Interactive Insurance Map: Latin America

What are the sources of insurance and reinsurance law in the jurisdiction? How is the insurance and reinsurance market regulated?

The Superintendence of Insurance is primarily responsible for regulating and supervising the insurance industry. Insurance companies are also subject to the jurisdiction of other government authorities for various aspects of their business, such as: the Public Registry, which maintains a register of all commercial entities; Federal Public Income Administration, which is responsible for federal tax matters, and provincial tax offices; and Consumer Protection authorities, at national, provincial or municipal levels, among others. The main legislation for re/insurance includes: the Insurance Law 17,418, which regulates re/insurance contracts; the Insurance Undertakings Law 20,091; the General Regulation of Insurance Activity, approved by Superintendence of Insurance (Resolution 38,708) in 2014, which establishes the main regulations for the insurance and reinsurance activity; and the Law 22,400, which governs insurance broking activity.

Burden of proof

Who has the burden of proof when a claim is made? Does the burden of proof switch to the other party and if so, at what point?

The burden of proof lies with the party that asserts the existence of a disputed fact as the basis for its claim or defence. However, the Civil and Commercial Code (Article 1735) includes mechanisms for courts to shift the burden of proof to the party that the judge considers is in a better position to prove a disputed fact.

In consumer insurance contracts, insurers have the duty to provide to the court all the evidence that they hold in their possession and the necessary collaboration to clarify the issue under dispute (Article 53 of the Consumer Protection Law), and contractual provisions that aim at shifting the burden of proof to the policyholder may be considered abusive (Article 37 of the Consumer Protection Law).

Effect of a ‘reservation of rights’ and ‘without prejudice’ correspondence

What is the effect of a reservation of rights? Does the jurisdiction recognise the concept of without prejudice correspondence?

“RoR” and “WP” are not terms of art under Argentine law. A “pre‑emptive rejection” made by an insurer within the 30 days in which, according to the Insurance Law 17,418, it has to decide if a loss is covered or not should protect the insurer’s position. Absence of a formal decision within the 30‑day term would lead to an implicit acceptance that the loss is covered.

Confidentiality agreements may be signed by parties purporting to protect correspondence that is genuinely aimed at settlement (i.e. WP correspondence). However a party who is a consumer would normally be allowed to disclose to the Court documents exchanged with its counterparty in spite of a confidentiality agreement.

Privilege

Does the jurisdiction recognise the concept of legal privilege? In what circumstances?

Privilege applies to attorney-client communications and advice and gives rise to an obligation and right of professional confidence.

Disclosure

Is there a duty of disclosure in litigation?

Are parties obliged to disclose documents that are unfavourable to its own case?

Parties are under no obligation to produce documents other than those on which they rely. Parties may request that opponents or third parties produce documents specifically identified as relevant to the dispute.

Expert witnesses are appointed by the courts and are independent from both parties. In general, they advise the court on the questions that are put to them by each of the parties. To prepare their advice, they are entitled to request via the courts documentation from each of the parties including documents which are adverse to the producing party. Judges may draw a negative inference if these requests are rejected. Different rules may apply at provincial level.

Interest

Is there a statutory interest rate in commercial matters? Can parties contract out of this? When does interest start to accrue?

Parties may contractually agree the applicable rate of interest. If no contractual provision exists the parties can still claim interest on sums due. Interest rates vary but the courts in Buenos Aires may award interest on debts in ARS, presently at an annual rate of 125%, and at 6–8% on debts in USD or other international currencies. As a general rule interest begins to run from the date when the relevant obligation becomes payable.

Costs

Does the losing party of a legal action bear the costs of the successful party?

The general principle (at federal level) is that the losing party bears the costs of the litigation. The court has discretion to totally or partially derogate from this general principle if there are sufficient grounds. In general, costs comprise Court tax, lawyers’ fees and experts’ fees. Court tax usually amounts to 3% of the sum in dispute. The court will calculate legal fees due considering the scale and complexity of the litigation and the proficiency of the lawyers involved. Expert fees are fixed by the Court in accordance with fee regulations applicable to different professions.

Monetary correction

Is monetary correction applied in the jurisdiction? If so, how is it calculated?

Monetary correction is legally forbidden by Law 23,928. However, given the current economic environment, where the annual inflation rate is estimated to exceed 80%, some courts are circumventing this legal prohibition through different mechanisms, especially in the field of insurance. For instance, in cases of mandatory motor liability insurance, where a minimum liability limit is dictated and regularly adjusted by the Superintendence of Insurance, some courts (most notably, courts within the jurisdiction of the Province of Buenos Aires, following the precedent created by the Buenos Aires Supreme Court of Justice, “Martínez, Emir c/ Boito, Alfredo Alberto s/ daños y perjuicios”) are disregarding liability limits agreed in the policies and applying instead the minimum liability limit in force at the time insurers compensate victims of car accidents. Some commercial courts in the City of Buenos Aires are also disregarding sums insured agreed in motor policies for damages to vehicles when insurers pay late and applying instead the value of similar vehicles at the time of the payment.

Punitive damages

Does the jurisdiction recognise punitive damages?

Punitive damages can be awarded to a consumer for violations of the Consumer Protection Law. The maximum amount that can be awarded to a consumer is ARS 345,267,300 (approximately, USD 1,750,000 at today’s official exchange rate)

Moral damages

Are moral damages available? If so, in what circumstances?

Moral damages are available under Article 1741 of the Civil and Commercial Code, for when the aggrieved party suffers non‑pecuniary damages (e.g., damage to his/her feelings as a consequence of the suffering or pain that a person undergoes). The amount of this compensation must be set by assessing the substitute and compensatory satisfactions that the recognised sums can procure to the aggrieved party.

Expected length of case

What is the usual timeframe from the filing of a claim to judgment at first instance? What about the timeframe for appeal proceedings?

Four years to first instance judgment and a further two years to final appellate level judgment.

Arbitration

Are arbitration clauses enforceable in an insurance or reinsurance contract?

Arbitration clauses cannot be included in insurance policies (Article 57, Insurance Law). However, arbitration agreements can be reached after a conflict has arisen. By contrast, arbitration clauses are admitted in reinsurance agreements, provided the seat of the arbitration is in Argentina.

Alternative dispute resolution

Is ADR (e.g. mediation) compulsory or encouraged within the jurisdiction?

In the City and in the Province of Buenos Aires, mediation is compulsory before a dispute can reach the Courts.

Jurisdiction and governing law

What are the requirements for the governing law and jurisdiction in insurance policies?

Persons, goods and any other insurable interest of Argentine jurisdiction can only be insured with insurers licensed by the Superintendence of Insurance.

Contracts must be governed by Argentine law and disputes will be resolved within the Argentine jurisdiction.

Limitation

What is the limitation period applicable to a re/insurance contract in the jurisdiction? When does limitation start running?

The limitation period for claims brought under an insurance contract is one year. There is some conflicting case law, however, in consumer insurance contracts, where some courts apply three or even five-year limitation periods.

There is no express legal provision governing limitation periods in reinsurance contracts. Courts have applied different limitation periods (1, 5 and 10 years). The prevailing view of the Argentinian courts seems to be that the limitation applicable to reinsurance contracts is one year.

In both insurance and reinsurance contracts, the limitation period starts on the date when the relevant obligation becomes payable. Parties may suspend a limitation period by agreement or by certain acts (e.g., correspondence) or by interruption (e.g., loss adjustment process, filing of a complaint).

Conditions, conditions precedent and warranties

Are these types of terms of re/insurance contracts recognised in the jurisdiction? What is their status and what is the effect of breach?

Conditions precedent and warranties are concepts alien to Argentine re/insurance law. In principle, re/insurance contracts are subject to the terms agreed between the parties, provided they do not conflict with the mandatory provisions of public policy.

The Insurance Law establishes that where the law does not set forth the effects of the breach of a contractual duty or obligation, the parties to an insurance contract may agree on the forfeiture of the insured’s rights if the breach is due to its negligence, according to the following regime (Article 36):

• if the obligation must be fulfilled before the loss, the insurer must claim that the insured has forfeited its rights within a month;
• when the loss occurs before the insurer can claim that the insured has forfeited its rights, the insurer will be bound to cover if the breach had no influence on the occurrence of the loss or on the extent of the insurer’s obligation;
• if the obligation must be executed after the loss, the insurer will decline liability if the breach had an effect on the extent of the insurer’s obligation.

Non-disclosure/misrepresentation

What are the remedies for non-disclosure or misrepresentation?

An insurance contract may be void ab initio in the case of a material non-disclosure or misrepresentation which, if previously known by the insurer, would have led them not to underwrite the risk, or to underwrite it on different terms. An insurer may be deemed to have affirmed the policy if it does not elect to avoid a policy and/or acts in a way consistent with treating the contract as in existence, after becoming aware of facts that give it the right to do so.

There is no express legal provision regarding misrepresentation and/or non-disclosure in re/insurance contracts, although it is generally accepted that there is a duty on the reinsured to disclose and not to misrepresent material facts. Courts are likely to apply insurance law principles to contracts of reinsurance.

Late notification

Is there a statutory timeframe within which an insured must notify a claim? What are the consequences of late notification of a claim?

The insured must give notice of the loss within three days after the loss has come to the insured’s knowledge. This time limit can be extended but not shortened by the insurance policy. Late reporting entitles an insurer to avoid coverage.

