On June 9, 2020, CNSP Resolution 384/2020 (“Resolution”) was published, converting the rules for capitalization operations already reviewed by SUSEP Circular No. 569/2018 into Resolution.
The main objective of the Resolution is to establish clearer rules for the capitalization market, giving greater transparency to the consumer.
Through the Resolution, as already provided for in the previous Circular, capitalization bonds are now structured in six modalities, namely: traditional; guarantee instrument; scheduled purchase; popular; incentive; or award-winning philanthropy, with the following characteristics:
• traditional: its purpose is to refund the holder the total amount of the contributions made by the subscriber at the end of the term;
• guarantee instrument: allows the capitalization bond to be used as a guarantee or collateral. As a result, the capitalization bond is consolidated as an alternative to insurance bond and rental bond;
• scheduled purchase: guarantees to the holder the receipt of the redemption amount in national currency, with the option of receiving the goods and/or services referenced in the title, subsidized by commercial agreements with industries, wholesalers, commercial companies or service providers;
• popular: aims to provide capitalization of the contribution and the participation of the holder in sweepstakes, without the full refund of the amount paid;
• incentive: the focus is on linking to a promotional event of a commercial nature instituted by the subscriber to leverage the sale of its products or services or to retain its customers.
• award-winning philanthropy: this is an instrument aimed at the raising of funds by charities. In this modality, the right to redeem the value of the capitalization bond is assigned to the beneficiary entity, leaving the customer with only the right to participate in sweepstakes.
Thus, among other provisions brought by the Resolution, it is worth mentioning i. the possibility of holding sweepstakes with instant prizes; and ii. the need for communication by the capitalization company about the redemption between the end of the term and before the expiry of the statute of limitations term.
The Resolution will come into force on July 1, 2020.
Demarest’s Insurance and Reinsurance team is available for any additional clarifications that may be necessary.