil are the exclusive duty (monopoly) of IRB-Brasil Resseguros SA, a government controlled, mixed capital company that regulates coinsurance, reinsurance and retrocession. In the late 1990's, legislation was passed approving IRB's privatization, however, the current governing party, the PT, launched a court injunction that halted the privatization. Several foreign reinsurers who had established branches in Brazil left the country, though some continue to maintain offices in Rio de Janeiro to provide reinsurance to IRB. (U.S. DoC 2006, p. 20)

The Brazilian insurance market can be divided into the following segments: (1) insurance companies: may sell general, life and health insurance; (2) open complementary pension entities: work with pension-type benefit plans and may also sell personal insurance; (3) capitalization companies: sell capitalization securities; (4) health plan operators: work exclusively with health insurance for individuals and legal entities. As of 2006, there were approximately 180 insurance companies in Brazil, including capitalization companies and open pension entities, a little more than 65 thousand insurance brokers, a little more than two thousand operator companies, represented by approximately 15 insurance companies specialized in health, 550 dental companies and the rest, which are health plan operators. (KPMG 2006, p. 138)

The sector's national association is the National Federation of Private Insurance and Capitalization Firms (Federacao Nacional das Empresas de Seguros Privados e de Capitalizacao, or FENASEG). (U.S. Embassy 2000)

Superintendency of Private Insurance (Superintendencia de Seguros Privados, or SUSEP) is a member of the International Association of Insurance Supervisors (IAIS). The National Federation of Private Insurance and Capitalization Firms (Federação Nacional das Empresas de Seguros Privados e de Capitalizaçao, or FENASEG) is an observer of the IAIS. (IAIS website)

The Principles

ICP 1 Conditions for effective insurance supervision

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There is no publicly available information as to Brazil's compliance with this principle.

ICP 2 Supervisory objectives

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There is no publicly available information as to Brazil's compliance with this principle.

ICP 3 Supervisory authority

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There is no publicly available information as to Brazil's compliance with this principle.

The National Council of Private Insurance (CNSP) is responsible for defining the guidelines and rules for private insurance. The president of the CNSP is the Minister of Finance and he is supported by representatives from the Ministry of Justice (Ministério da Justiça, or MoJ), the Ministry of Social Welfare (Ministério da Previdência Social, or MPS), the Federal Agency of Private Insurance (Superintendencia de Seguros Privados, or SUSEP), the Central Bank of Brazil (Banco Central do Brasil, or BCB), and the Securities and Exchange Commission of Brazil (Comissão de Valores Mobiliários, or CVM). The CNSP is also the agency that decides on the loose ends in the field of insurance in the last instance, regulates the compulsory insurances and establishes the limits for insurance operations in Brazil. Reinsurance activities in Brazil are the exclusive duty (monopoly) of IRB-Brasil Resseguros SA, a government controlled, mixed capital company that regulates coinsurance, reinsurance and retrocession. (KPMG 2006, pp. 138, 139)

The SUSEP is the regulatory and inspection agency for the insurance, capitalization and open private pension market, and is responsible for the authorization of, inspection of and intervention in companies in the event of the malfunctioning of any component of the market. It is also responsible for authorization for opening insurance companies, private open pension entities and capitalization companies, for the regulation of insurance operations, approval of insurance plans that are placed on the market and inspection of the insurance brokers, who should be duly accredited by the SUSEP. (KPMG 2006, p. 139)

ICP 4 Supervisory process

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There is no publicly available information as to Brazil's compliance with this principle.

ICP 5 Supervisory cooperation and information sharing

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There is no publicly available information as to Brazil's compliance with this principle.

ICP 6 Licensing

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There is no publicly available information as to Brazil's compliance with this principle.

The establishment of insurance and capitalization companies and complementary pension plan entities depends on prior authorization by the Superintendency of Private Insurance (Superintendencia de Seguros Privados, or SUSEP). The requests for approval should contain minimum elements, such as indication and identification of the future controllers, with proof that they have financial capacity compatible with the undertaking; presentation of the structure of the controlling group and of the holders of qualified stakes; proof of the origin of the funds; proof of the good standing of these controllers before the supervisory agency in Brazil and abroad, if applicable, as well as indicating the other investments held in Brazil or made with other Brazilian companies by the future controllers, when it is the case. (KPMG 2006, p. 139)

After receiving prior approval, the shareholders should submit the articles of incorporation for approval, so that the company may be incorporated. The authorization granted by the SUSEP will be subject to proof of the inexistence of registration constraints on the administrators and controllers, and payment of the minimum required amount of capital. Authorization to operate will be granted through a SUSEP Ordinance published in the Official Gazette. (KPMG 2006, p. 140)

To operate in the supplementary health sector, authorization is needed from the National Agency for Supplementary Health (Agência Nacional de Saúde Suplementar, or ANS), which occurs after registration of the operator, registration of the product and presentation of the business plan, provided that there is no incompatibility or inconsistency in this information. In the event of cancellation of the registration, the company may not stop operating if it has clients in its portfolio. The existence of clients also impedes cancellation of the registrations of the products. (KPMG 2006, p. 140)

ICP 7 Suitability of persons

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There is no publicly available information as to Brazil's compliance with this principle.

