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​D&O Insurance: SUSEP Publishes New Circular 553/2017


5/25/2017 12:00 AM Demarest News


D&O Insurance: SUSEP Publishes New Circular 553/2017

On 5/24/2017 SUSEP published Circular no. 553/2017 with the general regulation applicable to Civil Liability Insurances of Legal Entity Officers and Directors (D&O Insurance).

The new Circular was preceded by meetings between SUSEP and representatives of several segments of the market after the critical reception of the previous 541/2016, now revoked. Below we clarify the main changing points in the ruling, pointing out the fact that the insurance companies will have until November 20 to adapt the plans in effect.

Indemnifiable Loss and Defense Costs as Basic Coverage

The main change in the new Circular is the express acknowledgment of the coverage for Defense Costs as basic. It derives from the new definition of indemnifiable loss (art. 3, item XXIII), absent in the previous regulation:

XXIII - indemnifiable loss: for the purpose of the definition of basic coverage of the policy, the items indicated below are defined as indemnifiable loss where they arise from a relationship against the secured covered by the policy:

a) any Defense Costs;

b) indemnity; or

c) settlements, provided that upon prior consent in writing from the insurance company.

We understand that the rule, when mentioning 'relationship against the Insured' in the definition, in fact refers to the claim against the insured. Anyhow, it is clear that, for the purpose of the definition of the basic coverage of the policy, the Defense Costs would be indemnifiable loss, which is reinforced in p. 3 of article 5, according to which the coverage may comprise the defense costs and the fees of the counsel for the insured. Other provisions that in the previous rule referred to the coverage for defense costs as an additional coverage were suppressed. 

It seems to us that, although not expressly, SUSEP accepted, at this point, the claim of the insurers that covered the liability for D&Os of the Closed Supplementary Social Security Entities, which are prohibited from covering indemnities due to third parties and which are permitted to cover defense costs only (art. 22 of Resolution CGPC no. 13/2004 of the Supplementary Social Security Management Council [Conselho de Gestão de Previdência Complementar - CGPC].

In view of the possibility of establishing a basic coverage that provides for coverage for defense costs, it would be possible, in theory, to issue policies with this type of coverage only, as it was the market's practice before the revoked Circular.

Direct Contracting by Individuals

With a simple amendment to art. 4, the new Circular establishes that the D&O Insurance may be contracted directly by the individual that will benefit from it. However the rule establishes that the insurance plans that provide for direct contracting must be registered separately from the plans for legal entities, with different numbers of procedures (art. 4, p. 3).

Coverage of the Client in case of Claims from the Exchange Market (Side C)

The new regulation does not mention the possibility of the Client contracting coverage by virtue of Claims arising from activities in the Securities Market, the so-called Side C.

At the same time, the Circular defines the D&O Insurance as that one contracted by the legal institutions (client) for the benefit of individuals that hold administrative or management positions in them (art. 4, head paragraph), so that, apparently, the Side C coverage for the client is not encompassed in the insurance definition in itself.

However, the Circular mentions the company's liability for administrative acts of its managers as additional coverage (art. 5, p. 6), which might indicate the possibility of the Side C coverage being contracted as an additional coverage.  To this end, the rule requires the link to performance of culpable illicit acts by the managers.

Should the company's liability for acts of its managers be part of the basic coverage, the new rule requires that the plan be registered as General Civil Liability (art. 6, sole paragraph).   

Civil Fines

When mentioning the coverage for fines, the revoked Circular referred to them as contractual and administrative fines and penalties imposed on the insured when exercising their functions. (par. 4, art. 5). The new regulation describes them as follows:

Art. 5. [...] p. 5 The guarantee may comprise coverage for civil fines and penalties imposed on the insured when performing their functions, at the client, and/or its subsidiaries, and/or affiliates.

Apparently, the option for the term "civil" instead of "contractual" was intended to make this coverage more comprehensive. In our view, now fines of non-criminal or punitive nature may be covered, such as the fines imposed by bodies such as the Prosecution Office in civil investigations, market regulating authorities, regulatory agencies and other tax administrative bodies.

Mentions of the foreign legislation for the World Territory.

Previously prohibited by the revoked regulation, mentions of the foreign legislation are now allowed, as expressly stated in p. 1 of art. 12 of the new Circular. We stress that the use of foreign expressions were already possible according to the old rule, provided that common to the market jargon and explained and translated in the glossary of the Policy.

The authorization brought an end to the discussion about the possibility of issuance of policies within the global territory scope, a practice already consolidated in the domestic companies operating internationally.


We understand that the changes made by the regulatory agency are positive and the result of a fruitful opening of a dialog between SUSEP and the market. Practices such as contracting insurance against defense costs as basic coverage and issuance of policies in world programs were respected and incorporated by the new regulation.

Some propositions, however, will depend on an appropriate adjustment of the insurance market to the regulation and on SUSEP's clarification at the time of the approval of the adapted plans, as well as in regard to Side C coverage.

We are at your disposal to assist you in the adaptation of the D&O insurance plans to the new rule.

Demarest Advogados

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