It is interesting to note that the Brazilian Commercial Code of 1850, Title VIII, with five chapters – has disciplined Marine Insurance contracts and, in article 687, objectively included reinsurance provisions: “The Insurer may reinsure with other insurers the same objects it may have insured, under similar or different conditions, and for a lower, equal or higher premium”. The legal prerogative, determined in the XIX century in this Country, still in Imperial times, gives rise to underlying and thoroughly updated concepts – according to today’s conception of reinsurance, for dealing with the proportionality and non-proportionality, in addition to making quite clear the separation existing between an insurance contract and a reinsurance contract.
Insurance operations in Brazil have taken a significant step forward with the advent of the Civil Code of 1916 and, despite the Brazilian economy being based on agriculture and then not much developed, insurance contracts had gradually achieved their importance in the society. The Brazilian market was then represented by large foreign companies, a few medium-sized Brazilian insurance institutions and the majority of small insurers. Reinsurance and retrocession were fully passed along to overseas companies, with very low retention of risks by Insurers in Brazil. In 1939, Getúlio Vargas’ administration created the Brazilian Reinsurance Institute – IRB. The Institute has definitively propitiated the development of the nation’s direct insurance market, extending the monopoly of its operations for just over 69 years.
The Decree-law No. 73 created the National Insurance System in the country (National Private Insurance Council - CNSP, Superintendence of Private Insurance - SUSEP, Brazilian Reinsurance Institute - IRB, Insurers, Insurance Brokers), hierarchizing and rendering operational the relevant state agencies.
In the years 80 and 90 – a deregulatory cycle benefited the insurance activities, by releasing premium and insurance brokerage rates from governmental control. The Insurers, previously merely acting as operators of rates set forth by the public administration, were allowed to create their own tariff tables, on basis of the pertinent actuarial technique. They were then capable of performing the sector end-activity under the free initiative and the market supply and demand regime, as provided in the Federal Constitution of 1988.
The Consumer Protection Code – Law No. 8078, dated 11.09.1990 – judicial micro-system that affected all consumer relationships, including those of a financial and insurance nature, has definitely modified the insurance activity in Brazil, with no retrogression. The Civil Code of 2002, in force since 2003, has modernized the contractual concepts, insurance contracts among them.
The Insurer Market, in this new economic and social scenario in Brazil, has acquired a new status, necessarily modernizing its operations and its commercialized products, in a dynamic and continuous process. The purchase of insurance today is no longer made as in past decades. The paradigms elected by the consumer society are no longer the same ones and the market must continuously adapt to them.
Also, reinsurance required modernization and a long process was started in Brazil:
• Constitutional Amendment No. 13, dated 21.08.96 – changes article 192, item II, of the Federal Constitution, extinguishing the IRB exclusivity as an official reinsuring agency.
• Executive Order No. 1578, dated 17.06.97 - transforms IRB into a joint stock company. Inclusion of IRB in the National Deregulation Plan.
• Passed at the National Congress, on 13.08.97, the conversion of Executive Order No. 1578 into Law No. 9482, providing on IRB administration and on the assignment of its shares.
• Passing of Law No. 9932/99, dated 22.12.1999, in the Fernando Henrique Cardoso administration, transferring all IRB-Brazil Re assignments to SUSEP.
• Bill on Direct Unconstitutionality Act (ADIn) No. 2223-7, dated 08.06.2000, aimed at fulminating the provisions of Law No. 9.932/99.
• Acting President of Supreme Federal Court, sanctions ADIn No. 2223-7, dated 14.07.2000. The enforcement of Statutory Law No. 9932/99 is, therefore, suspended. On 10/10/2002 – The STF Court sanctions the Injunction Relief of ADIn No. 2223-7, maintaining the suspension of Law No. 9932/99.
• Constitutional Amendment No. 40, dated 29.05.03 changing once more article 192 of the Federal Constitution.
• The Ministry of Finance introduces Complementary Bill No. 00249/2005, in the National Congress, providing on the policy of reinsurance, co-insurance, retrocession and its intermediation, overseas insurance and foreign currency operations in the insurance sector.
• The passing of Complementary Law No. 126, dated 15.01.2007 published in the Federal Gazette (DOU) dated 16.01.2007, caused the Brazilian reinsurance market to definitively be open. This Complementary Law establishes the basic standards for exercising reinsurance activities in Brazil and, as it should be, adopts the principle of free covenanting between all interested parties, such as prevailing all over the world in terms of reinsurance. The internationality of the operation is a sine qua non condition for its efficacy, whereas the practice of reinsurance is governed by long standing international custom and usage. The reinsurance agreement (treaty) is in itself a primary source of Law for the parties entering in this special type of private covenant, where there is no specific state intervention. And thus will also have to be practiced in Brazil.
• The non-statutory regulation on reinsurance operations is sponsored by National Private Insurance Council - CNSP, Superintendence of Private Insurance – SUSEP and National Monetary Council - CMN, in force since 2008. The Brazilian Insurance Market, therefore, is definitively inserted in the worldwide reinsurance context.
• Resolution CNSP No. 168, dated 17.12.2007 (Federal Gazette - DOU - 12/19/2007), providing on the activity of reinsurance, retrocession and its intermediation, concentrates all the fundamental rules of the reinsurance activity in the country, as it determines the conditions for the access and exercise of Local – Admitted – Occasional Reinsurer, the conditions for contracting a reinsurance policy (either directly or through a broker), of a reinsurance in foreign currency, of warranties and provisions, of the Admitted Reinsurer agency office, of mandatory contractual clauses, of the reserve for Locals, among other provisions.