With the conversion of Provisional Measure No. 1,103/2022 into Law No. 14,430/2022, the insurance sector saw the consolidation of the rules of the insurance credit securitization market in Brazil.
Through securitization, insurance companies, supplementary pension entities, and insurance operators
supplementary health or reinsurance companies may raise financial resources by transferring part of the risks assumed in their own operations.
This assignment will be made to a Special Purpose Insurance Company (SSPE), an insurance company whose sole purpose is to carry out one or more independent insurance risk acceptance operations. The SSPE will be responsible for raising funds for its insurance activities through the issuance of Insurance Risk Notes (LRS), a debt instrument linked to insurance and reinsurance risks.
Although the LRS is an investment with fixed rates of return, investors will be subject to the obligations of the risk assignment agreement that underpin the LRS.
CMN (National Monetary Council) and CNSP (National Council of Private Insurance) will regulate the SSPE with regard to the duties and responsibilities of the fiduciary agent, while CVM (Securities and Exchange Commission) will regulate matters relating to the public offering and distribution.
Finally, Law 14,430/2022 ends up amending Law No. 9,718/1998, to grant similar tax treatment to all credit securitization companies (mandatory adoption of the Real Profit system, and the possibility of deducting fundraising expenses incurred from the Pis/Cofins base.
