Brazil: Insurance & Reinsurance

The Brazilian (Re)Insurance Regulator (“SUSEP” – Superintendency of Private Insurance) is responsible for overseeing the policy wording in Brazil. The Brazilian law divides insurance into life and non-life and SUSEP regulates the requirements appliable to each type / lines of business.

As a general rule, the policy wording must be registered with SUSEP and the regulator imposes several mandatory clauses to be contemplated therein.

In relation to non-life insurance, SUSEP issued new and more flexible rules segregating non-life insurance products into two categories: (i) large P&C risks (corresponding to more complex lines of business and policies with high policy limits or purchased by companies which meet the economic criteria established in the regulation); and (ii) mass / affinity insurance.

1. Large P&C risks: Oil & gas, BBB, aviation, marine, nuclear risks and credit insurance purchased by legal entities are promptly classified as large risks insurance and are governed by Resolution CNSP No. 407/2021. The policies issued under such Resolution are freely negotiated between the parties, establishing only minimum requirements that must be observed in the insurance products. Such Resolution has also expressly allowed all risks policies. The Resolution encourages the parties to adopt alternative dispute resolution (ADR) to solve conflicts, although such ARD are not mandatory. Now, large risks policies do not have to be registered with the regulator, but only kept for supervision of SUSEP and must contain the signature of representatives of both the insurer and the insured.
2. mass / affinity insurance: all other non-life insurance not contemplated in the large P&C regulation as well as life insurance are governed by mass / affinity regulations and therefore, must be registered with SUSEP and reflect the mandatory provision required by the regulation. The offer of insurance is also regulated by SUSEP and there are different intermediaries and distributors of insurance that will be further informed in our responses below.

Insurers and reinsurers are regulated differently in certain aspects. Insurance companies are permitted to underwrite risks directly and in retrocession only. In turn, reinsurers are allowed to underwrite only reinsurance and retrocession risks in Brazil. There are four main status of registration (not taking into account brokers): (i) insurers; (ii) local reinsurers; (iii) admitted reinsurers; and (iv) occasional reinsurers.

1. Insurers: insurance companies must be incorporated in Brazil as corporations (“sociedade por ações”, also referred to as S.A.) or as co-operatives (“cooperative”). The former type is the most common and the criteria for the licence authorisation are detailed in our response 4 below. Since 2020, insurance companies and local reinsurers are subject to four different segmentations for the purpose of prudential and solvency regulations. The criteria for each type of segmentation (S1, S2, S3 or S4) varies in accordance with the market stake held by a given company considering, inter alia, the technical provisions, premium, reinsurance premium and if the company pertains to a group.
2. Local reinsurers: local reinsurers are one of the type of reinsurers that can operate in Brazil and they also must be set-up as a corporation. The incorporation rules that are applicable to insurers are also applicable to local reinsurers and, therefore, the licence authorisation procedure are the same as well as the rules relating to control and segmentation. The minimum capital requirement for local reinsurers is higher than the one applicable to insurance companies.
3. Admitted reinsurers: admitted reinsurers are foreign reinsurers, which (i) have a representative office in Brazil (normally a service company set up by the foreign reinsurer as a subsidiary or a third party service company), (b) maintain mandatory deposits in Brazil in the amount of US$5 million to write non-life business or US$1 million to write exclusively life business, and (c) comply with certain expertise, capital, and solvency requirements to register with SUSEP.
4. Occasional reinsurers: occasional reinsurers are foreign reinsurer, which complies with certain expertise, capital, and solvency requirements to register with SUSEP. They do not have a presence in Brazil by means of a representative office and cannot be headquartered in jurisdictions that are considered tax havens.

Yes. SUSEP specifically regulates three (3) types of intermediaries, in the insurance level: (i) insurance brokers; (ii) insurance agents (insurance representatives); and (iii) holders of group policy (“estipulantes”, in Portuguese).

