Insurance and Reinsurance Monopolies - Is It Really the End? 'Major Developments in Costa Rica and Brazil: The 2010 Forecast'

By Yani Contreras and Thomas F. "Tom" Morante

Yani Contreras, Foreign Legal Counsel, is based in our Washington, D.C. office Thomas Morante, partner, is based in our Miami office.

As the G-20 grapple with how to change the global legal framework for financial services to ensure that there are no future financial crises, some countries have moved to quickly modernize their laws to accommodate the insurance needs of consumers and the business opportunities afforded thereby. Two such countries in Latin America present interesting case studies: Costa Rica and Brazil. This article addresses the evolving nature of insurance legislation in these countries and demonstrates the growing significance of the insurance market worldwide.

Costa Rica

At long last, following adoption of the DR-CAFTA Free Trade Agreement and enactment of the required enabling legislation, 2010 will witness the actual opening of Costa Rica's insurance market to competition with the entry of four new participants, one local company, one U.S. company and two Panamanian companies.

The four new participants that have been authorized by the General Superintendent of Insurance (SUGESE) are Seguros del Magisterio for personal insurance; Aseguradora Mundial (subsidiary of a Panamanian insurer) for general insurance; ALICO (an AIG branch) for personal insurance; and ASSA (a subsidiary of Grupo Assa Panama) for personal and general insurance.

These companies, which are expected to begin operations in the middle of the year, will compete in the market with the Costa Rican long lasting National Insurance Institute (INS), which has had the monopoly on insurance since 1924, offering both personal and general lines of insurance. The entry of domestic and foreign insurers to the Costa Rican insurance market expands the market by exploring the needs of new segments of the population and improving the options available for Costa Rica's insureds.

This radical change in the insurance environment in Costa Rica is the result of a long process that began in 2004 when Costa Rica signed the DR-CAFTA – which required signatories to open their insurance markets. This was followed by the adoption of the Insurance Market Regulatory Law in 2008 and corresponding regulations in 2009, which afforded the legal framework governing authorization procedures, registration and operation requirements for the insurance companies along with the creation of the SUGESE.

SUGESE operates under the supervision of the...