Late payment

Is there a specific timeframe within which re/insurers must respond to the insured? What are the consequences of late payment of a claim?

As a general rule, an insurer must take a decision as to the right of the insured to be indemnified within 30 days of the insurer’s receiving notice of the loss. If the insurer does not formally reject the claim within 30 days of the loss being reported, in principle, the law will consider that the loss has been tacitly accepted by the insurer, unless it requests complementary information. This request postpones the inception of the 30 day term to accept or reject a loss. There is no express legal provision to this effect in the reinsurance context, although there are precedents where the courts have applied this 30 day term to reinsurance contracts. Please note that Argentina is a civil law country, where the “stare decisis” doctrine (i.e. where judges are obliged to respect the precedent established by prior decisions) does not apply.

Fronting requirements

What are the fronting requirements in the jurisdiction? Are foreign companies permitted to issue a local reinsurance policy?

Reinsurance and retrocessions may be placed both with local reinsurers and with admitted reinsurers (i.e., foreign reinsurers acting from their home offices and registered with the Superintendence of Insurance). Insurers may place reinsurance, in all lines, with admitted reinsurers up to a maximum of 75% of premium ceded under the contract. Facultative reinsurance contracts for individual and catastrophe risks for sums equal or higher than USD 35 million may be fully placed with admitted reinsurers.

Local reinsurers may not transfer to admitted reinsurers belonging to the same financial group more than 75% of written premiums, net of annulments, calculated at the end of each fiscal year. Such limit may only be exceeded with the Superintendence of Insurance’s prior authorisation.

Jurisdiction and governing law

What are the requirements for the governing law and jurisdiction in reinsurance policies?

The contract is governed by Argentine law and disputes will be resolved within Argentine jurisdiction.

Follow the settlement/follow the fortunes

Does the jurisdiction recognise the concepts of follow the settlements/follow the fortunes?

Parties are free to include “Follow the Fortunes” and “Follow the Settlements” clauses in reinsurance contracts. The scope of these clauses would depend on their text. Even if there is no express provision in the contract, reinsurers may be held to be bound to follow the fortunes of their cedants as a general principle of reinsurance law. There are few court precedents on the actual scope of this principle. It has been recognised that reinsurers may object to the handling of a loss by their cedants when the reinsurer is of the view that the cedant has not acted in good faith.

Claims cooperation clause/claims control clause

Are claims cooperation/control clauses recognised in the jurisdiction?how are they interpreted?

The reinsured is directly responsible for the handling of claims, although reinsurers and reinsureds can freely agree on the right of reinsurers to monitor or control claims, provided this does not breach any mandatory legal provision or public policy. The scope of these clauses would depend on their text.

Role of the reinsurance broker (placing and producing)

What is the role of the reinsurance broker? Is there a requirement for brokers to be authorised by a statutory body? Is the knowledge of the broker imputed to the principal?

Reinsurance brokers are independent intermediaries.

Any Argentine company or branch of a foreign company can act as reinsurance broker, provided it is licensed by the Superintendence of Insurance. To obtain this licence, certain requirements must be met (i.e., a minimum capital of ARS1 million (about US$5100 as at the time of writing)).

Brokers may act on behalf of either the cedant or the reinsurer provided they are appointed as agents through a written agreement. This may occur, for instance, in facultative reinsurance when reinsurers grant authority to brokers to execute cover notes on reinsurers’ behalf.

Nevertheless, an agency relationship may exist even in the absence of a written agreement. Under general agency principles, brokers may be given authority either expressly or tacitly. An express authorisation can be conferred by a public or private instrument, by letters and also verbally. A tacit authorisation exists when it can be inferred from the cedant’s or reinsurer’s acts or inaction.

Even if a broker has not been granted authority expressly or tacitly, it may have apparent authority to bind either the cedant or the reinsurer if the broker usually acts in their name with their authority, leading parties to believe, bona fide, that the broker acts with sufficient authority.

By analogical application of the provisions of the Insurance Law regarding insurance agents, it may be argued that the knowledge of facts which are known to brokers but not known to their principals can be imputed to their principals (section 55 of the Insurance Law). The issue, however, will be decided on a case-by-case basis.

What are the sources of insurance and reinsurance law in the jurisdiction?

The following laws and regulations make the insurance and reinsurance legal framework in Bolivia:

• The Commerce Code – Law No. 14379 of February 25, 1977;
• The General Insurance Law No. 1883 of June 25, 1998;
• Supreme Decree No. 25201 – Complementary Regulations to the General Insurance Law;
• Administrative Resolution SPVS/15 No. 764 of September 30, 2008 which regulates passive insurance regulation, and;
• Administrative regulations issued by the Supervision Authority of Pensions and Insurance of Bolivia (“APS”).

How is the insurance and reinsurance market regulated?

Bolivia’s insurance and reinsurance market is regulated by the Authority for the Supervision of Pensions and Insurance of Bolivia (APS), which is the public entity in charge of supervising, inspecting, controlling, and regulating individuals and companies which carry out activities in the insurance sector pursuant to the insurance and reinsurance legal framework.

In addition to the applicable laws and regulations set forth in the insurance and reinsurance legal framework, periodically the APS establishes certain guidelines for the insurance market in Bolivia through administrative resolutions and/or administrative circulars.

Insurance and reinsurance companies are also subject to other government authorities when conducting business in Bolivia, such as, for example, the Registry of Commerce, the National Tax Authority and the municipal authorities where the company conducts activities.

Burden of proof

Who has the burden of proof when a claim is made?

The insured bears the burden of proof after reporting the insurance claim. The insurance claim must be made three days after the insured event takes place.

Once the claim is filed, the insured is required to provide the insurer with all relevant information concerning the occurrence of the insured event.

Does the burden of proof switch to the other party and if so, at what point?

Yes, once the insured files a claim and provides information concerning the occurrence of the insured event, the insurer must prove the facts and circumstances that could release it, in whole or in part, from its responsibility.

The insurer is required to confirm coverage, or not, of the damages caused by the insured event up to thirty days from receiving all requested information from the insured.

Effect of a ‘reservation of rights’ and ‘without prejudice’ correspondence

What is the effect of a reservation of rights?

Reservation of rights correspondence is permitted but does not generate any legal effects in Bolivia.

Does the jurisdiction recognise the concept of without prejudice correspondence?

No.

Privilege

Does the jurisdiction recognise the concept of legal privilege? In what circumstances?

Yes, legal privilege applies to attorney-client communications, and information provided to counsel in a confidential capacity cannot be made public.

Disclosure

Is there a duty of disclosure in litigation?

Insured parties are only required to produce information requested by the insurer so long as such information is relevant to the insured event.

Are parties obliged to disclose documents that are unfavourable to its own case?

No. Parties are not required to produce documents other than those on which they rely to file an insurance claim.

Interest

Is there a statutory interest rate in commercial matters?

The Civil Code allows parties to agree on interest rates with a 3% per month ceiling. On the other hand, if the parties do not agree on an interest rate, the applicable interest rate set by law is 6% per annum.

Can parties contract out of this?

Yes, parties can contract out of the interest rate ceiling so long as the agreed interest rate does not exceed 3% per month.

When does interest start to accrue?

Interest begins to run from the date when the relevant obligation becomes payable.

Costs

Does the losing party of a legal action bear the costs of the successful party?

Yes, unless otherwise agreed by the parties that each will bear the legal costs of the dispute at its own expense.

Monetary correction

Is monetary correction applied in the jurisdiction? If so, how is it calculated?

No.

Punitive damages

Does the jurisdiction recognise punitive damages?

No.

Moral damages

Are moral damages available?

No.

If so, in what circumstances?

N/A

Expected length of case

What is the usual timeframe from the filing of a claim to judgment at first instance?

Approximately two years from filing a claim with the court system. However, note that by law insurance disputes must be resolved through arbitration and the timeframe between filing the claim and the issuance of a final award may vary between six and twelve months.

What about the timeframe for appeal proceedings?

Please note that arbitral awards are not subject to appeal.

Arbitration

Are arbitration clauses enforceable in an insurance or reinsurance contract?

Yes.

Alternative dispute resolution

Is ADR (e.g. mediation) compulsory or encouraged within the jurisdiction?

ADR is encouraged but not mandatory.

Note that for claims of less than $35,000 the parties may seek conciliation services from the regulator, the APS, and if the conciliation effort is not successful the parties may request the APS to resolve the dispute via administrative resolution.

Jurisdiction and governing law

What are the requirements for the governing law and jurisdiction in insurance policies?

According to the Insurance Law, insurance contracts must be governed by Bolivian law and must be adjudicated in Bolivia.

Limitation

What is the limitation period applicable to a re/insurance contract in the jurisdiction?

The limitation period applicable to a re/insurance contract is two years.

When does limitation start running?

From the date of the occurrence of the event.

Conditions, conditions precedent and warranties

Are these types of terms of re/insurance contracts recognised in the jurisdiction?

Yes, conditions, conditions precedent and warranties are recognized in the jurisdiction

What is their status and what is the effect of breach?

A breach of conditions, conditions precedent and warranties could generate a breach of contract and would allow the insurer to reject the coverage in whole or in part.

Non-disclosure/misrepresentation

What are the remedies for non-disclosure or misrepresentation?

If the insured fails to disclose relevant information or misrepresents information prior to entering into the insurance agreement, the insurer may annul the insurance agreement. If the insured fails to disclose relevant information or misrepresents information relating to the insured event the insurer may reject coverage in whole or in part.

