After a transition period of two years, the new Insurance and Surety Institutions Law (Ley de Instituciones de Seguros y Fianzas) (\u201cLISF\u201d) will enter into force on April 4, 2015. The most important objective of the LISF is to implement the Solvency II framework in Mexico.<\/p>\n
Over the next 12 months, our Firm will be sharing with our clients and friends 12 monthly updates on relevant aspects of the insurance and surety legislation that will change as a result of the legal reform.<\/p>\n
This is the third of three updates distributed to date. In case you are interested in receiving any of our prior updates please send us an e-mail.<\/p>\n
Foreign Reinsurers<\/strong><\/p>\n As has been the case under existing legislation, the LISF requires that foreign reinsurers be registered with the General Reinsurers\u2019 Registry (\u201cRGRE\u201d) in order to assume risks from Mexican cedents. Under the LISF, the authority now in charge of maintaining the RGRE is the National Insurance and Surety Commission (\u201cCNSF\u201d).<\/p>\n In addition to complying with existing requirements, under Chapter 34 of the new Unified Insurance and Surety Regulations (\u201cCUSF\u201d), foreign reinsurers must file declarations with respect to the \u201cEconomic Links\u201d and \u201cBusiness Links\u201d they have with prospective cedents and with other Foreign Reinsurers registered with the RGRE. This new disclosure requirement relates to Section 34.1.20 of the CUSF which reads as follows:<\/p>\n \u201cThe recording with RGRE shall not be granted or renewed with respect to foreign insurers, reinsurers or re-bonding companies or with respect to Registered Foreign Reinsurers whose majority or exclusively the operations of assumed Reinsurance or Re-Bonding have been carried out or are intended to be carried out with Institutions that have Economic Links or Business Links with them.\u201d<\/em><\/p>\n In recent months Section 34.1.20 has raised concern among the global insurance and reinsurance community that conducts business in Mexico. The sector\u2019s concern stems from the circularity and succinctness of the language of Section 34.1.20, which allows for at least two interpretations.<\/p>\n The most reasonable interpretation, is consistent with the CNSF’s powers (as keeper of the RGRE) to analyse the foreign reinsurer’s operations as a whole and asses the adequate diversification of risks by the same to the extent it could affect Mexican insureds. Therefore, Section 34.1.20 can be read in the sense of requiring that the aggregate portfolio of assumed reinsurance of a foreign reinsurer may not be conformed in its majority (ie., more than 50%) by risks assumed from Mexican affiliate cedents. In other words, such portfolio may be diversified with cedents from other jurisdictions.<\/p>\n Section 34.1.20 can also be interpreted in a way that is contrary to business sense and market reality, namely that the CNSF may not grant or renew the registration with the RGRE of any foreign reinsurer that assumes reinsurance from affiliate cedents where \u201cMexican risks\u201d underwritten on a direct basis by such affiliate cedents exceeds the majority (i.e., more than 50%) of the insurance premiums for the overall interpretation does not look at the overall portfolio reinsured by the foreign reinsurer but artificially limits the analysis to the Mexican segment of its portfolio and disallows RGRE registration if such segment is assumed in its majority from Mexican affiliate cedents.<\/p>\n As is the case every year, the renewal of the recording of foreign reinsurers with the RGRE will be due in October 2015. Although we believe it would be unlikely, there is a possibility that the CNSF may endorse the second interpretation explained above. However, there are alternatives for gaining legal certainty with respect to compliance with RGRE renewal requirements in advance of the October deadline.<\/p>\n Creel, Garc\u00eda-Cu\u00e9llar, Aiza y Enr\u00edquez, S.C. is committed to being a strategic service provider to its international and domestic clients, and continues its tradition of providing high-quality, expert and responsive legal advice across fields of law in Mexico, including M&A, banking and finance, real estate, competition law, energy, infrastructure, intellectual property, employment law, tax law, environmental law, insurance and reinsurance, transportation and telecommunications law.<\/p>\n Mexico City, on March 31, 2015.<\/p>\n","protected":false},"excerpt":{"rendered":" After a transition period of two years, the new Insurance and Surety Institutions Law (Ley de Instituciones de Seguros y Fianzas) (\u201cLISF\u201d) will enter into force on April 4, 2015. The most important objective of the LISF is to implement the Solvency II framework in Mexico.<\/p>\n","protected":false},"featured_media":0,"template":"","cltvo_categoria_tax":[83],"tipo_publicacion_taxonomy":[179],"class_list":["post-8951","cltvo_publicaciones","type-cltvo_publicaciones","status-publish","hentry","cltvo_categoria_tax-insurance-and-reinsurance","tipo_publicacion_taxonomy-client-alerts"],"acf":[],"yoast_head":"\n