1. insurance brokers are the intermediaries authorised to exclusively offer insurance contracts and must have a specific license to operate as such, either as an individual or a legal entity. Either way, an insurance broker must have its information fully updated with SUSEP.
2. Insurance agents (representatives) are the insurance companies’ representatives, engaged in the offering and distribution of insurance products on behalf of the insurance company. It may perform underwriting of risks, loss adjustment, collection of insurance premiums and settlement of claims, among other activities, always on behalf of the insurance company. Differently from insurance brokers, insurance agents do not need to be licenced by SUSEP and they are also not required to have the main purpose of insurance representation and are free to perform other activities. Insurance brokers cannot act as agents.
3. Holders of group policy (“estipulantes”) are defined as the intermediaries which purchase a group policy for a group of insureds with whom they maintain a previous relationship. The “estipulantes” act as a representative of such insured group vis-à-vis the insurer and, therefore, intermediate the communications between the insurer and members of the insured group. They do not require to be licenced by SUSEP.

Brokers can be holders of group policy only for their own employees and cannot act in such capacity for offering commercially insurance products. Agents cannot act as agent of the insurance company and holders of group policy in the same policy.

In reinsurance, there is only one intermediary, namely reinsurance brokers. They are required to be incorporated in Brazil and hold a licenced with SUSEP. They also must have a specific purpose and are limited to place reinsurance and retrocessions arrangements.

Yes. In Brazil, authorisation is required for insurers and reinsurers.

The authorisation process for operating as a (re)insurer in Brazil is different in accordance with the type of company that is under registration with SUSEP. The procedure for registration of insurers and local reinsurers follows the same standard and regulations, since they are both required to be incorporated as a corporation (“sociedade por ações”), but with different capital requirements.

The registration procedure for obtaining the licence of an insurance company or a local reinsurer consists, in summary, in a proceeding of two phases – (i) the first phase or “prior approval” consists in providing the regulator with a three-year business plan and evidencing the financial capacity of the controlling group to support the setting up the company and its business plan; (ii) the second phase or “final approval” (“homologação”) aims mainly to evidence the entry of the required resources for the operation in Brazil and the corporate acts that will incorporate the company. The whole proceeding takes roughly 6 to 12 months to be implemented. The most important element for SUSEP to authorise an insurance company or a local reinsurer to operate in Brazil is to evidence its financial strength, liquidity for the minimum capital required and funds for its first operational year.

In turn, the procedure for registration of foreign reinsurers is different and they require the presentation of certain documents to evidence compliance with the requirements set out by law and regulations, as detailed in our response 2 above.

The main differences between occasional and admitted reinsurers are the fact that the latter has a level of presence in Brazil by means of a representative office in the country and must maintain a mandatory deposit in Brazil to guarantee its obligations. Certain requirements were recently changed by a regulation issued by SUSEP, which makes difficult to foresee the timing for obtaining the licence as a foreign reinsurer. It used to take 2 to 6 months for this exercise.

SUSEP regulates who can hold direct control in insurance companies. There are no limitations or restrictions for foreign ownership, provided they comply with the rules of direct control.

The regulation permits the following entities/individuals, resident or set up in Brazil or not, to hold equity directly in insurance company: (i) individuals; (ii) companies set up with the main purpose of holding direct control in entities supervised by SUSEP. Such company does not need to have the exclusive purpose and may have other secondary purposes as well provided they relate to the activities of the (re)insurance market; (iii) companies regulated by SUSEP; and (iv) equity investment funds, which purpose is to hold equity in entities regulated by SUSEP. These funds may also have other secondary purposes as well provided they relate to the activities of the (re)insurance market.

In the authorisation procedure for requesting the set-up of an insurer or local reinsurer, the regulation also requires information about all indirect shareholders up to the ultimate beneficial owner of the prospective company and require everyone to evidence a spotless reputation.

Brazil is a non-admitted jurisdiction for insurance purpose. As such, the Brazilian (Re)insurance laws and regulations permit risks to be underwritten as follows: (a) insurance risks to insurance companies duly licenced to operate in Brazil by SUSEP; (b) reinsurance risks to reinsurers duly licenced to operate in Brazil, namely local, admitted or occasional reinsurers, and (c) retrocession risks to the same entities mentioned in item (b) above and to insurance companies duly licensed in Brazil.

However, in exceptional circumstances, non- registered companies may operate on a non-admitted basis provided certain criteria are met. The regulation applicable to insurance and reinsurance transactions are different, but the rationale is similar and the placement of a risk with a not-registered company (“NRC”) relates mainly with the lack of capacity offer or interest in the risk by the local market.