Late notification

Is there a statutory timeframe within which an insured must notify a claim?

The insured must notify the insurer within three days of having knowledge of the insured event, except in force majeure or justified impediment situations, in which case the term may be extended. This term can be extended by contract. According to market practice, the term is often extended to fifteen days.

What are the consequences of late notification of a claim?

The insurer may deny coverage.

Late payment

Is there a specific timeframe within which re/insurers must respond to the insured?

Yes, reinsurers are required to respond to the insured’s request for coverage no later than thirty days after receiving the claim and the supporting information from the insured.

What are the consequences of late payment of a claim?

If the insurer fails to pay within the timeframe set forth in the laws, it may be considered in breach of contract. Such a breach would allow the insured to seek payment of the insurance coverage through a summary process, including the payment of any resulting damages and interest.

Fronting requirements

What are the fronting requirements in the jurisdiction?

To conduct fronting activities, companies must be incorporated in Bolivia and obtain a license from the APS.

Are foreign companies permitted to issue a local reinsurance policy?

No.

Jurisdiction and governing law

What are the requirements for the governing law and jurisdiction in reinsurance policies?

Reinsurance policies must be governed by Bolivian law and disputes must be adjudicated by means of arbitration.

Follow the settlement/follow the fortunes

Does the jurisdiction recognise the concepts of follow the settlements/follow the fortunes?

Bolivian law considers reinsurance contracts to be separate and independent from the underlying insurance agreement. Therefore, the terms of the reinsurance coverage are governed by the reinsurance agreement and are not automatically deemed to be identical to the terms of the insurance coverage.

On the other hand, the reinsurer shares the fortune of the insurer as set forth in the insurance policy.

Claims cooperation clause/claims control clause

Are claims cooperation/control clauses recognised in the jurisdiction?

Yes.

How are they interpreted?

In essence, they require the cedant to provide prompt notice of and cooperate with the reinsurer in the handling of claims and may grant the reinsurer a “right to associate” in the defence of any claim, suit, or proceeding that may involve the reinsurer.

Role of the reinsurance broker (placing and producing)

What is the role of the reinsurance broker?

Reinsurance brokers act as intermediaries – working for a commission – in the relationship between the insurer and the reinsurer.

Is there a requirement for brokers to be authorised by a statutory body?

Yes, reinsurance brokers must obtain a special authorization from the APS to conduct brokering activities.

Is the knowledge of the broker imputed to the principal?

No, because the broker is not a party to the insurance agreement.

What are the main sources of insurance and reinsurance law in the jurisdiction?

The main sources of insurance and reinsurance law in Brazil are the Brazilian Civil Code (“BCC”), the Law Decree 73 of 1966 (Decreto Lei 73/1966), and the Complementary Law 126 of 2007 (Lei Complementar n. 126/2007).

How is the insurance and reinsurance market regulated?

The insurance and reinsurance market in Brazil is regulated by the Superintendence of Private Insurance (Superintendência de Seguros Privados – “SUSEP”), a public entity with administrative and financial autonomy, and by the National Council of Private Insurance (Conselho Nacional de Seguros Privados – “CNSP”), a government council formed by high-ranking government officials, which sets the insurance policy guidelines and standards.

Who has the burden of proof when a claim is made? Does the burden of proof switch to the other party and if so, at what point?

As a general rule, in Brazil, the claimant has the burden of proving the loss and that it falls within the scope of the insurance or reinsurance policy. However, in practice, the courts tend to shift this burden so that in order to deny the claim, the insurer may need to show that the loss does not fall within the scope of the insurance or reinsurance policy.

In cases of consumer insurance, the ordinary burden of proof (as outlined above) is on the insurer, pursuant to Article 6°, VIII, of the Brazilian Consumer Protection Code (Código de Defesa do Consumidor). This article applies to insurers pursuant to Article 3°, § 2°, of the same statute.

Reservation of rights

What is the effect of a reservation of rights?

In Brazil, a ‘reservation of rights’ may not have the same effect as under English law. In particular, concessions or admissions made in writing may be relied upon in court, in the absence of an agreement to the contrary.

Without prejudice

Does the jurisdiction recognise the concept of without prejudice correspondence?

Brazilian law does not recognise the concept of ‘without prejudice correspondence’. The best way of protecting ‘without prejudice’ communications (in the English law sense) is to enter into a confidentiality agreement/non-disclosure agreement.

Privilege

Does the jurisdiction recognise the concept of legal privilege? In what circumstances?

All communications (and the contents therein) between a lawyer and his or her client and/or third parties are privileged, as long as they relate to legal services provided by the lawyer, irrespective of whether adversarial proceedings are in contemplation. There are exceptions to this general rule, including for example where the lawyer is being investigated.

Disclosure

Is there a duty of disclosure in litigation? Are parties obliged to disclose documents that are unfavourable to their own case?

The ‘all cards on the table’ approach to disclosure does not exist under Brazilian civil procedural rules. As a general rule, each party discloses only the documents it requires to prosecute or defend its case, i.e. the documents on which it relies. The judge may allow the parties to present further documents during the course of the proceedings.

In some cases, the judge may order a party to disclose a certain document, usually upon application of one of the parties.

There is a special measure for obtaining the pre-action disclosure of documents, e.g. where a party needs to access a specific document before filing suit. The party will need to provide detailed reasons about the relevance of the document and why it requires access to the document.

Non-parties / third parties may be required to present documents in their possession. However, there are restrictions and exemptions, e.g. in circumstances where such documents contain privileged or confidential information. These requirements to present documents can be made on application of one of the parties and/or at the discretion of the judge.

Interest

Is there a statutory interest rate in commercial matters? Can parties contract out of this?

Legal interest will normally be applied as of the date on which the debtor was served with the lawsuit, unless otherwise established in the contract. If not set out in the contract, it shall be determined in accordance with the interest rate applicable to the late payment of Federal taxes. Some courts, such as the Brazilian Superior Court of Justice, consider the Brazilian Central Bank’s official interest rate to be applicable, the so-called SELIC, which is a variable rate (13.75% per year, as at 30 March 2023) as set out by specific legislation on the matter. However, this is not an un-disputed issue, as some courts and commentators are of the view that the rate should be a non-variable rate of 1% per month, based on a subsidiary rule set out by the Brazilian Tax Code. Neither of these rules should prevail over any express contractual agreement regarding interest, however, this point is not universally agreed.

Costs

Does the losing party of a legal action bear the costs of the successful party?

The losing party will usually pay (i) all judicial costs and (ii) the winning lawyers’ fees, known as ‘sucumbencia’. These legal fees are ordered by the Court and are paid by the losing party to the winning party’s lawyers. According to the applicable legislation, ‘sucumbencia’ will normally range from 10% to 20% of the total amount awarded to the winning party, depending on how diligent the lawyer was and how important and complex the case. ‘Sucumbencia’ fees are due irrespective of the actual legal fees contractually engaged by the party with his or her lawyer (e.g. hourly rates or success fees). Thus, the lawyers’ contractual fees are not subject to this rule and are usually borne by each party.

Monetary correction

Is monetary correction applied in the jurisdiction? If so, how is it calculated?

As a general rule, monetary correction begins to run from the date of effective damage. In an insurance context, quantum is therefore usually adjusted from the date of loss. However, an STJ decision (‘sumula’ 632, dated 8 May 2019), in respect of life insurance, held that monetary correction applies to the insurance indemnity from the date of execution of the contract.

The rate for monetary correction varies from state to state, and is set in accordance with rates contained in tables issued by the Courts. Since monetary correction is intended to make good losses caused by inflation, the rate usually corresponds (more or less) with the prevailing rate of inflation. At the time of writing, the rate of inflation in Brazil is 5.60%.

Additionally, the Brazilian insurance regulator can apply regulatory fines, e.g. in the event of breach of contract or the delay in fulfilment of a party’s obligations.

Punitive damages

Does the jurisdiction recognise punitive damages?

Brazilian law does not expressly provide for punitive damages. However, in practice, some judges may, in certain circumstances (especially in consumer law), sanction a party by applying or increasing moral damages (see below), in order to give them a punitive character.

Moral damages

Are moral damages available?

Moral damages are available and are usually intended to compensate for pain and suffering.

Expected length of case

What is the usual timeframe from the filing of a claim to judgment at the first instance?

The length of lawsuits in Brazil varies depending upon the state in which the claim is filed. Normally, 1st instance judgments may take around 2 to 3 years.

What about the time frame for appeal proceedings?

An appeal may take from 1 to 5 years to be decided, depending upon the complexity of the case and the Court.

However, the litigation timeframe is difficult to estimate and it depends upon a number of variables, including (but not limited to) the Court in which the claim is filed, the complexity of the case, the pro-activity of the parties and the judge, and the number of interim applications filed by the parties. For these reasons, it is usual for cases to take much longer to reach a final and un-appealable judgment.

Arbitration should be a faster process. An arbitral proceeding normally takes around 2 years, in a complex case. Arbitration awards are normally un-appealable (although the parties can contract out of this general rule) and can only be challenged in Court in the event of a serious breach of the Brazilian Arbitration Law. If handled sensibly, arbitration is usually the best forum for resolving complex cases in Brazil.

Arbitration

Are arbitration clauses enforceable in an insurance or reinsurance contract?

