The National Council of Private Insurance (CNSP) published, on December 16, 2020, CNSP Resolution No. 395, which establishes new rules for the Special Regimes of Tax Management, Intervention and Extrajudicial and Ordinary Liquidation applicable to insurance companies, capitalization companies, open supplementary pension entities and local reinsurers (“the Supervised”) for the purpose of ensuring the soundness, stability and regular operation of the National System of Supervised Companies.
As a way to ensure that these objectives are met, certain guidelines provide for the preservation of the public interest, the timely adoption of the Special Regimes, the speed of processes carried out under the Regimes, the protection of the consumer’s rights and due efforts to ensure the appropriate use of available resources.
Under the terms of the new Resolution, which came into force on the date of its publication, SUSEP may appoint a Tax Officer when it finds irregularities in the economic standing of companies, as well as insufficiency and inappropriateness in the constitution and application of technical provision resources to the Supervised. Specific scenarios are provided for by the Rule in the case of Open Complementary Pension Entities.
It is the Tax Officer’s duty to execute measures that regularize and restore to normalcy the economic, financial and actuarial situation of the Supervised. Among these measures, the Tax Officer may veto proposals or acts that are detrimental to the financial rebuilding of a certain supervisor. It is also the responsibility of the Tax Officer to suggest to the administrators the administrative practices that help in the development of the business for the purpose of consolidating the financial stability of the companies.
The new Rule also covers scenarios in which the Board of Directors of SUSEP may decree the intervention of an insurance company, a capitalization company and a local reinsurer, in the event of the following situations occurring:
- the entity suffers loss, as a result of maladministration, which subjects its creditors to risks; or
- repeated violations of the provisions of insurance legislation or repeated conduct practices considered to constitute harmful acts, which have not been regularized following determinations of SUSEP.
Once the intervention has been determined, the following operations of the company will be suspended: (i) the enforceability for collection of the obligations due and (ii) the effectiveness of the term of the maturing obligations previously contracted.
The new Rule also provides for the liquidation of supervised companies, determining that a notice to creditors to declare their credits must be published in the Official Gazette, in a large circulation newspaper and on the company’s website. Creditors for claims or restitution of premiums are exempt from this obligation and will be granted a period of 20 to 40 days for the declaration of claims.
Resolution No. 395 can be accessed at this link.
Demarest’s Insurance and Reinsurance team is available to assist you in implementing procedures related to the changes brought about by CNSP Resolution No. 395, as well as to provide any additional clarifications that may be necessary.