PGFN/MF Ordinance No. 2,044/2024: New regulations governing insurance guarantee

On December 31, 2024, the General Counsel for the Federal Treasury (“PGFN”) published PGFN/MF Ordinance No. 2,044/2024, which establishes new requirements for accepting guarantee insurance for federal debts registered as overdue tax liabilities or undergoing registration, and for those under administrative negotiation. The new ordinance fully repeals the former ordinance addressing the topic (PGFN Ordinance No. 164/2014) and introduces a number of significant changes.

The key changes introduced by PGFN/MF Ordinance No. 2,044/2024 are summarized below:

1. Policy term and renewal:

• PGFN/MF Ordinance No. 2,044/2024 introduces substantial changes to the policy term and renewal regime. The minimum term for tax execution guarantees has been significantly extended, from two to five years, to provide greater stability and legal certainty for the guarantees offered, thus reducing the need for frequent renewals.
• Regarding policy renewal, the 60-day deadline for renewal before maturity was eliminated. In its place, a more dynamic renewal system was established, in which the insurer must guarantee ongoing coverage by means of successive renewals. These renewals must preserve the original conditions of the policy, only allowing for adjustments to the guarantee amount and term.
• For administrative negotiations, the regulation determines that the term of the policy must correspond to the entire negotiation period.

2. Claim characterization and compensation system:

• One of the most prominent aspects of the new regulation concerns the characterization of the claim and the compensation system. The regulation binds the claim to the final and unappealable decision on the merits, even if it is partial. This represents a significant change in relation to the previous regime, which provided for the characterization of the claim in the event of non-receipt of a motion for execution or an appeal without suspensive effect.
• The new system also establishes that, in cases of a partially granted decision, the indemnity will be proportional to the amount by which the policyholder was defeated. This provision provides greater balance to the insurance relationship and avoids distortions in terms of when the policy is triggered.
• Another important innovation is the explicit prohibition against acceptance of new guarantee insurance after the claim has been characterized, including retroactively. This prohibition aims to curb practices that could compromise the effectiveness of the guarantee.

3. Value and update of guarantees:

• With regard to the value and updating of the guarantees, PGFN/MF Ordinance No. 2,044/2024 establishes the obligation to include the legal charge of 20% in the insured amount, even before the filing of the tax execution (this requirement does not apply to rural credits).
• The guarantee amount will be updated automatically, following the legal indexes applicable to debts registered as overdue tax liabilities.

4. Claims and indemnity conditions:

• Within the context of the insurance guarantee for tax execution, PGFN/MF Ordinance No. 2,044/2024 establishes that the claim will only be considered as such if the policyholder fails to pay the guaranteed amount within 15 days following notification of the final and unappealable decision on the merits. This differs from the revoked ordinance, which established that a claim would arise when the policyholder failed to pay an amount defined by the judge, regardless of a final decision. In addition, in the case of guarantee insurance for tax executions filed in advance, the claim is deemed valid if the policyholder fails to pay the guaranteed amount within 15 days of the deadline for filing a motion for execution, without a lawsuit being filed to dispute the debt. The indemnity will be proportional to the amount by which the policyholder was defeated in the event of a partially granted decision.

5. Responsibilities and consequences:

• PGFN/MF Ordinance No. 2,044/2024 innovates by establishing stricter consequences in the event of default by the insurer. If the debt is not fully settled, the PGFN must adopt several measures, including:
  • registering the insurer as co-responsible for the debts registered;
  • filing or redirecting the tax execution against the policyholder and the insurer;
  • adding the insurer to a restrictive list drafted by the PGFN, which prevents the  acceptance of new guarantee insurance policies from the same insurer for 180 days;
  • implementing additional collection measures against both parties.

6. Policy endorsement procedures:

• From an operational point of view, the new regulation introduces significant innovations. PGFN/MF Ordinance No. 2,044/2024 allows for registering the policy in the REGULARIZE system after it has been accepted for tax execution, in addition to setting a 30-day deadline for analyzing offers and renewals through such platform.

7. Co-insurance and guarantee conditions:

• Guarantee insurance policies can be the subject of co-insurance, and PGFN/MF Ordinance No. 2,044/2024 establishes that co-insurance operations are prohibited when involving an insurer without the assumption of liability, which is not the case at present.
• Also, there is an explicit prohibition against clauses establishing deductibles, compulsory contributions by the insured, and grace periods.

8. Replacement of guarantees, insurance requirements, and impediments:

• The policy can only be modified at the request of the insured or upon their explicit agreement.
• For debts guaranteed by seizure or pledge, replacing the asset by the guarantee insurance will be carried out at the PGFN’s discretion.
• Impediments to accepting and renewing guarantee insurance include adjusted net worth below the minimum capital requirement and other adverse financial situations.

9. Regulation transition:

• The new regulation provides for a balanced transition regime. Policies formalized and accepted under the repealed ordinance will remain subject to it until the end of its term. However, applications pending analysis by the time the new regulation comes into force (March/2025) will immediately be subject to the new regime.

In addition, PGFN/MF Ordinance No. 2,044/2024 clearly defines the concepts and scope of guarantee insurance, including definitions of terms such as: “policyholder”, “insured”, “insurer”, “administrative negotiation”’, “guarantee insurance for tax execution”, “guarantee insurance for administrative negotiation”, “policy”, “claim”, “claim expectation”, “indemnity”, “premium”, “leading insurer”, “leading insurer clause”, “co-insurance”, “modality”, “main purpose”, “guaranteed obligation”, “remaining outstanding balance from negotiation” and “guarantee amount”.

Demarest’s Tax and Insurance, Reinsurance, Health, and Private Pension teams remain available to provide any clarification that may be necessary on the new regulation and the corresponding legislation.