In insurance, the purchase of insurance abroad with NRC is permitted in certain circumstances, namely (i) when the cover for the risk is not offered in Brazil and provided the insurance does not breach Brazilian laws; (ii) risks located abroad for individuals that reside in Brazil, while such individual is abroad (e.g. travel insurance); (iii) insurance that are subject of agreement with the National Congress; (iv) hull, machinery and liability insurance for vessels registered under the Brazilian Special Registry – REB.

In the event of lack of interest for the insurance risk or existing insurance coverage offer in Brazil, insureds are exceptionally allowed to purchase insurance abroad with an NRC, provided they can evidence such a lack of interest or coverage pursuant to the terms and conditions set out by SUSEP, presenting, for instance, denials by at least 5 insurers that operate in Brazil in the line of business that must be insured.

In reinsurance/retrocession, the lack of interest or capacity offer is ascertained when all local, admitted and occasional reinsurers refuse to totally or partially underwrite a given risk. In this event, the risk may be placed with an NRC, provided the NRC complies with minimum requirements imposed by SUSEP and the cedant can successfully evidence of the “insufficient capacity offer”, pursuant to the applicable regulation.

Usually, companies are very rarely set up in Brazil as branches of overseas companies, given that governmental authorisation (from the executive instance) is required for such purpose, which can be a cumbersome and more expensive process (although the government has taken measures to facilitate this process)1. Accordingly, companies wishing to establish a presence in Brazil are usually incorporated as subsidiary companies and must be individually authorized to operate by SUSEP.

The regulator imposes two different main penalties for those who operate without appropriate permission in Brazil, as follows: (i) those who operate (re)insurance transactions without appropriate permission are subject to a fine equivalent to the (re)insured amount, which is limited to BRL 3,000,000.00 (approximately USD 600.000,00) and (ii) those who operate as (re)insurance brokers in Brazil without appropriate permission are subject to a fine ranging from BRL 50,000.00 (approximately USD 10,000.00) to BRL 1,000,000.00 (USD 200,000.00).

SUSEP imposes a rigorous supervisory and enforcement environment in Brazil. Supervised entities are often subject to SUSEP’s audits and inspections (by electronic or in person means) which focus on the following areas: (i) prudential, (ii) solvency, (iii) internal controls and compliance, and (iv) conduct towards clients and third parties.

Supervised entities have periodic electronic reporting requirements, which differ depending on the type of licence and facilitates inspections by SUSEP. Enforcements are common and most of them arises from electronic inspections and/or electronic reports, where SUSEP usually verifies supervised entities’ failure in complying with internal controls and prudential requirements.

Complaint and accusations from consumers and third-party in general are also source of investigation and enforcement by the regulator. Usually, enforcement arising from complaints refer to supervised entities conducts or operation without appropriate permission.

Regulations set out fines and penalties that range between BRL 30,000.00 (approximately USD 6,000.00) to BRL 1,000,000.00 (approximately USD 200,000.00). The highest amount of a penalty that may be imposed by SUSEP for operating (re)insurance transactions in Brazil without appropriate permission, can achieve BRL 3,000,000.00 (approximately USD 600,000.00). Penalties, however, can cumulate when a variety of violations are verified.

Although enforcement is common, there is a due process of law in the administrative level, where supervised entities are entitled to defend themselves and can even appeal against SUSEP’s enforcement decision to the Appellate Council, which is formed by members representing the market, the Ministry of Economy, and SUSEP. A considerable amount of enforcement decisions is reverted in the Appellate Council.

The assessment of solvency of insurers and local reinsurers is a constant activity from SUSEP under its prudential scope. This exercise is performed mainly by two means: (i) inspections from SUSEP; and (ii) by the review of information that is disclosed by all supervised entities to SUSEP, by means of periodic reports, where a number of information must be disclosed by all supervised entities. Among such information, regulated entities must disclose data about written risks, losses covered, assets, guarantees, collaterals and solvency status. In addition to the above, insurers and local reinsurers are required to maintain a minimum capital that varies in accordance with its operation.