The parties to an insurance policy can choose arbitration as the forum for dispute resolution. There are a number of Chambers in Brazil with arbitrators who are qualified to handle complex insurance claims. For complex reinsurance claims, the number is far fewer, although it is increasing, as more time elapses since the opening of the reinsurance market.

Since insurance agreements are generally considered to be consumer ‘adhesion’ agreements, arbitration clauses will only be considered valid and enforceable if previously agreed by the insured, as evidenced by a specific document which is not the insurer’s general policy conditions, or by including an arbitration clause in the policy in bold and initialled by the adhering party.

With regards to Reinsurance, there is normally no element of ‘vulnerability’ between the parties (i.e. as such, a Reinsurance Contract should not be regarded as a consumer contract or a contract of adhesion). Arbitration Clauses are (increasingly) being included in Reinsurance Contracts. Most of these clauses provide for Brazilian law and jurisdiction of a Brazilian Arbitration Chamber such as FGV, CCBC and FIESP.

Arbitration awards issued overseas are enforceable by the courts in Brazil, provided the Arbitration proceedings are compliant with Brazilian Arbitration law and public policy. Brazil is a party to the New York Convention.

In subrogated recovery actions, there is a growing body of case law in Brazil establishing that the subrogated insurer is bound to the arbitration clause agreed between the insured and a third party, although the position is far from settled.

Alternative dispute resolution

Is ADR (e.g. mediation) compulsory or encouraged within the jurisdiction?

Brazil recognizes Alternative Dispute Resolution (“ADR”) and encourages the courts and the parties to use ADR. The parties in dispute are encouraged to seek settlements at all stages prior to and during the proceedings. The Brazilian Code of Civil Procedure (‘BCCP’) provides that a mediation or conciliation hearing should be set before the defence is presented. These hearings, however, are not compulsory. Mediation and conciliation, although encouraged, are not as developed in Brazil as they are in many other jurisdictions.

Article 27 of CNSP Resolution 407/2021, which regulates the insurance of ‘large risks’, establishes that the parties to a ‘large risks’ insurance contract must indicate whether they will refer any disputes to arbitration or mediation or any alternative dispute resolution mechanism.

Governing law and jurisdiction

What are the requirements for the governing law and jurisdiction in insurance policies?

It is a requirement of Brazilian law that insurance policies covering risks located in Brazil are subject to Brazilian law. Recent regulations divided insurance contracts into “mass insurance”, subject to consumer laws and tighter regulations and “large risks” insurance, which can be freely negotiated between the parties. For mass insurance, where the insured qualifies as a consumer, the consumer’s place of residence shall be the appropriate forum for the resolution of a dispute. However, the parties are free to choose the applicable forum for large risks insurance, where there is no consumer relationship.

Limitation

What is the limitation period applicable to a re/insurance contract in the jurisdiction? When does limitation start running?

Under the Brazilian Civil Code (“BCC”), an insured has 1 year to file a lawsuit under the policy from the date on which its claim arises. Parties are not allowed to contract out of limitation periods, although time-bar can be interrupted once, as explained below.

There is some debate about when the ‘claim arises’, i.e. whether it is the date on which when the insured became aware of the loss or the date on which the insurer denied cover. This issue was clarified in March 2022 when the STJ ruled that time is only triggered by the denial of cover, irrespective of the date of loss. However, this point is not universally agreed.

Pursuant to Sumula 229 of the STJ, the notification of the loss by the insured suspends the limitation period, which resumes for the remainder of the one-year period, if the insurer denies cover.

As far as civil liability insurance policies are concerned, the one-year term starts to run from the date the insured is served with the proceedings filed by a third party or on the date the insured pays a third party, with the insurer’s consent.

Brazilian law also provides for the possibility of a standstill. This is normally achieved by way of special proceedings, served on the other side and filed with the court, to stop limitation running. Once interrupted, the whole one-year period (re)starts over. Time can only be interrupted once, as per article 202 of the Brazilian Civil Code.

In a reinsurance context, there are no specific provisions concerning the limitation period, which could be either one year (as per insurance law) or ten years (as per general contract law). The only STJ decision on the reinsurance level qualifies it as a type of insurance contract and, accordingly, establishes that the one-year limitation period is also applicable for reinsurance. This decision, however, is not binding and, therefore, this issue remains controversial.

Conditions, conditions precedent and warranties

Are these types of terms of re/insurance contracts recognised in the jurisdiction?

Condition precedents and warranties, as understood by English law, are not recognised under Brazilian law.

A condition is defined in the BCC as a clause whereby the parties subject the effects of a contract to the occurrence of a future and uncertain event. A breach is considered on a case-by-case basis and in view of existing Court decisions or related matters. It is also necessary to consider the wording of the insurance or reinsurance contract in order to understand the obligations of the parties and the consequences of any breach.

What is their status and what is the effect of breach?

Based on Brazilian case law on insurance and depending on the contract wording, a breach may only give a re/insurer grounds to repudiate liability if the re/insurance company can prove that such breach caused actual damage to them (as opposed to being a ‘technical breach’).

Non-disclosure/misrepresentation

What are the remedies for non-disclosure or misrepresentation?

The BCC contains express provisions on the non-disclosure and/or misrepresentation of material information in insurance contracts. However, there are no express provisions for reinsurance. According to article 766 of the BCC and its sole paragraph:

Art. 766. If the insured, by itself or by its representative, makes inaccurate statements or omits circumstances that may influence the acceptance of the proposal or the premium rate, it will lose the right to cover, in addition to being obliged to pay the premium due. If the inaccuracy or omission in the statements does not result from the insured’s bad faith, the insurer will be entitled to terminate the contract, or to charge, even after the loss, any differences to the premiums due.

The consequences of breach of the insured’s duties of disclosure and accurate representation therefore depend on whether such breach was made in bad-faith. If it was, then the insured may lose the right to cover. If not, then the insurer may only charge a difference in premium. The burden of proving bad-faith lies on the insurer.

General rules applicable to insurance may also be considered, by a judge, to be applicable in the reinsurance context. In a reinsurance context, it is also important to consider the principle of good faith, which is generally applicable to all agreements executed under Brazilian law. It is also necessary to consider the express contract wording. Noting the absence of reinsurance legal provisions regulating this matter, the express provisions and remedies established in the reinsurance agreement should be upheld.

Late notification / late payment

Is there a statutory timeframe within which an insured must notify a claim?

Article 771 of the BCC establishes that the insured must inform the insurer about the occurrence of a loss as soon as he or she becomes aware of it, subject to losing his or her right to indemnity. In the event of a late notice of claim by the insured, however, Brazilian courts have ruled that insurance companies will only have legal grounds to deny the payment of the loss if they can prove that the omission or late notice caused damage to the insurer.

In general, insurers must pay the indemnity to the insured within 30 days from delivery by the latter of all documentation and information required to take a final view on coverage and quantum. This deadline is usually suspended if the insurer requests additional documentation from the insured. However, the request must be justified and based on reasonable grounds. There are no specific provisions regarding the application of this rule to reinsurance contracts. On this basis, the contractual provisions agreed by the parties should prevail.

What are the consequences of late payment of a claim?

Article 772 of BCC establishes that any delay in the payment of the indemnity by the insurer shall result in (i) monetary correction on the amount due and (ii) late payment interest, in addition to other potential loss and damage. The parties are free to establish the rate of interest in the contract. When the rate is not established in the contract, it shall be determined in accordance with the interest rate applicable to the late payment of Federal taxes. There is considerable scope for negotiation of the applicable rate of interest in a reinsurance context.

What are the requirements for the governing law and jurisdiction in reinsurance policies?

Pursuant to article 11 of CNSP Resolution 451/2022, Reinsurance contracts in respect of risks (i.e. the insured subject matter) located in Brazil must also be subject to Brazilian law, except where the parties elect for arbitration, in which case they can freely choose the law that applies to the contract.

In a situation where the risk is not located in Brazil, it is possible to specify a different governing law and jurisdiction.

Follow the fortunes/settlements

Does the jurisdiction recognise the concepts of follow the settlements/follow the fortunes?

Brazilian law does not regulate or define ‘follow the fortunes’ or ‘follow the settlement’ clauses. A judge or arbitration tribunal should be influenced by how these clauses are applied in other jurisdictions, based on custom and/or practice in the international market. However, this evidence is persuasive but not binding. As there is almost no reinsurance case law in Brazil, the parties should, at the time of drafting the ‘follow the fortunes’ or ‘follow the settlement’ clause, include detailed wording, setting out how the clause is intended to operate and the sanctions for breach.

Claims co-operation/claims control

Are claims cooperation/control clauses recognised in the jurisdiction?

Brazilian law expressly provides that the parties are free to agree on claims co-operation provisions between themselves. However, the participation of the reinsurer in the claims adjustment process must not affect or modify the obligations of the insurer vis a vis the insured.

Brazilian law establishes that the parties to a reinsurance contract (whether treaty or facultative) can insert a claims control provision in favour of the local reinsurer, as per CNSP Resolution 451/2022.

How are they interpreted?

As with ‘follow the settlement’ and ‘follow the fortune’ clauses, a judge or arbitration tribunal may be influenced by how claims control and co-operation clauses are applied in other jurisdictions. However, as above, this evidence is only persuasive but not binding and the Court will look closely at the specific drafting of the clause.

Role of the reinsurance broker (placing and producing)

What is the role of the reinsurance broker?

Brokers are classified by their activity of intermediating insurance and/or reinsurance agreements. However, the parties to an insurance and/or reinsurance contract may contract directly, as per Article 8 of Complementary Law 126/2007 and article 9 of Decree-Law 73/66.

