Moody’s Sees Brazil’s New Insurer Audit Regs as Credit Positive

Rules that strengthen insurers’ corporate governance are credit positive for Brazilian insurers there, analysts for Moody’s Investors Service said in a commentary last week.

The Moody’s report by senior analysts Alejandro Pavlov and Diego Kashiwakura referred to actuarial and audit requirements put in place on 25 June by Superintendencia de Seguros e Previdencia (SUSEP), Brazil’s insurance regulator.

The rules for insurance companies and their boards of directors seek to increase transparency and ensure that auditors and outside actuaries remain independent from their insurance clients, Moody’s said.

According to Moody’s, the new regulations (Resolution Numbers 311 and 312), which take effect in 2015 for the 2014 fiscal year, require:

• The boards of insurers with more than BRL500 million ($212 million) of equity and BRL700 million ($297 million) in reserves to create an audit committee composed of independent members.
• All Brazilian insurers to rotate their external auditing and actuarial firms every five years, and allow three years to pass before rehiring them.

The Moody’s analysts said the regulator’s sustained effort to increase surveillance and improve controls for insurers and reinsurers in Brazil is positive, noting that the latest regulations follow similar controls that SUSEP has implemented in recent years, including the required disclosure of certain actuarial information by general insurers in their public filings and the establishment of additional reserving and risk-based capital standards.

Source: Moody’s Investors Service