The following supervised entities are subject to minimum capital requirement to operate in Brazil: insurance companies, local reinsurers, admitted reinsurers and occasional reinsurers. Please find below a brief description of each of them:

1. Insurance companies’ minimum capital required: Insurance companies are required to always maintain a minimum capital equivalent to the greater amount between the base capital and the risk capital. The base capital is a fixed amount which varies depending on the segment in which the insurance company is classified, as follows:
   

   Segmentation	Capital Base
   S1 or S2	BRL 15.000.000,00 (approximately USD 3,000,000.00)
   S3	BRL 8.100.000,00 (approximately USD 1,600,000.00)
   S4	BRL 3.960.000,00 (approximately USD 800,000.00)
   Exclusive operation with microinsurance	BRL 3.000.000,00 (approximately USD 600,000.00)

   The risk capital is calculated according to an actuarial formula imposed by the regulator based on the number of risks written by the insurance company and related risk exposure. Therefore, the minimum capital requirement directly depends on the insurance company’s segment, the number of risks written and related exposure, varying on a case-by-case basis.

2. Local reinsurers’ minimum capital requirement: Local reinsurers are also required to always maintain a minimum capital equivalent to the greater amount between the base capital and the risk capital. The base capital required from local reinsurers is a fixed amount equivalent to BRL 60,000,000.00 (approximately USD 12,000,000.00). The risk capital is calculated according to an actuarial formula imposed by the regulator based on the number of risks written by the local reinsurer and related risk exposure. Therefore, the minimum capital requirement directly depends on the number of risks written by the local reinsurer and related exposure, varying on a case-by-case basis.
3. Admitted and Occasional reinsurers minimum capital requirement: To register in Brazil as admitted or occasional reinsurer, among other requirements, the foreign reinsurer must evidence a net equity of at least USD 150,000,000.00 or the equivalent in another freely convertible currency.

There is no policyholder protection scheme in Brazil.

Usually, SUSEP does not supervise the group of supervised entities, but supervises each regulated company in a one-to-one basis, considering the regulatory framework and requirements for operating in Brazil.

Only in certain circumstances, SUSEP will overlook a group’s information to grant a permission or permit the compliance of a given regulation. As an example, SUSEP may overlook the solvency rating of the group of a foreign reinsurer, if it is not possible to have a separate and specific rating, in a process for registration of a foreign reinsurer. Further, SUSEP may permit the use of the same risk manager, for instance, for a group of supervised entities.

Despite the above, SUSEP is interested in having information about the controlling group of a supervised entity. In this regard, when permitting a company to operate as an insurer or local reinsurer in Brazil, SUSEP evaluates the controlling group of the supervised entity, i.e. those individuals /companies or group of individuals or companies that are connected by a voting agreement or under common control, having rights as a controlling shareholder, pursuant to the Brazilian laws. In the case of corporations, such controlling right is ascertained whenever (i) the shareholder has a permanent right of vote with the majority of stake in a company and with powers to elect the majority of managers; or (ii) use its powers to direct and company’s management and functions. In the case of limited liability companies, the control is exercised by whoever holds at least 75% of stake in a company.

SUSEP is also interest in those direct and indirect stakeholders of supervised entities that are deemed as holders of “qualifying stake”, i.e. those individuals or companies that directly or indirectly hold 15% or more of corporate interest in supervised entities. In the event of change of control or entry of a qualifying shareholder, the regulation requires a degree of approval (prior and final approval in the event of change of direct or indirect control and final approval in the event of entry of qualifying shareholders).

Yes. Officer and Directors of an insurance company, local reinsurer, reinsurance broker and representative office of an admitted reinsurer are required to be previously approved by SUSEP prior to their election. SUSEP reviews the prospective D&O qualifications and reputation and provides a confirmation whether or not their election is permitted.

The Managers may be held personally liable in an administrative level by SUSEP if it is duly evidenced that they have acted with fault in conducting a given act that triggered a regulatory breach. In practice, we could see D&Os being personally liable in the past together with the regulated entity, but this is no longer the case. According to the current regulation, SUSEP must assess and demonstrate the manager’s fault connected to the regulatory breach prior to holding him/her liable for the regulatory breach.

If, nonetheless, an insurance company or a local reinsurer is put under liquidation or declared insolvent, D&Os are, at a first moment, strictly liable and one of the first measures taken by SUSEP is to freeze D&Os assets until a full assessment of the status of the company is completed.