Is there a requirement for brokers to be authorised by a statutory body?

Reinsurance brokers must be incorporated as a legal entity. On the other hand, insurance brokers can be a legal entity or an individual. However, both need the regulator’s prior authorization to intermediate insurance transactions. They must have a technical manager (an officer or an owner empowered to represent and/or manage the company) who will be responsible for the company’s activities.

Is the knowledge of the broker imputed to the principal?

Both insurance and reinsurance brokers are understood to be independent intermediaries, unless there is compelling evidence to show that they are acting as agent for one of the parties. They are generally responsible for approaching the interested parties and helping them to conclude the re/insurance operation. Brazilian law makes no formal distinction between placing brokers and producing brokers.

Brazilian law provides for a specific intermediary figure other than the broker, called an ‘insurance agent’. Insurance Agents represent and act on behalf of insurers. Insurance Agents should not be confused with brokers. They are regulated by SUSEP and by the CNSP, which establish that an insurance agent can promote insurance contracts in the name of, and on behalf of, the insurance company.

As of the enactment of CNSP Resolution 431/2021, effective in December 2021, the operation of Managing General Agents is authorised in Brazil, including not only the offering and distribution of insurance but also general management, underwriting, adjustment of claims and other kinds of services, provided that they are regulated by a contract entered into with the insurer.

Fronting requirements

What are the fronting requirements in the jurisdiction?

The reinsurance of risks located in Brazil must be written through a local insurer or cedant company. There are three classes of reinsurance licence in Brazil: local, admitted and eventual or occasional. Each licence is subject to different capital and entry requirements and different rules, including regarding the cession of risks. At the time of writing, there are 119 reinsurers operating in the Brazilian market: 13 are local, 31 are admitted and 75 are eventual or occasional.

There are currently two main rules regarding the cession of risks: the ‘preferential offer rule’ and ‘the cession limits rule’. Under the ‘preferential offer rule’ provided for in Complimentary Law 126/2007, local insurance companies are obliged to offer at least 40% of each reinsurance cession to local reinsurers before offering such risks to the international market. Local insurance companies are no longer subject to a cession limit, but any cessions superseding 90% of risks on a given fiscal year must be justified to SUSEP. Local Reinsurers can freely retrocede up to 70% of the premium issued in relation to the risks they have underwritten, considering all their operations in a financial year, save for the following lines: financial risks, rural and nuclear. Cessions above 70% must have a technical justification and be previously approved by SUSEP. Under the “cession limits rule’, contained in Decree 10167/20219 a local insurer or reinsurer can cede in reinsurance or retrocession to an occasional reinsurer up to 95% of the total amount of premium earned in its operations within a calendar year.

There is no longer a % limit on intra-groups cessions. However, intra-group cessions must take place at arms-length, subject to prevailing market terms.

The transfer of risks to reinsurers or retrocessionaires who are not authorised to operate in Brazil is only possible where there is insufficient capacity in the Brazilian (local, admitted or occasional) market. These cessions must be notified to SUSEP within 30 days, who may request copies of the relevant policies. Absent a request from SUSEP, there is no longer an obligation to provide each and every policy to SUSEP.

What are the sources of insurance and reinsurance law in the jurisdiction?

The primary sources of insurance and reinsurance law are various statutes, in particular the Law of Insurance Companies (Decree with Force of Law No. 251, of 1931, and its various amendments), the Code of Commerce (articles 512 to 601), Law 21.000 which establishes the Comisión para el Mercado Financiero (CMF, the securities and insurance regulator). The Regulator issues regulations on various matters, relating, inter alia, to insurance and reinsurance, intermediation and loss adjustment. In insurance and reinsurance contracts, besides the norms in the Code of Commerce on the contract of insurance, the general norms on contracts contained in the Civil Code are also applicable. In reinsurance, there are very few substantive norms, however article 584 of the Code of Commerce establishes that international usages and custom apply in the interpretation of reinsurance contracts.

How is the insurance and reinsurance market regulated?

Insurance regulation is contained primarily in the Law of Insurance Companies and the regulations issued by the regulator, the CMF. Also, general norms relating to corporations, consumer protection and intermediaries are often applicable.

Burden of proof

Under article 531 of the Code of Commerce, a loss is presumed to be covered when an event that makes the insurer liable occurs. It falls upon the insurer to prove that the loss has not arisen out of a fact that would make the insurer liable under the contract or the law.

Who has the burden of proof when a claim is made?

The general rule is that the burden of proof is on the claimant.

However, as above, pursuant to article 531 of the Chilean Code of Commerce, a loss is presumed to be covered when an event that makes the insurer liable occurs.

Does the burden of proof switch to the other party and if so, at what point?

As per article 531 above, the burden of proof shifts to the insurer, who has to prove that the loss is attributable to a fact or event which the policy does not cover, either under the law or under the insurance contract itself.

Reservation of rights/without prejudice rule

This matter is not regulated under Chilean insurance or reinsurance law. However, as part of the general freedom of contract that shapes our legal system, it is possible to conclude that a ‘Reservation of Rights’ or ‘Without Prejudice’ correspondence will have the same force as a written proposal. Therefore, it would be advisable that both the intention and the consequences of the ‘Reservation of Rights’ or ‘Without Prejudice’ correspondence is expressly stated in order to prevent it from being considered as a written proposal.

As a written proposal, if a party writes a letter under a ‘Reservation of Rights’ or on a ‘Without Prejudice’ basis, the ‘Reservation’ or ‘Without Prejudice’ qualification will have full effect unless the other party makes an objection, in which case the entire letter will be treated as having not been made or issued (i.e. including any offer or proposal contained within it). If no objection is made, it would be deemed as accepted as having been written on a ‘Without Prejudice’ basis or under a ‘Reservation of Rights’.

The timeframe to object is 24 hours if the addressee lives in the same ‘place’ (this is understood to be the city or region, however it is a matter of fact to be decided in each case), and ‘by return of mail’, if the addressee lives in a different place. The applicability of this rule to emails has not been tested and is not clear under Chilean law, albeit the 24-hour rule is most likely to apply.

Privilege

Communications and correspondence between a lawyer and their client are privileged, the objective being to protect the client’s trust that the lawyer will not reveal the information without their consent. Therefore, the lawyer is exempt from disclosing, in any proceedings, privileged information received from their client in his/her capacity as a lawyer. In addition, there is a general rule establishing that courts cannot order the production of confidential documents. Under the Chilean Criminal Code, a lawyer who reveals confidential information commits a criminal offence. Privilege may be waived by the lawyer with the consent of the client.

Disclosure

Disclosure of instruments or documents under the possession of a party or third party can be ordered by the Court at the request of any party in a proceeding or even before the proceedings commence, as long as the requested instruments or documents directly relate to the dispute and are not confidential. The costs of producing the documents fall upon the party making the request. Unless the Court orders otherwise, the party producing documents is not bound to “offer” disclosure of documents that are adverse to its case.

Interest

If the re/insurer delays payment, the re/insured is entitled to the rate of interest agreed in the contract for late payment. If no interest rate is agreed in the contract, it will be ordered by the Court or the Arbitrator. The Court or the Arbitrator have wide discretion as to the rate, having as main reference the interest rates set for various kinds of obligations informed by the regulator CMF to the public as being the average interest rates in the formal local market. The conduct of the parties is not relevant in fixing the interest rate.

The Court or Arbitrator will also fix the period for which interest shall apply. The period will commence from the date on which payment should have been effected, which may be the date of the lawsuit or its service on the opponent, or the date of the Court or Arbitrator’s final decision, at the Court or Arbitrator’s decision, and it will be extended until payment is actually effected.

Costs

The general rule is that the losing party will be ordered to pay the costs, unless the court considers that such party had reasonable grounds to litigate. The consequence is that each party will usually bear its own costs. Awards on costs, when issued, are generally low.

To exempt the losing party from paying the opponents’ costs, the Court or Arbitrator has to declare that, in its judgment, the losing party had justifiable grounds to litigate. In practical terms, this means that awards on costs are issued only in circumstances where either the claim submissions or the defence are considered totally groundless or frivolous. Costs are classified as either procedural (such as clerks and experts) or personal (which refer mainly to lawyer’s fees). Courts do not order the payment of the actual fees incurred by the party, but rather an amount at the Court’s discretion, taking into account the quantum of the case, its complexity and duration of proceedings.

Monetary correction

Monetary correction is available under Chilean law only if the obligation is in Chilean currency. Often the insured or reinsured value is fixed in “Unidad de Fomento” (UF), which is a unit of indexation whose value varies daily, in accordance with previous inflation. On 11 August 2023, 1 UF was equivalent to 36,037.40 Chilean Pesos which at the rate of 851.70 Chilean Pesos per 1 USD, results in a value of 42.3 USD per 1 UF.

Punitive damages

Punitive damages are not available under Chilean law.

Moral damages

Are moral damages available?

In respect of individuals, moral damages are always available in cases of death, personal injury or extra-patrimonial damages, which need to be properly evidenced.

For corporations, apart from physical damages, other damages may be available if a monetary loss was sustained, such as loss of market.

In general, it is required that the loss be actual and a direct consequence of an intentional or negligent wrongdoing committed by a third party, without the concurrence of any cause that may exonerate the tortfeasor from civil liability, or a breach of a contract in respect of which damages have not been limited to physical damages.

