SUSEP issues Notice for launch of the second edition of the Regulatory Sandbox

The Superintendence of Private Insurance (SUSEP) published SUSEP Electronic Notice No. 001 for the selection of those interested in participating in the second edition of the experimental regulatory environment, the Regulatory Sandbox.

This year, up to 15 projects that present innovative insurance products will be chosen, developed either from new procedures and methodologies or existing technologies applied from new perspectives, which will have the opportunity to operate with greater regulatory flexibility.

Confirming what had been forecast during the public consultation phase, the Notice provides for the carrying out of the selection process in two subsequent stages: the first, related to the selection process; and the second, related to the granting of temporary authorization. For those selected, the authorization granted will enable a period of 36 (thirty-six) months for operation.

Eligibility requirements for participation in the Sandbox are similar to those of the first edition and are provided for in item 3 of the Notice[1]. In addition to complying with the requirements set forth in the Notice, those applying must carefully read CNSP Resolution No. 381/2020 and SUSEP Circular No. 598/2020[2], which also provide for rules and criteria for operating in the Sandbox.

Contrary to what had been projected for this year’s edition, the Notice excludes the requirement that those interested in participating be part of the Open Insurance System. Adherence to Open Insurance is no longer a requirement as initially thought, but instead becomes the highest scoring criterion for project selection, reaching 25 points, while the other criteria score from 10 to 15.

In case the candidate indicates an interest in adhering to Open Insurance in the business plan presented in the registration, it must submit a statement formalizing that the adhesion will be made within 120 days from the start of the insurance company’s operation, under penalty of cancellation of the temporary authorization.

This edition of the Sandbox also comes with the experimental function for SUSEP itself. This year, the reinsurance risk assignment limit will be increased from 50% to 90%, in accordance with CNSP Resolution No. 417/2021. The idea is to give more space for the use of reinsurance and transparency to the risk assumed, with the objective of testing and, eventually, expanding this practice to the entire market.

In addition, SUSEP also made progress in experimenting with new products, with the aim of expanding the potential observed in the first edition to other insurance lines. Now, in addition to the insurance products belonging to the automobile, property and personal lines, rental guarantee coverage may also be offered, conditioned to lease contracts with a maximum of one year of effectiveness, coverage for domestic animals and agricultural insurance, conditioned to production cycles of up to 6 (six) months, as well as microinsurance plans for such coverages.

The application process will take place from August 30, 2021 to September 09, 2021, and proposals sent before or after this period will not be accepted. Following this, the result of the selection process will be announced by October 24, 2021, with the granting of a period of 30 days for those selected to apply for temporary authorization, until November 23, 2021. Entries will be made electronically, through a petition in the Electronic Information System – SEI, whose user manual can be found here.

This initiative by SUSEP to promote an experimental regulatory environment contributes immensely to the revolutionary period that the insurance market is experiencing, in which the objective is to make relations easier, less bureaucratic and to foster competition and innovation in the sector.

Demarest has been closely following these groundbreaking developments, and has increasingly sought to be present in the major changes in the market. Through our newly created initiative – Disrupt –, we offer a new model of legal advice with solutions aimed at startups – whether for entrepreneurs or investors – with the objective of contributing to the realization of innovative business, which is exactly the focus of the Regulatory Sandbox.

Demarest’s Insurance and Reinsurance team and the Disrupt initiative will continue to follow the development of the Sandbox and are available to advise on the formation of the business model for those who wish to enroll in the SUSEP selection process, in the corporate structuring, investment capture, preparation of contracts, and other services related to participation in the experimental regulatory environment.

Requirements for participation in the Regulatory Sandbox are:
I – present a product and/or service that fits the concept of innovative project;
II – use remote means in operations related to its insurance plans, as provided for in the specific regulation;
III – present how the technology used in the product and/or service is innovative or how it is being used in an innovative way;
IV – present a product and, when applicable, a service, at a stage of development compatible with the expectation of granting the temporary authorization;
V – present a business plan, with the requirements described in this Notice; and
VI – present an analysis of the main risks associated with its performance, including those related to cyber security, and the mitigation plan for any damages caused to customers.

[2] As well as CNSP Resolution No. 417/2021, which amended CNSP Resolution No. 381/2020, and SUSEP Circular No. 636/2021, which amended SUSEP Circular No. 598/2020.