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Brazil’s insurance law needs improving, according to Brazil’s Bar Association

Débora Schalch, chair of the Insurance Law commission of the Brazilian Bar Association’s São Paulo chapter (OAB-SP), takes a look at the major obstacles impacting companies in Brazil’s insurance sector.  .

Over the past decade, insurance industry revenues have risen from 128.3 billion reais (approximately US$35 billion) to 430.4 billion reais (approximately US$118 billion). In fact, despite the economy’s recent ups and downs, the insurance sector has flourished and repeatedly outperformed GDP growth. As Brazil’s economy now looks set to get back on track, however, it has been predicted that the sector will double in size over the next few years. But this optimistic projection may not materialise if Brazil’s Congress passes its Insurance Contract Bill (PLC 29/2017).

Although the new insurance bill has been going through Congress since 2004 with the justification of “protecting” consumers of insurance, its latest version does the opposite by not differentiating group policyholders from big companies that have huge financial capacity and technical expertise. This failure to distinguish between one and the other may lead to distortions and imbalances in terms of mutuality, which is the basic principle of insurance.

In addition to stipulating fines and other penalties that could add to insurers’ costs and possibly raise insurance prices for many consumers, the bill also contains a number of other provisions that may hinder insurance businesses. These points were listed in a technical report from the Insurance Law Commission of the Brazilian Bar Association’s São Paulo chapter (OAB-SP) concluded at the end of last year.

The report points to a provision in PLC 29/2017 that addresses reinsurance: why does a law intended to regulate insurance also cover reinsurance? This is at the very least inconsistent, since reinsurance is doing very well with its own laws and resolutions. If this provision remains in the bill, it will cause legal uncertainty and deter foreign investors.

PLC 29/2017 also sets forth some rules about arbitration, which also has its own law and is acting in accordance with international standards. The bill changes existing rules by proposing that arbitration be conducted only in Brazil and under Brazilian law. By withdrawing the parties’ right to elect a jurisdiction and the legislation to be applied, as the law states, the bill may further deter investors from other countries.

No less concerning is the change in the statute of limitations stipulated by the bill, which would start only as of an express and reasoned refusal of coverage by an insurer. Without computing the period between the date of a claim and when the loss event was reported to the insurer, a statute of limitations may extend for many years. In practice, this means that insurers must hold reserves and provision for years until a policyholder decides to file its claim.

Finally, the new bill is also mistaken in applying the “duty to inform” during loss adjustment proceedings (which are the proceedings companies carry out to analyse if a claim is covered and should be paid or not), thus forcing insurers to inform interested parties of the content of their investigations. In addition to violating the principle of confidentiality, the bill also undermines insurance companies’ rights to keep their documents confidential.

These points and others on PLC 29/2017 made by the OAB-SP Insurance Law Commission and included in its technical report were sent to the Federal Senate’s rapporteur for the bill, senator Armando Monteiro. At the time, he was surprised to learn that the senators’ advisors had not yet received any report or document that posed new points of view on the project, despite the negative impacts that the proposal could produce for the insurance sector.

The OAB-SP’s Insurance Commission aims to improve PLC 29/2017 and in this respect it has fulfilled its role by providing the bill’s rapporteur with its contribution for a more realistic analysis of the bill’s effects for the insurance business. Whether the insurance industry needs a new law is no longer the matter being discussed; now the issue is how to prevent a law holding back the industry’s performance and threatening its development.

First published on the LACCA website, 25 May 2018  


Pelo terceiro ano, A Schalch Sociedade de Advogados integra o seleto grupo de escritórios brasileiros na área de seguros e é recomendado pelo The Legal 500 Latin America 2019.

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A edição 2019 do guia internacional sobre a América Latina The Legal 500, destacou Debora Schalch, Tatiana Algodoal Rosa e João Paulo Leite na lista de “Recommended Lawyer”.

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A edição de 2020 do Chambers&Partners destacou pelo segundo ano consecutivo Debora Schalch como uma das melhores no setor de seguros e resseguros.

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