If so, in what circumstances?

In the case of individuals, death or bodily injuries virtually always originate moral damages, particularly to indemnify pain and suffering and other types of extra-patrimonial damages.

Only in limited situations moral damages are awarded to companies. In general, they are available when the illicit or undue conduct causes detriment to its assets (for instance, ill-founded adverse publicity, or when the prestige of the company is affected). This matter has been shaped by judicial precedents; the decisions relate to specific cases submitted to the courts, so the boundaries for moral damages awarded to legal entities are imprecise.

Expected length of case

The length of civil proceedings will vary depending on the specific court, the complexity of the matter, and the incidental or preliminary issues that the parties may raise. On average, the length of civil proceedings is between 2 and 3 years, although due to the accumulation of pending cases originated by a law enacted shortly after the Covid-19 outbreak, which suspended the probatory stage in all civil proceedings until 30 September 2021, the length of proceedings has increased. Arbitration proceedings usually take less time. An appeal can take a further year. Mediation is not compulsory in commercial matters, but the parties may agree to mediate before filing proceedings.

Arbitration

Are arbitration clauses enforceable in an insurance or reinsurance contract?

Arbitration is the primary means of insurance dispute resolution. When the quantum of the claim is lower than UF 10,000, the insured may opt to claim before ordinary courts.

In reinsurance, the parties have the freedom to decide whether or not to submit the dispute to arbitration.

Ordinary courts of appeal may intervene in any arbitration if the parties have not renounced their rights to appeal, and Courts may revoke the arbitrator’s decision if it has been issued in violation of the law.

Alternative dispute resolution

Is ADR (e.g. mediation) compulsory or encouraged within the jurisdiction?

In insurance and reinsurance, mediation is encouraged only by institutional arbitration and mediation bodies such as the Santiago Chamber of Commerce.

Jurisdiction and governing law

What are the requirements for the governing law and jurisdiction in insurance policies?

Insurance contracts related to Chilean risks are subject to Chilean jurisdiction. Chilean law does not apply if the parties agree that a foreign law will be applicable, although Chilean mandatory provisions shall always apply, except in respect of large risks, in which there is complete freedom of contract. Large risks are those in which the insured/beneficiary are legal entities and the annual premium exceeds UF 200, i.e., Chilean Pesos 7,103,958 equivalent to USD 7,386,15 at the exchange rates of 1 March 2023. Also, hull insurances and marine and aviation carriage insurance are deemed to be large risks.

Limitation

What is the limitation period applicable to insurance contracts in your jurisdiction?

The limitation period is 4 years, which is counted since the date of the breach of the contract.

When does limitation start running?

The limitation period starts to run since the date in which an obligation arising out of the contract is due and demandable, and the respective party does not comply on a timely basis with such an obligation (breach of the contract).

Conditions, conditions precedent and warranties

Are these types of terms of re/insurance contracts recognised in the jurisdiction?

Only warranties are expressly recognised in the Code of Commerce. They are defined as a requirement that may be included in the policy to limit or reduce the insured risk.

What is their status and what is the effect of breach?

They are conditions that must be fulfilled in order for a policy holder to claim an insurance indemnity.

Non-disclosure/misrepresentation

What are the remedies for non-disclosure or misrepresentation?

The main remedy is that the insurer may propose to amend the contract by modifying either the premium or the terms of cover.

The duty regarding information on the risks which are to be transferred to the insurer is limited to the insured’s clear response to any specific questions from the insurer, in respect to circumstances which are known by the insured. Clear responses allow the insurer to identify the object of the insurance, and to evaluate the extent of the risk. Apart from that declaration, any policy provision requiring the insured to inform the insurer of any other circumstances (even those which may be material to assess the risks), would be null and void.

Those are mandatory norms that apply to non-large risk insurances, i.e., insurances in which the insured and beneficiary of the policy are individuals, or the insured, if a legal entity, pays annually an insurance premium of UF 200 or less (USD USD 7,386,15 at the exchange rates of 1 August 2022).

In respect of large risks, there is freedom of contract and so it is possible to establish a higher level of disclosure and information from the insured.

Late notification

Is there a statutory timeframe within which an insured must notify a claim?

Article 524 No. 7 of the Code of Commerce establishes that the insured shall notify the insurer, as soon as possible once he has taken knowledge, of any occurrence that may originate a claim. Again, in large risks, the insurance contract may establish a more precise timeframe to notify the claim.

What are the consequences of late notification of a claim?

There is no statutory rule on the matter. The trend of courts and arbitrators’ decisions is to consider that there is a breach of the contract if the late notification caused damage to the insurer, such as preventing recovery actions against third parties, substantial material salvage, or timely inspection of the insured matter or the circumstances of the loss.

Late payment

Is there a specific timeframe within which insurers must respond to the insured?

The statutes do not refer to this matter specifically; in the absence of a contractual stipulation, the insurer shall respond when the legal and contractual requirements to indemnify have been fulfilled, or when the insured files a judicial claim to put the debtor in default.

What are the consequences of late payment of a claim?

Under Decree 1055 of 2013, the loss adjuster’s final report (which shall contain conclusions regarding coverage and quantum of the loss) may be objected to by any of the parties to the insurance contract within a 10-day period. This period increases to 20 days in respect of insurances in which there is freedom of contract, i.e., hull and marine or aviation carriage, and insurances in which the insured and beneficiary are individuals, or the insured, if a legal entity, pays annually an insurance premium of more than UF 200 (which amounts USD 7,386,15 at the rates of 1 August 2022). The timing established in this norm may pose some obstacles to the compliance with claims control or cooperation clauses.

If objections are made to the loss adjuster’s final report, then the controversy is to be resolved in accordance with the dispute resolution provisions in the policy. Undisputed amounts must be paid by the insurer to the insured.

The consequences of not objecting to the adjustment report within the term established in the regulations are not clear. Not objecting may be considered a tacit acceptance of the adjustment report. Alternatively, parties may still be able to exercise their rights if they are not time-barred, as per the Chilean Code of Commerce, which should prevail over the rules on loss adjustment. In general, the lack of timely objection to the adjuster’s report does not prevent a party from seeking that Courts protect its rights.

Late payment originates interest to be paid by the insurer.

Fronting requirements

There are no specific requirements for fronting and Chilean law does not mandatorily apply to reinsurance contracts. The parties are free to choose the applicable law in reinsurance contracts, but Chilean jurisdiction mandatorily applies.

Jurisdiction and governing law

What are the requirements for the governing law and jurisdiction in reinsurance policies?

In the absence of an express choice of law clause, accepted principles on conflicts of laws shall be used to determine the applicable law. Amongst them, the law of the forum is predominant. Since the reinsurance of ‘Chilean risks’ is subjected to Chilean jurisdiction, in the absence of an express choice of law clause, the ‘law of the forum’ principle will lead to the application of Chilean law. This is consistent with another overarching principle, ‘territoriality’, which Chilean courts have consistently applied.

Other criteria that may be used are the place of the contract, the domicile of the parties, the location of the risk insured in the contract and the place of performance of the obligations established in the contract. Often it is also possible to infer the parties’ choice of law from the reinsurance documents. That is the situation when, for instance, a Chilean legal provision is mentioned in the documents.

Limitation

The four year limitation period commences from the date the reinsured is entitled to claim payment of the reinsurance indemnity from the reinsurer. Usually this will coincide with the date of the loss, although in some cases the mere occurrence of the loss would not be sufficient to entitle the insured to claim the insurance indemnity (as it occurs, for example, if the reinsurance contains the rule “pay to be paid”).

To interrupt the time bar, it is necessary to file the lawsuit and serve it upon the defendant’s representative within the limitation period. Time bar can be stayed by agreement between the parties in maritime matters.

Conditions, conditions precedent and warranties

These matters are not regulated by statutes in respect of reinsurance and, in general, freedom of contract is respected and the parties are able to include contractual provisions on those matters.

In some cases, the Courts have evaluated whether or not the magnitude of the breach of a condition justifies the rescission of the contract.

In respect of a condition to promptly notify a loss or claim, Courts generally require that, in order to deny cover, the delay in notification must be material and must have prejudiced the party’s position.

Non-disclosure/misrepresentation

There are no specific statutory norms on this matter. The terms of the contract as well as the principle of good faith provide the relevant framework to interpret concrete cases. If non-disclosure or misrepresentation are considered as having induced the insurer in error, so that it would not have otherwise entered into contract, the insurer may request the nullity of the policy.

Follow the fortunes/settlements

This matter is not regulated in statute. In the Code of Commerce, one of the most important reinsurance rules provides that the insurer or cedent cannot delay the payment of a loss based on a delay by its reinsurer. This is a mandatory rule and any stipulation to the contrary is null and void.

In respect of the principle “follow the fortunes/settlement”, any such clause stipulated in the contract shall fully apply. Under the Code of Commerce, in reinsurance contracts the usages and international custom shall assist the interpretation of the will of the parties.

Claims co-operation/claims control

There are no provisions in Chilean law regarding claims cooperation or control. Therefore, there is absolute freedom of contract. However, we reiterate the rule referred to above, i.e. that the insurer or cedent cannot delay the payment of a loss based on a delay by its reinsurer.

The regulations regarding the adjustment of claims may also have potential relevance in connection with claims control/co-operation. In particular, the loss adjuster appointed has to be impartial and independent from the parties to the insurance or reinsurance contract. The adjuster is appointed by the insurer, although for large risks it is common to have the name of the adjuster included in the policy.

