Reinsurance Regulations Become More Flexible

Since Resolution No. 35,615 enacted on February 11, 2011, the National Superintendence of Insurance (“NSI”) limited the execution of reinsurance agreements to Local Reinsurers, i.e. Argentine reinsurance companies or Argentine subsidiaries or branches of foreign companies established in Argentina, admitting exceptionally the execution of reinsurance agreements with Admitted Reinsurers (i.e. foreign reinsurers registered with the NSI and with a local representative registered with the Public Registry of Commerce), when due to the magnitude and the characteristics of the risks, these could not be covered in the national reinsurance market or when an individual risk would exceed US$ 50 million, that portion that exceeds said sum could be reinsured with an Admitted Reinsurer (see “Further Changes to Reinsurance Regulations” in Marval News # 106).

New Resolution No. 40,163 eased the regime enacted by Resolution No. 35,615, permitting the insurers the execution of passive reinsurance transactions with Admitted Reinsurers, according to the following schedule:

• From 1/1/2017 onwards, a maximum of 10% of the ceded premiums may be reinsured with Admitted Reinsurers;
• From 7/1/2018 onwards, a maximum of 20% of the ceded premiums may be reinsured with Admitted Reinsurers;
• From 7/1/2019 onwards, a maximum of 30% of the ceded premiums may be reinsured with Admitted Reinsurers;
• From 7/1/2020 onwards, a maximum of 40% of the ceded premiums may be reinsured with Admitted Reinsurers;
• From 7/1/2021 onwards, a maximum of 50% of the ceded premiums may be reinsured with Admitted Reinsurers;
• From 7/1/2022 onwards, a maximum of 60% of the ceded premiums may be reinsured with Admitted Reinsurers;
• From 7/1/2023 onwards, a maximum of 70% of the ceded premiums may be reinsured with Admitted Reinsurers;
• From 7/1/2024 onwards, a maximum of 80% of the ceded premiums may be reinsured with Admitted Reinsurers.

In addition, Resolution No. 40,163 established that reinsurance contracts of individual risks in excess of US$ 50 million may be executed with Admitted Reinsurers in full, and will not be computable to the purposes of calculating percentages mentioned in the previous paragraph.

Moreover, Resolution No. 40,163 removes point 3.2 of the Annex to the point 2.1.1 of the General Insurance Regulatory Framework that established that Local Reinsurers may retain at least 65% of the premiums issued for the area of “Persons” and at least 15% of the premiums issued for the area of “Property”. Thus, the NSI eliminated minimum risk withholdings to Local Reinsurers in these areas.

Finally, Resolution No. 40,163 also eased new capital requirements required from Local Reinsurers by  recent Resolution No. 39,957 (enacted by the NSI on July 29, 2016). Resolution No. 39,957 established a gradual capital increase schedule, which culminated with the accreditation of a minimum capital of $ 300 million on September 30, 2017 (see “Amendment to the Regime of Minimum Capital for Insurance and Reinsurance Companies” in Marval News # 164). Resolution No. 40,163 maintains that regime but modifies the last section of the schedule, which can now be accredited until June 30, 2018.