CNSP Resolution No. 412/2021: New rules on liquidity of supervised entities and assets held abroad

On July 2, 2021, the National Council of Private (CNSP) published Resolution No. 412/2021, which provides for liquidity management and assets held abroad. The Resolution follows from the Public Consultation Notices No. 8, 9, 10 and 11/2021.

The new Resolution amends CNSP Resolution No. 321/2015 and introduces the following main innovations:

 

  • Inclusion of “assets held abroad” in the list of assets that reduce the need to cover technical provisions by guarantor assets, eliminating the need for duplication of assets to back such guarantee operations within the scope of international markets;
  • Reduction of the book value accrual cap of every subordinated debt liability issued, from the tier of 30% to 15%, of minimum required capital (CMR);
  • Inclusion of reinsurance or retrocession operations as a baseline for adjustments associated with economic value variations, for the calculation of adjusted net equity (PLA);
  • Regulation of 3 (three) adjusted net equity (PLA) levels for quality adjustments to coverage of minimum required capital (CMR);
  • Implementation of the plan to regularize coverage sufficiency (PRC), which must be submitted to the Superintendence of Private Insurance (SUSEP), aiming for the restoration of the technical provisions coverage, as well as the exclusion of the solvency regularization plan (PLR);
  • Definition of the tax management regime for supervised entities, in the case that the insufficiency of technical provisions coverage, at monthly balance closing dates, is greater than 30%;
  • Reduction of deadline to submit the plan to regularize the coverage sufficiency – PRC (formerly solvency regularization plan – PLR), from 45 to 30 days, counted from the date of receipt of SUSEP’s notice. The same deadline is enforced in the case that the original plan is rejected;
  • Reduction of maximum deadline for reorganization of the technical provisions coverage insufficiency, from 6 to 3 months, counted from the month following the date of receipt of SUSEP’s notice;
  • Option of drafting a new amount of the retention limit calculation by the supervised entities, if such entities obtain a capital increase in cash or assets, paid-in after the base dates of December or June, according to the adjusted net equity (PLA) of the month of the increase. The calculation must be performed in the month immediately following the increase and will be effective as of the first day of the month following the calculation.

 

The full text of CSNP Resolution No. 412/2021 can be accessed through this link and we also make available attached a comparative table prepared by Demarest (only in PT-BR) that presents a comparison of the texts of CNSP Resolution nº 321/2015 and this Resolution

The Resolution will come into effect on (i) August 2, 2021, regarding the inclusion of assets held abroad in the list of assets to reduce the need to cover technical provisions by guarantor assets; and (ii) on December 1, 2021, regarding the other innovations.

Demarest’s Insurance, Reinsurance and Supplementary Health team is available to provide any further clarifications that may be necessary.