Late notification/late payment

Late payment triggers the accrual of interest to be paid by the reinsurer.

Role of the reinsurance broker (placing and producing)

Reinsurance brokers are regulated under Chilean law only insofar as it relates to the requirements they must meet to be admitted as such by the insurance regulator.

In the absence of any terms agreed between the parties, the reinsurance broker’s mandate will be regulated by the general norms of the Civil and Commercial Codes applicable to insurance brokers and intermediaries in general. When it would be adequate by analogy, the rights and duties of an insurance broker would apply to a reinsurance broker. Therefore the reinsurance broker’s principal would be the reinsured. However, a placing broker will be deemed to be the agent of the producing broker.

What are the sources of insurance and reinsurance law in the jurisdiction?

The Costa Rican insurance market is regulated by the Insurance Market Regulatory Act No. 8653, effective as of August 7, 2008 and the Insurance Contract Regulatory Act No. 8956, effective as of September 12, 2011. In the case of the latter, the provisions of the Commercial Code and the Civil Code additionally apply as expressly established by this Act.

The mandatory Labour Risk Insurance and Vehicle Insurance are regulated by specific regulations. Other regimens like the Costa Rican Social Security System administrated by the State entity named Caja Costarricense del Seguro Social (Known as CCSS), the special pension funds created by Law and the mandatory Mutual Policy administrated by the Life Insurance Association of the National Educational System, named Sociedad de Seguros de Vida del Magisterio Nacional, are excluded from the scope of the mentioned Acts.

How is the insurance and reinsurance market regulated?

Prior to August 2008, the Government had a monopoly for 84 years over the Costa Rican insurance and reinsurance market through the Instituto Nacional de Seguros (INS).

The opening of the market was part of the commitments assumed by the State when it executed the Free Trade Agreement with the United States in the year 2008.

The enactment in that year of the Insurance Market Regulatory Act established the creation of the General Superintendence of Insurance (SUGESE, for its acronym in Spanish), responsible for ensuring the stability and efficient operation of the insurance market. SUGESE is responsible for the authorization, regulation and supervision of individuals and corporations engaged in acts or contracts related to insurer and reinsurer activity.

Who has the burden of proof when a claim is made?

The policyholder or insured must demonstrate the occurrence of the event and the approximate amount of the loss. It also must assist the insurer in the inspection and other duties that are part of the compensation process.

Does the burden of proof switch to the other party and if so, at what point?

Regarding medical insurance and personal accident and disability insurance, conditions of illness that existed as of the date the agreement became effective are not covered, except where the contrary is stipulated by the parties. In these cases, the burden of proof falls on the insurer to evidence the pre-existing condition.

Effect of a ‘reservation of rights’ and ‘without prejudice’ correspondence

What is the effect of a reservation of rights? Does the jurisdiction recognise the concept of without prejudice correspondence?

‘Reservation of Rights’ and ‘Without Prejudice’ are not regulated under the Costa Rican legislation; however, the contract can include this type of clause if agreed by the parties. There is no indication on how the courts will rule on the interpretation of these contractual clauses. According to general commercial law, the Courts will rely on the drafting of the clause and regularly accepted market practices to rule on a case when there is a legal gap or an absence of law.

Privilege

Does the jurisdiction recognise the concept of legal privilege? In what circumstances?

Lawyers are allowed to withhold evidence based on reasons of professional secrecy with clients.

Disclosure

Is there a duty of disclosure in litigation? Are parties obliged to disclose documents that are unfavourable to its own case?

The plaintiff is required to produce the evidence to make out its claim but is not expressly required to produce documents which may harm its own case. If a party wishes to produce further evidence after the period for lodging evidence has expired, and before the final ruling is issued, the party may apply to the judge to allow it to have the further evidence considered. This may include a request for documents by one party from a producing party which are harmful to the case of the producing party. The judge will rule if the new evidence is required or not for the final ruling. The other party will be notified by the Court that new evidence will have been filed and has the opportunity to oppose or challenge it. The judge will decide whether or not the further evidence should be accepted.

Interest

Is there a statutory interest rate in commercial matters?

Interest is calculated from the date of the final decision of the Court or Arbitrator at a rate based on the basic passive rate of the Central Bank of Costa Rica for operations in national currency (6.03% in July 2023), and equal to the ‘prime rate’ for operations in U.S. dollars (8.50% in July 2023).

Can parties contract out of this?

Yes, those are reference rates. The parties can agree their own interest rate.

When does interest start to accrue?

Interest is calculated from the date of the final decision of the Court or Arbitrator.

Costs

Does the losing party of a legal action bear the costs of the successful party?

Each party pays the legal fees of their own lawyers. The judge awards other expenses such as technical advisors’ fees, duties, stamps, services of notices etc. to the successful party, unless the judge considers that the losing party litigated in good faith, in which case the judge has discretion as to whether or not to charge court fees and expenses.

Monetary correction

Is monetary correction applied in the jurisdiction? If so, how is it calculated?

Monetary correction does not exist in Costa Rican law.

Punitive damages

Does the jurisdiction recognize punitive damages?

Punitive damages do not exist in Costa Rican law.

Moral damages

Are moral damages available?

Yes.

If so, in what circumstances?

In Costa Rica, contractual liability awards include compensation for material losses (damages to the person’s property), and for moral damages. Moral damages compensate for harming the non-breaching party’s reputation (daño moral objetivo) or for psychological suffering (daño moral subjetivo). There are no specific rules for the awarding of moral damages, and they are defined by the judge on a case-by-case basis (First Chamber of the Supreme Court, ruling 00870 of 07/22/2010). In the case of a claim for moral damages by a legal entity, only objective moral damage shall be indemnified.

Damages that are subject to compensation in Costa Rica are those which are real (not hypothetical or eventual), a direct consequence of the breach and have been actually suffered by the victim. In case of a claim, the claimant has the burden of proving the damages. Punitive, consequential and indirect damages are not indemnifiable under Costa Rican law.

Expected length of case

What is the usual timeframe from the filing of a claim to judgment at first instance? What about the timeframe for appeal proceedings?

A civil law action may take up to eight years to reach a judgment at first instance. The parties have remedies of appeal before a higher court and in some cases an additional remedy before the Supreme Court of Justice which may take a further four years to reach judgment. Arbitration is allowed only if it is expressly agreed by the parties in the insurance contract. An arbitration award can be obtained within one year. In a reinsurance case, arbitration is allowed even if it is not expressly provided for in the contract.

Arbitration

Are arbitration clauses enforceable in an insurance or reinsurance contract?

Pursuant to the Insurance Contract Regulatory Act, insurance contracts must include a clause that sets out the possibility of selecting alternate means of settling controversies when the parties agree to do so. It also provides that insurance contracts must identify the administrative, judicial or the alternative dispute resolution procedure.

Alternative dispute resolution

Is ADR (e.g. mediation) compulsory or encouraged within the jurisdiction?

It is encouraged as mentioned in the previous answer.

Jurisdiction and governing law

What are the requirements for the governing law and jurisdiction in insurance policies?

The parties have the right to select the governing law and jurisdiction in insurance policies.

Limitation

What is the limitation period applicable to a re/insurance contract in the jurisdiction?

According to Civil Law the statute of limitations is 10 years. In commercial law – including insurance and reinsurance – and in matters of civil liability against the State and its entities the limitation is 4 years. In both insurance and reinsurance, time begins to run from the date of the accident. In reinsurance context this is the time of the original loss.

When does limitation start running?

Limitation starts running from the point when a party is in a position to bring a claim.

Conditions, conditions precedent and warranties

Are these types of terms of re/insurance contracts recognised in the jurisdiction?

Prior to August 2008 the government had a monopoly over the Costa Rican insurance and reinsurance market through the Instituto Nacional de Seguros (INS). If a contract contains any of the above (i.e. conditions, conditions precedent and warranties) they shall be recognised by the legal system, and can be enforced before a court of law. According to general commercial law, the Courts will rely on the drafting of the clause and generally accepted market practices to rule on a case when there is a legal gap or an absence of law. General law will recognize the right to claim damages and will consider whether there is any liability from the insurer or the reinsurer.

What is their status and what is the effect of breach?

General law will recognize the right to claim damages and will consider whether there is any liability of the insured, the insurer or reinsurer arising from the breach.

Non-disclosure/misrepresentation

What are the remedies for non-disclosure or misrepresentation?

Due to the general contractual principles of good faith, there is a duty on both parties to an insurance contract and to a reinsurance contract to disclose and not to misrepresent material facts. If this duty is breached, the corresponding clause or section may be declared null and void. If a non-disclosure either has a bearing on a specific clause or would have influenced an underwriter not to consider a specific risk, the relevant clause or section of the policy or the policy itself may be avoided, depending on the extent of the misrepresentation or non-disclosure. There are not specific remedies but there is always the right to claim damages in a Civil Court.

Late notification

Is there a statutory timeframe within which an insured must notify a claim?

There is no time frame within which an insured must make a claim, provided the claim is made within the limitation period and complies with the notification conditions within the policy.

What are the consequences of late notification of a claim?

The only consequence is that the indemnification process is delayed.

Is there a specific timeframe within which re/insurers must respond to the insured?

The Insurer must provide a response to all claims within a maximum period of thirty calendar days after the claim is received. If the insurer is going to proceed with the payment it should be made within a maximum period of thirty calendar days from the date when acceptance of the claim was notified.

