Admitted reinsurers: Difficulties in the registration process
In early 2011 the insurance regulator overhauled the entire reinsurance regime in Argentina (for further details please see "Insurance regulator enacts new reinsurance framework"). One of the changes that has caused the most concern in the market is the requirement for 'admitted' reinsurers to register a permanent establishment in Argentina. Admitted reinsurers are authorised to offer reinsurance from their head offices only on a per-exception basis, and may freely offer retrocession coverage to 'local' reinsurers.
The market questioned the need for the registration of a permanent establishment since, in essence, the reinsurers would not be conducting business locally and all the underwriting would be done directly by their head offices. Regardless of these arguments, the insurance regulator persisted in its position that registration of permanent establishments was required.
Pursuant to Argentine law, a permanent establishment of a foreign company must be registered with the public registry of commerce of the jurisdiction in which the permanent establishment's main activity is to be conducted. For reinsurance companies, this is the Office of Companies in Buenos Aires.
Once the Buenos Aires Office of Companies began receiving requests for registration of a permanent establishment from foreign reinsurers seeking admitted status, it began to question the need for registration, arguing - as the reinsurers had done - that there would be no commercial activity carried out in Argentina and, therefore, registration was not only unnecessary, but impossible. However, the insurance regulator was adamant that registration was required and would not review its prior position.
This discussion between the two government entities lasted several months; filings of foreign reinsurers were delayed, pending resolution of the conflict. The situation was apparently resolved and it was implied that the Buenos Aires Office of Companies would register the permanent establishments of admitted reinsurers if it received a decision from each company's board of directors stating that the limited activities that the company would conduct in Argentina fell within the scope of the reinsurer's corporate purpose. This was conveyed to the reinsurers seeking registration through requests for additional information by the Buenos Aires Office of Companies.
However, the situation is far from being resolved. The Buenos Aires Office of Companies continues to require additional information and documentation from foreign reinsurers (in addition to the board resolution requirement), which is not required in the registration of other permanent establishments. Simultaneously, the regulator has begun to demand that admitted reinsurers complete the registration process with the Buenos Aires Office of Companies. Registration is being delayed by continuous requests for information from the Buenos Aires Office of Companies, delay in processing files and frequent strikes by Buenos Aires Office of Companies personnel.
Due to the situation, the regulator has stated that admitted reinsurers will be allowed to operate as such, as long as they are included in the list published on the regulator's website, until this issue is resolved.
It is hoped that registrations will be finalised shortly, but as yet, it is impossible to guess at a timeframe in which the market will settle and the formal registration processes will be concluded.
For further information on this topic please contact Martín G. Argañaraz Luque