Presence is required for companies operating as an insurance company or a local reinsurer in Brazil. In these circumstances, the insurer or local reinsurer must incorporate a corporation (“sociedade anônima”) to be able to undertake their activities, after having been obtained the licence to operate, as described in response 2 above. Admitted reinsurers, as well, are required to have a local presence in the country in Brazil and the requirements for their operation have been detailed in response 2 above.

When insurers and local reinsurers obtain their licence, they are authorised to carry out only their respective activity. The core business relating to the risk acceptance itself requires to be solely taken by the licenced company by SUSEP.

However, the regulation permits the outsourcing of a number of activities by the regulated entities, and this has been reinforced with the publication of a new regulation relating to agents. Such regulation described certain activities that may be performed by the agent, e.g. underwriting of risks, claim adjustment and payment of indemnity on behalf of the insurer.

Although there is not a similar figure as the insurance agents in the reinsurance level, the same can be understood in respect to the local reinsurers. In fact, it is not uncommon for insurers and reinsurers pertaining to the same group to outsource some back-office activities or even share the burden between them, by means of a cost sharing and service level arrangements.

Brazilian regulators have not issued any regulation specifically relating to operational resilience, although it has tough control mechanisms contemplated in the regulation and on the reporting level to avoid disruptions and have indications of a possible crisis within the market.

Yes. SUSEP and the Brazilian Monetary National Council (“CMN”) regulate the specific investments available for insurance companies’ and local reinsurers’ admitted assets. According to the regulations, admitted assets are assets linked to and used for backing the technical provisions of the supervised entity, in accordance with the guidelines set out by the CMN. Most investments available for admitted assets are the ones held in Brazil under fixed income. There are, however, some limited options available in the CMN regulation for investments subject to foreign exchange rate variation, investments abroad or with a higher risk for the admitted assets of supervised entities. The remaining non-admitted assets (free assets) of supervised entities can be freely invested.

The admitted reinsurer’s mandatory deposit held in Brazil is also subject to limited options of investments, as regulated by the CMN.

In Brazil sales of insurance are subject to SUSEP’s regulations and the Brazilian Consumer Protection legislation. Therefore, insurance sales are supervised and controlled by SUSEP, the Public Prosecutor Office and/or the Consumer Protection Program (“PROCON”).

In the insurance regulatory level, insurance sales are regulated by the conduct regulations issued by SUSEP and applicable to the insurance companies and its intermediaries such as brokers, agents, and holders of group policies. SUSEP usually regulates the insurance company’s sales by means of inspections and monitoring of consumer complaints. Any violation of conduct regulations may trigger an enforcement by SUSEP and an administrative sanction proceeding which may result in a fine, suspension of activities or suspension of insurance product.

Finally, SUSEP expects the insurance company to supervise and control the sales of insurance by its agents, holding insurers joint and severally liable for the acts and omissions of their agents.

Any violation to the Consumer Protection Code provisions or related regulation is subject to the control and supervision of the Public Prosecutor Office and/or the PROCON which are empowered to investigate, impose penalties, and initiate collective actions against the insurance companies and/or intermediaries for violations of Consumer Protection laws when selling insurance in Brazil. Usually, investigations by such authorities are triggered by complaints.

As a non-admitted jurisdiction, individuals residing in Brazil and entities domiciled in Brazil are not allowed to purchase insurance from foreign insurers, except in the fewer cases described in our response to question 6 above. Considering that commercial banks in Brazil are subject to heavy exchange control rules, cross-border transactions are strictly supervised by the banks, meaning that to remit premium to a foreign insurer and/or receive insurance indemnity from a foreign carrier, the insured in Brazil must evidence to the remitting bank the legality of the cross-border transaction.

Usually when insurance is purchased online from a foreign carrier, insureds in Brazil pay for the premium with credit card, avoiding, therefore, the commercial banks scrutiny of the transaction. However, considering the insured residing in Brazil are not allowed to purchase insurance from a foreign carrier, upon the claim’s liquidation, the insured will face difficulties to receive any indemnity in Brazil through the Brazilian banks.

