New provisions to liberise insurance and reinsurance.
The state monopoly on reinsurance in Brazil has now been removed by amendment 13 to the Constitution, dated August 21, 1996. In accordance with the new wording of Article 192, II of the Constitution, licesing requirements and other conditions applicable to reinsurance shall be regulated by means of a complementary law. Two Bills attempting to regulate the market have already been introduced in a Congress renowned for its sluggishness.
The view has been put forward by some that, in the absence of any pertinent legislation, valid reinsurance contracts can be entered into (subject to the prior express approval by the Brazilian Institute of Reinsurance (IRB)). This wishful if unrealistic statement does not address the practical point that the IRB is not likely to refuse any chance of earning a comission, and so the IRB may refrain from approving operations without its participation. In addition, in a country still subject to exchange controls, the practical side of transfer of funds and exchange coverae mut be appropriately addressed before full liberalisation is implemented. As a result, there has been pressure from insurance companies for the situation to be fully regulated in the near future. In the meantime, two major reinsurance players, SwissRe and Scor, have opened up representative officers in Brazil.
Almost contemporaneous with the amendment to the Constitution, the Brazilian Official Gazette of June 10, 1996 published opinion GQ 104 by the Federal General Attorney exempting the insurance sector from restrictions on foreign capital imposed by Article 52 of the transitory provisions of the Constitution. The opinion was prompted by a refusal on the part of the Superintendent of Private Insurances to allow a company reorganisation in violation of Article 52 of the Constitution and Resolution 14 / 86 of the National Council for Private Insurances. The latter attempted to restrict direct or Indirect foreign participation in insurance companies to 50 per cent of the total capital, up to a limit of one-third of the voting capital. This opinion was expressed in the face of the reservation made by Brazil during the Uruguay Round of the GATT and was in contradiction to another opinion given in the recent past by the same Federal Attorney on the same subject, which is indicative of the disposition of the current Brazilian Government unilaterally to liberalise the insurance and reinsurance sectors.
Such developments in fact liberalise the sector to foreign capital under the present Cardoso Administration. It is reported that one company – Generali – has already availed itself of the opportunity opened by the foregoing situation in order to operate in the domestic insurance market. Other major international companies are expected to follow in the near future.
Lawyer admitted in Brazil, England and Wales and Portugal. GATT and WTO panelist. Brazilian government ad-hoc representative for the Uruguay Round of the GATT. Post-graduation professor of the law of international trade.