Regulation

Decree Law 73/66 established the Brazilian Private Insurance System, which includes CNSP, SUSEP, IRB, insurance companies and brokers. CNSP, consisting of members indicated by several government agencies, has regulatory authority to lay down general insurance and reinsurance policies and regulates the creation, organization, operation and inspection of insurance companies and insurance brokers.

SUSEP is a federal government autonomous agency with powers to implement the policies established by CNSP and supervise the insurance industry, analyze requests for authorization of operation, restructuring, merger, transfer of ownership and amendments to the bylaws of insurance companies, issue opinion on such authorization requests, create regulations relating to transactions involving insurance activities, pursuant to the policies issued by CNSP, determine the terms and conditions of insurance policies, special coverage and operating methods to be adopted by the insurance companies, and approve the operating limits of insurance companies.

Insurance companies are required to obtain approval from government to operate, as well as specific approval from SUSEP for each of their insurance products. Insurance companies should maintain reserves in conformity with the criteria established by CNSP. The investments which guarantee these reserves should be diversified.

The reserves maintained by insurance companies should be invested in marketable securities pursuant to the diversification rules imposed by CMN. Consequently, insurance companies are large investors in the Brazilian financial markets and are subject to several rules and conditions imposed by CMN with regard to the investment of technical reserves. The authorization for insurance companies is granted by the Ministry of Finance, after the request is filed at SUSEP and submitted to CNSP. Any proposed amendment to the bylaws of insurance companies, or any consolidation, merger or similar operation, should also be submitted to SUSEP and, in certain cases, to the Ministry of Finance, to be approved.

Insurance companies are not allowed to open offices or branches abroad without the authorization of the Ministry of Finance. In the event of maintaining any offices or branches abroad, the insurance company should (i) keep the proceeds deriving from transactions abroad in separate items in its financials, (ii) provide a detailed report to SUSEP relating to the proceeds deriving from transactions abroad, (iii) present evidence that the financial statements relating to offices and branches abroad have been approved by competent foreign authorities.

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