Locally, there are specific regulations ruling insurance distance selling which includes online sales, phone sales or sales by any other remote mean. Specific requirements are imposed to distance sales such as the means the insured must receive policy language, facilitated channels available for insureds to cancel the insurance purchase or notify a claim. Finally, when purchasing insurance by remote means, insureds are entitled to 7 days to give up the insurance purchase and be fully reimbursed by the insurance company of the premium amount.

Consumer policies in Brazil are strictly regulated by SUSEP. The product wording must be registered with SUSEP prior to offering for consumers and must reflect several compulsory provisions for the consumer protection. Insurance companies are not allowed to sell an insurance product to a consumer which has not been previously registered with SUSEP.

Agents and brokers are required by legislation to offer insurance clearly and comply with insurance companies’ instructions about the product’s features when selling insurance.

All the parties involved in the insurance sale are joint and severally liable for the sale to the consumer, according to the Brazilian Consumer Protection Code.

However, there is no pricing restrictions in Brazil. Insurance companies and intermediaries must clearly disclose to the insureds the amount of the insurance premium, any additional cost related to it such as assistance services costs, the applicable taxes, and the percentage of intermediary commission.

The Brazilian Courts are not specialized in complex commercial matters, such as insurance and/or reinsurance disputes. Even the two main State Courts of Brazil, headed in São Paulo and Rio de Janeiro, which have a special chamber specialised in business law and commercial claims are not familiar with sophisticated insurance disputes such as those involving Surety Bond, D&O, E&O, Cyber and Casualty policies, and face difficulties in interpreting policy wordings and applying local laws. The difficulties are even greater when the Courts are ruling reinsurance lawsuits in view of the lack of court precedents and because these matters are usually disputed in arbitration courts in Brazil, which are confidential and hardly reach the judiciary.

Yes, alternative dispute resolution is very well established in Brazil, especially arbitration. The Brazilian Arbitration chambers have arbitrators who are more familiar with complex commercial cases, including the ones involving insurance and reinsurance disputes.

Yes. SUSEP regulates the transfer of portfolio between (re)insurance companies in Brazil which requires a prior approval. The prior approval process may take from 3 to 6 months (depending on the portfolio complexity it may take longer). The regulator focusses its reviews on what will be transfer under the portfolio (products and reserved) and if the assignee has sufficient financial capacity and solvency to receive the portfolio – usually the regulator analyses the impact of the new portfolio in the assignee’s accounts and reserves. The regulator also requires an appropriate proceeding to inform all the insureds covered by the portfolio products about its assignment. Please note that reinsurance portfolio transfer was not regulated until recently (December 2021) and still might be further regulated by SUSEP.

The primary challenges to new market entrants start with the authorization process, which might be complex and time consuming. Generally, it is difficult for direct and indirect controllers to comply with SUSEP financial requirements and to properly evidence the origin of the funds invested in the new supervised entity in Brazil. These requirements are specially challenging for venture capital structures where the investors are not the ones controlling the supervised entity and running the business in Brazil. Challenges about confidentiality of funds financial information might also prove to be challenging. Regulators are open for meetings and clarification and are willing to work alongside the applicant to find ways to comply with the expected documentation.

Once approved, new entrants face another significant challenge which are (i) the immediate compliance with reporting requirements, (ii) implementing several compliance requirements, (iii) approving products and properly managing reserves and accountants. Being prepared to hire a group of experienced employees in the local market and outsource activities to experienced services providers, enabling the company to be ready to operate as soon as the license is granted is of the essence to avoid penalties and questioning in the start-up months. Regulator remains available and supportive for clarifying doubts, but we have seen some troublesome start-up months for unprepared groups.

Prior to the pandemic period, insurance placement rules used to require many formalisations and signature of documents, making digital sales a challenge for insurance companies. Although the regulator created certain initiatives to permit and foster the insurance digital sales by issuing a regulation ruling insurance sales by remote means in 2014, the required sales procedures were still burdensome.

With the pandemic, we have seen an increase of digital sales and several investments in insurtechs in Brazil by local and foreign investors, as well as the creation of digital solutions for insurance sales, loss adjustment and claims liquidations.

In response to such a digital innovation in the last couple of years SUSEP has launched several regulations simplifying products and sales requirements to make insurance digital sales possible and easier, and has launched two different Regulatory Sandbox projects.

