In late January 2014, Brazil applied for Solvency II equivalence for its insurance solvency regime. Its regulator, Superintendência de Seguros Privados (SUSEP), is currently negotiating an agreement with EIOPA in order to evaluate the extent to which Brazil’s insurance legislation complies with the upcoming Solvency II rules. After what was a less than positive outlook on Solvency II, Brazil now appears to be very optimistic that its supervisory model will receive equivalence status under Solvency II.
It is unclear however what type of equivalence Brazil will be applying for; whether it be equivalence for the group capital calculation, for group supervision equivalence, or for reinsurance equivalence. If Brazil was found to be equivalent in all three areas (either on a full or transitional basis), this would enable European firms to apply local solvency rules to their Brazilian subsidiaries, and would help Brazilian groups, and Brazilian reinsurers, with European operations or European ambitions to do business in the European Economic Area. Danilo Claudio da Silva, a director at SUSEP, said that “our plan is to improve the rules over the next couple of years to coincide with Solvency II coming into force in Europe”. As the time for implementation nears, and more countries inevitably apply for equivalence, this may give the countries that are ardently against gaining Solvency II equivalence something to think about.
This will also be good news for the UK Government, who, in December 2013, announced its UK Insurance Growth Plan (the Plan) (copy found here). The Plan’s main objective is the growth of the insurance market and the strengthening of the sector’s contribution to the British economy. It states that the Financial Services Trade and Investment Board (the Board) has agreed to promote the insurance sector as one of its top priorities and that over the next 12-18 months, the Board will oversee high value initiatives for five markets which have been identified by UK insurers as key targets for growth. The Plan lists Brazil as one of those strategic markets, together with China, India, Indonesia and Turkey. In turn, the Board will oversee joint work between Government departments and private sector organisations to identify key opportunities for the growth of the UK insurance sector in each of those markets. Brazil applying for Solvency II equivalence should mean that the number of those opportunities substantially increase.