Insurance and Reinsurance

Insurers must now repatriate all foreign investments

The insurance regulator recently issued Resolution 36.162/2011, which was published in the Official Gazette on October 27 2011. The resolution restricts the possibility for local insurance companies to hold foreign availabilities and investments, mandating that all availabilities and investments of insurance companies instead be held in Argentina.

The resolution recalls that under the regulator's previous resolution (32,668/2007), the investments and cash availabilities abroad of local insurance companies could not exceed 50% of the credit capital or 50% of the net commitments, whichever was highest. The new resolution establishes the following additional obligations:

  • Within 10 days of the entry into force of the resolution, all insurance companies must file with the insurance regulator a sworn statement indicating, in detail, all foreign investments that are held in the investment portfolio of the company. In accordance with local regulations, the 10 days expire on November 14 2011.
  • Within 50 calendar days of the entry into force of the resolution, insurance companies must show to the insurance regulator that they have transferred all of the availabilities and investments held abroad into Argentina. From that date, insurance companies will not be permitted to hold reserves or investments abroad. In accordance with local regulations, the 50 days expire on December 24 2011.

The resolution further states that given the growth in the Argentine market and economy, the conditions are such that it is now possible for all the reserves and investments of insurance companies to be established in Argentina. Foreign reserves and investments were previously held only on an exceptional basis, as a result of the crisis in Argentina; current conditions in the international markets now make it advisable to repatriate all reserves and investments. Furthermore, experience has shown that the control mechanisms of the insurance regulator cannot be exercised in a timely manner over foreign investments. In addition, if reserves and investments are held in Argentina, they will be more readily available for compliance with commitments towards insureds.

The resolution further amends Section 35.4 of the General Regulations of the Insurance Activity (Resolution 21.523) to read as follows:

"35.4. All of the investments and availabilities of insurance companies must be located in the Republic of Argentina as from the Financial Statements ended December 31, 2011.

The INSURANCE SUPERINTENDENCE OF ARGENTINA may authorise the temporary maintenance of investments held abroad, on an exceptional basis and on a wellsupported resolution, in the cases where there are no instruments in the local market which are reasonably correlated to the commitments to be supported or when the inconvenience to conform to this resolution is conclusively proved. In both cases the factual circumstances supporting the request for the exceptional criterion must be proved before filing each Financial Statement.

All of the investments and availabilities held abroad by reinsurance companies may not exceed, in any case, 50% of the capital to be proved."

As indicated, the regulator may authorise (on an exceptional basis) the maintenance of foreign investments if there are no investments in the local market that would serve as adequate reserves for the commitments to insureds or if the inconvenience of adapting to the resolution is sufficiently evidenced. The circumstances that make the request for exception must be proven to the insurance regulator before the end of each fiscal quarter. The resolution does not clarify the process for obtaining this authorisation, or whether investments may be maintained abroad once the request has been filed, pending the authorisation of the insurance regulator.

While not directly applicable to reinsurance companies, the final paragraph of the new Section 35.4 of Resolution 21.523 states that reinsurance companies may still have foreign reserves and investments of up to 50% of the creditable capital, thus eliminating the alternate limit that existed with the previous regulations.

For further information on this topic please contact Martín G. Argañaraz Luque