SUSEP’s regulatory Sandbox created a controlled environment where SUSEP opened a tender to accept players with innovative projects and products to operate for 3 years closely controlled by the regulator (submitting to the regulator real time information by API), with less prudential and capital requirements, as well as facilitated sales rules. The Sandbox operations have limit of items and coverage that can be written by its players, guaranteeing the operations under a lower minimum capital. It is essential for the Sandbox players to grant the consumer an innovative digital experience, facilitating purchasing, cancelling, and notifying claims in a digital manner.

Around 10 players are currently operating under the first Sandbox project launched in 2020, being one of them already converted into traditional insurance company and 25 players were selected for the second Sandbox project launched last year and are undergoing approvals by SUSEP.

The increase of digital innovation in the insurance industry by these new insurtechs along with the pandemic needs for digital transactions have been pressuring the traditional insurance players to adapt themselves to the digital innovation to compete with the new players and maintain their market share.

The consumers are the ones currently benefiting from all the innovative digital boom in the Brazilian market supported by the regulator, having access to straight-forward digital products with competitive prices and easier to manage.

The pandemic and new Sandbox initiative carried out by SUSEP since 2020 triggered a great support from the regulator for the digitalization process of insurance sales and claims handling. In this regard, the Sandbox required necessarily the use of new technology for the consumer to purchase insurance and lead to the interpretation that the participants of such programme would have more points if the projects provided to the consumer an experience from the beginning (purchase of insurance) to the end (claim adjustment and liquidation) in the digital environment.

Further, the regulation relating to the sale of insurance by remote means (online sale) requires insurers to provide the same means for purchase in case of cancelation.

Insurers may use customer data upon their consent and/or to comply with its obligations under the insurance contracts and to satisfy its legal and regulatory obligations, subject to the terms and conditions of the Brazilian General Data Protection Law (“Lei Geral de Proteção de Dados” – “LGPD”), which regulates the collection, use, process and sharing of personal data protection, as well as imposes security and compliance measures that must be complied with by the data processing agents. The Brazilian LGPD was created based on the terms and conditions of the EU/GDPR.

Any activity of processing personal data must follow the principles of purpose, adequacy, security and necessity, among others, meaning that (i) the process of personal data must be carried out for specific and explicit purposes duly informed to the data subject and no further process for different purposes than the original one is allowed; (ii) agents must collect and process the minimum of personal data necessary for the specific purpose; (iii) the process of personal data must be carried out in manner compatible and adequate to its purposes; (iv) the agents must adopt technical and administrative measures to protect the personal data and prevent incidents and non-authorised access to such data.

The transfer of customer data overseas/on a cross border basis are allowed for countries which holds a level of protection compatible with the ones required by the Brazilian General Data Protection Law (LGPD) and where the data controller guarantees the compliance with the principles of said law and with the rights of the data subject’s, by means of contractual clauses or corporate global policies expressly informing the customer regarding such transfer. The transfer of data customer overseas/on a cross border basis is also allowed for purposes of compliance with a statutory or regulatory obligation, performance of agreements, regular exercise of rights in lawsuits, administrative or arbitration proceedings and whenever necessary to serve the legitimate interests of the controller or of third parties and where the data subject has given its specific consent for such transfer.

Following the international trend, SUSEP has put under consultation a proposal of regulation relating to ESG in December 2021. The main idea of SUSEP is for insurers and local reinsurers to include in their internal controls and governance policies relating to ESG.

According to this proposal of regulation, the regulated entities will be required to put into the equation in their risk factors, sustainability policies that could impact in their underwriting process, credit and market risks and liquidity. This initiative aims to follow the recommendations set out by the Task Force on Climate-related Financial Disclosures (TCFD).

Brazilian insurance market has always relied heavily in car and life insurance. However, liability insurance has been increasing very fast (in 2021 it increased 30%) and significant part of the Brazilian society does not have any kind of liability insurance reason why there is much opportunity in such field. Recent developments in Brazilian bidding law and in surety bonds regulation may lead to an increase of such type of insurance. Cyber insurance is another type of insurance which growth is expected in the future. As a final comment, many insurtechs were incorporated in Brazil bringing new types of insurance and/or different covers in traditional insurance (such as intermittent insurance in car insurance