Effective September 1, 2011, a non-domestic reinsurance company wanting to do business in Argentina will be required to establish a local branch before it may reinsure any risks held by an Argentine insurer. The new regulation was among several changes to Argentina’s reinsurance regulatory framework that were published on February 21, 2011. (Resolution 35.615/2011 as published in Official Gazette No. 32.096 (Feb. 21, 2011) is available at http://infoleg.mecon.gov.ar/infolegInternet/anexos/175000-179999/179428/norma.htm.)
Under the new regulations, local insurers will be prohibited from ceding risks to any reinsurer who has not made itself subject to Argentina’s regulatory authority. Local insurers wanting to buy reinsurance will be limited to buying only through reinsurance companies that are domiciled in Argentina, including “[a]ny branches of foreign reinsurance companies that may be set up in the Republic of Argentina.” Ch. 1, § 1(b). A foreign reinsurer who intends to open an Argentine branch for the purpose of becoming licensed to transact reinsurance business in the market must provide capitalization of at least U.S. $5 million. Foreign reinsurers have until September 1, 2011 to conform to the new regulation or will thereafter be barred from accepting any reinsurance transactions originating in Argentina.
The sole exception to the regulation will allow a foreign reinsurer to transact business in Argentina if (a) the transaction cannot be covered by a domestic Argentine reinsurer and (b) the Superintendent of Insurance is provided an application to enter into the transaction in advance by the domestic insurer, who is also obligated to provide the Superintendent all of the relevant material “supporting the exceptional nature” of the ceded risks. Ch. 1, § 19. Only reinsurers that are authorized to do business abroad in their own countries are eligible to enter into such transactions. The regulations further set down requirements for foreign reinsurers in these limited circumstances, including providing proof from an external auditor of a minimum net worth of U.S. $30 million and maintaining copies of financial statements that are signed by an appointed attorney representative in the City of Buenos Aires. Once a license is issued allowing the transaction, the foreign reinsurer will be subject to numerous requirements on an ongoing basis during the life of the reinsurance agreement.
The new regulations are silent with respect to whether a domestic reinsurer may retrocede Argentine risks to a foreign reinsurer.
The local press has reported wide discontent over this reform coming from the insurance community and local brokers. Among other things, members of the insurance community have pointed out that the Argentine market has no capacity to assume the risk (more than 90% of risks are now reinsured abroad) and that even if there were capacity, this resolution concentrates all of the risk in local companies, which is far from desirable. In addition, it has been pointed out that this reform will increase premiums as there will be little competition from international reinsurers. Hence, it is very likely that the market will oppose this reform. However, it remains to be seen whether such opposition will be successful. In the meantime, reinsurance companies have less than six months to comply with this drastic reform.
Consult with a Proven Buenos Aires Argentina Insurance and Reinsurance Lawyer
The proven Buenos Aires Argentina Insurance and reinsurance lawyer professionals at Kier Joffe law firm are experienced in the effective resolution of Insurance and reinsurance lawsuits as related to Insurance and reinsurance contracts in Argentina. Buenos Aires Insurance and reinsurance attorney professionals are knowledgeable in all areas of general Insurance and reinsurance law and cases in Buenos Aires Argentina. Clients will have the confidence of knowing that the case is being handled by an experienced and knowledgeable Buenos Aires Insurance and reinsurance lawyer.
The proven Buenos Aires – Argentina lawyer professionals at the Kier Joffe law firm have experience working with foreign clients involved in all kind of cases in Argentina. Buenos Aires Argentina attorney professionals are knowledgeable in almost all the practice areas of law, to service its international cases in Buenos Aires Argentina. International clients will have the confidence of knowing that the case is being handled by an experienced and knowledgeable Buenos Aires lawyer in Argentina.