ICP 8 Changes in control and portfolio transfers

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There is no publicly available information as to Brazil's compliance with this principle.

ICP 9 Corporate governance

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There is no publicly available information as to Brazil's compliance with this principle.

ICP 10 Internal control

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There is no publicly available information as to Brazil's compliance with this principle.

Circular 249/2004 of the Superintendency of Private Insurance (Superintendencia de Seguros Privados, or SUSEP) issued on February 20, 2004, purportedly obliges insurance companies, capitalization companies, and open pension funds entities to establish, internal controls (including an internal audit) by December 31, 2004. (IMF 2005, p. 7)

ICP 11 Market analysis

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There is no publicly available information as to Brazil's compliance with this principle.

ICP 12 Reporting to supervisors and off-site monitoring

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There is no publicly available information as to Brazil's compliance with this principle.

ICP 13 On-site inspection

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There is no publicly available information as to Brazil's compliance with this principle.

ICP 14 Preventive and corrective measures

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There is no publicly available information as to Brazil's compliance with this principle.

ICP 15 Enforcement or sanctions

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There is no publicly available information as to Brazil's compliance with this principle.

ICP 16 Winding-up & exit from the market

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There is no publicly available information as to Brazil's compliance with this principle.

ICP 17 Group-wide supervision

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There is no publicly available information as to Brazil's compliance with this principle.

ICP 18 Risk assessment and management

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There is no publicly available information as to Brazil's compliance with this principle.

ICP 19 Insurance activity

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There is no publicly available information as to Brazil's compliance with this principle.

ICP 20 Liabilities

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There is no publicly available information as to Brazil's compliance with this principle.

ICP 21 Investments

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There is no publicly available information as to Brazil's compliance with this principle.

ICP 22 Derivatives and similar commitments

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There is no publicly available information as to Brazil's compliance with this principle.

ICP 23 Capital adequacy and solvency

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There is no publicly available information as to Brazil's compliance with this principle.

The solvency margin for insurance companies in Brazil will correspond to the sufficiency of the adjusted net equity to cover an amount equal to or greater than the following values: (1) 0.20 times the total net revenue from premiums issued in the last 12 months; or (2) 0.33 times the annual average of all retained claims in the last 36 months. For the calculation the operations for all the lines, except individual life and contributions for open private pensions, will be computed. The companies should present the calculation upon the closing of the financial statements as of June and December. (KPMG 2006, p. 140)

ICP 24 Intermediaries

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There is no publicly available information as to Brazil's compliance with this principle.

ICP 25 Consumer protection

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There is no publicly available information as to Brazil's compliance with this principle.

ICP 26 Information, disclosure & transparency towards the market

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There is no publicly available information as to Brazil's compliance with this principle.

ICP 27 Fraud

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There is no publicly available information as to Brazil's compliance with this principle.

ICP 28 Anti-money laundering/ Combating the Financing of Terrorism

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According to the assessment of anti-money laundering framework in Brazil conducted by th International Monetary Fund (IMF) in 2005, Brazil is compliant with or largely compliant with all of the Financial Action Task Force (FATF) 40 Recommendations requiring specific action. The IMF recommended that Brazil consider a clearer obligation to identify the ultimate beneficiary of accounts, especially for legal entities, and for the insurance sector regardless of the amount. Also, Brazil should amend its regulations for insurance to require the reporting of all suspicious transactions regardless of a threshold. (IMF 2005, p. 9) However, there is no information publicly available as to Brazil's compliance with ICP 28.

The Superintendence of Private Insurance (Superintência de Seguros Privados, or SUSEP) regulates and supervises the insurance market, capitalization companies and re-insurance for anti-money laundering purposes. Anti-money laundering requirements for the insurance sectors are specified in SUSEP Circular 200. For insurance, the identification requirement currently only extends to third-party payments exceeding BRL 10,000 (approximately USD 3,500) or to guarantee insurance contracts regardless of thresholds. (IMF 2005, p. 6)

The insurance regulations are somewhat more limited in that they require reporting of suspicious transactions (STR) exceeding BRL 10,000 or transactions from the specific list, although the lists are general and broadly include most types of suspicious activities. There has also been an increasing number of STRs filed by the insurance sector. (IMF 2005, p. 7)