What are the consequences of late payment of a claim?

In case of late payment the insurer will be liable for the loss suffered and the payment of legal interest in accordance with article 497 of the Commerce Code. Any provision in the contract to the contrary will be regarded as invalid.

Fronting requirements

What are the fronting requirements in the jurisdiction?

Under Costa Rican legislation, there are no regulatory requirements for local fronting companies, however, the General Superintendence of Insurance may issue regulations if it is considered necessary.

In order for an insurance company to operate in Costa Rica, it must be authorized by and must register its insurance contracts with the Superintendence of Insurance. The applicable law and jurisdiction for each agreement may be agreed between the parties. Insurance contracts must identify the administrative, judicial or the alternative dispute resolution procedure. The minimum capital required by law to establish an insurance company is valued in development units as follows:

Insurance entities for personal insurance, three million development units (approximately US$ 4,642,629).

Insurance entities for general insurance, three million development units (approximately US$ 4,642,629).

Mixed insurance entities, namely, personal and general insurance, seven million development units (approximately US$ 10,832,802).

Similarly, a reinsurance company operating in Costa Rica must be authorised by the General Superintendence and must comply with the requirements established in the Regulations for authorizations, registries and requirements. The minimum capital required by law to establish a reinsurance company is approximately ten million development units (approximately US$ 15,475,432). The parties can choose which law and jurisdiction clause applies to the reinsurance contract.

What are the requirements for the governing law and jurisdiction in reinsurance policies?

The parties have the right to select the governing law and jurisdiction in reinsurance policies.

Follow the settlement/follow the fortunes

Does the jurisdiction recognise the concepts of follow the settlements/follow the fortunes?

The local law does not contain specific regulations on this matter; however the contract can include this type of clause if it is agreed by the parties. According to general commercial law, the Courts will rely on the drafting of the clause and generally accepted market practices to rule on a case when there is a legal gap or an absence of law.

Claims cooperation clause/claims control clause

Are claims cooperation/control clauses recognised in the jurisdiction?

The local law does not contain specific regulations on this matter, however the contract can include this type of clause if it is agreed by the parties.

How are they interpreted?

According to general commercial law, the Courts will rely on the drafting of the clause and generally accepted market practices to rule on a case when there is a legal gap or an absence of law. There are no rules for the appointment of loss adjusters who can be employees of the insurance or reinsurance companies, or designated by them.

Role of the reinsurance broker (placing and producing)

What is the role of the reinsurance broker? Is there a requirement for brokers to be authorised by a statutory body?

Reinsurance brokers are not regulated under Costa Rican law.

Is the knowledge of the broker imputed to the principal?

Reinsurance brokers are not regulated under Costa Rican law.

What are the sources of insurance and reinsurance law in the jurisdiction?

The sources of insurance and reinsurance law in Colombia are the Commercial Code, the Colombian Financial System Statute (Estatuto Orgánico del Sistema Financiero) and the Financial Superintendence’s Legal Circular (Circular Básica Jurídica).

Law 1328/2009 (Protection of Financial Consumers) and Law 1480/2011 (Consumer Statute) are also relevant for consumer claims arising out of insurance contracts.

Additionally, the Supreme Court and Council of State rulings provide guidance as to the interpretation of insurance and reinsurance law. However, it should be noted that these courts have not adjudicated many reinsurance law issues.

How is the insurance and reinsurance market regulated?

In general, the statutes applicable to the insurance and reinsurance market are contained in the Colombian Financial System Statute and the Financial Superintendence’s Legal Circular and Law 1328/2009.

The Financial Superintendence is the government entity in charge of controlling and enforcing regulations applicable to local and foreign insurers and reinsurers. This entity also issues licenses to insurers and reinsurers to operate in Colombia (when applicable) and maintains the registry of foreign insurers and reinsurers that are authorized to carry out business related to Colombian risks.

Regulations provide that only authorized insurers may directly carry out insurance activities in Colombia. The Colombian Financial System Statute prohibits entering into insurance contracts in Colombia with non-authorized insurance companies or with their representatives or agents, except for the following:

• Foreign insurers can offer insurance contracts directly in Colombia for the following risks: a) International maritime transport; b) International commercial aviation; and c) Space launch and transport (including satellites). To carry out these activities, foreign insurers must first register in the Registry of Foreign Insurers that offer insurance related to international maritime transportation, International Commercial Aviation and Space Launch and transport, which is maintained by the Financial Superintendence.
• Generally speaking, Colombian residents may purchase insurance abroad (noting that the Colombian resident must be abroad to do so) except for the following types of risks, that must obtained from an authorized insurance carrier in Colombia: a) Insurance related to social security; b) Compulsory insurance; c) Insurance requiring compulsory underlying insurance; d) Any insurance where the State is the policyholder, insured or beneficiary.

Foreign reinsurers must be registered with the Financial Superintendence if they are willing and interested in underwriting reinsurance business from Colombian insurers. This registry is known as REACOEX.

Burden of proof

Who has the burden of proof when a claim is made?

The insured or policy beneficiary has the burden of proving the occurrence of the loss and the quantum of damages.

The insurer must prove the reasons that support its partial or total rejection of coverage.

Does the burden of proof switch to the other party and if so, at what point?

Pursuant to the Rules of Civil Procedure, the insured’s burden of proof may shift to the insurer (as a defendant in legal proceedings). However, this is unusual.

Effect of a ‘reservation of rights’ and ‘without prejudice’ correspondence

What is the effect of a reservation of rights?

ROR does not have specific status but it may be used to request additional information for coverage analysis. It is fundamental for insurers and reinsurers to be consistent in their approach when handling a claim.

Does the jurisdiction recognise the concept of without prejudice correspondence?

While the WP doctrine does not exist, the parties can agree to negotiate on a WP basis although there must be a clear agreement to this effect and on the meaning of WP correspondence. However, please note that this correspondence could be submitted as evidence in legal proceedings (it will be up to the judge to analyse the evidence and decide what weight, if any, will be given to WP communications during the proceedings).

Privilege

Does the jurisdiction recognise the concept of legal privilege? In what circumstances?

Yes, attorney-client work-product and attorney-client communications are privileged and confidential. Not only does the law (statutes issued by Congress) protect attorney-client work-product, but there is also an article in the Colombian Constitution protecting the “professional secret”.

There are only limited circumstances/exceptions under which attorney-client work-product may be disclosed. For example: a) with the authorisation of the client; b) if the attorney needs to use this information to defend themselves against a claim; c) to prevent a crime.

Disclosure

Is there a duty of disclosure in litigation?

Parties must act in good faith and with candour with the Court. However, this does not mean that parties have to disclose all the evidence they have when filing the lawsuit or providing the statement of defence.

There is a duty of disclosure in litigation if such disclosure is ordered by the Court. Parties may oppose an order of disclosure if the documents/information are protected by privilege or confidentiality pursuant to statutory law.

Are parties obliged to disclose documents that are unfavourable to its own case?

Yes – If it is ordered by the Court. However, arguments should always be presented in good faith and with due context.

Interest

Is there a statutory interest rate in commercial matters?

Once a valid insurance claim is filed (judicial or non-judicial), it must be paid or declined within 1 month. Once this term expires, moratory interest will accrue on the claim at 1.5 times the banking rate if the claim is valid. As at August 2023, the applicable moratory interest rate is 41.13%.

Can parties contract out of this?

If a) the insured is a corporation;

b) it is damage insurance (seguro de daños); and

c) the insured value is greater than 15,000 minimum wage salaries (COP 15,000,000,000 for 2022; USD 3,419,972 as per the rate of exchange applicable on 30.08.2022) the parties may agree to a different moratory rate for a valid claim.

When does interest start to accrue?

See above.

Costs

Does the losing party of a legal action bear the costs of the successful party?

Costs are generally borne by the losing party.

Where a claim succeeds in whole or in part, the judge will award costs accordingly. The costs awarded will not necessarily accord with the amount incurred by the parties. The amount is a matter of discretion for the judge. Consideration will be given to duration, complexity and the lawyer’s proficiency.

Monetary correction

Is monetary correction applied in the jurisdiction? If so, how is it calculated?

It is not available as it is understood to be incorporated in the monetary interest rate. The Court may apply monetary correction if it does not apply the moratory interest rate.

Punitive damages

Does the jurisdiction recognise punitive damages?

No.

Moral damages

Are moral damages available?

Yes.

If so, in what circumstances?

Generally speaking, for claims based on death and/or injury.

Expected length of case

What is the usual timeframe from the filing of a claim to judgment at first instance?

It is difficult to provide accurate timeframes, however it is reasonable to expect 1–3 years for cases that have been filed under the oral system. The oral system is applicable for all civil and commercial cases filed after 01.01.2016.

What about the timeframe for appeal proceedings?

It is difficult to provide accurate timeframes, however it is reasonable to expect 6–18 months for appeals heard under the oral system.

Arbitration

Are arbitration clauses enforceable in an insurance or reinsurance contract?

Yes.

Alternative dispute resolution

Is ADR (e.g. mediation) compulsory or encouraged within the jurisdiction?

Prior to filing legal proceedings, the plaintiff must have previously gone through compulsory mediation (conciliación). However, generally speaking mediation is not compulsory if the plaintiff requests precautionary measures (medidas cautelares) together with the lawsuit.

Compulsory mediation is not required if the claim is to be adjudicated via arbitration.

Jurisdiction and governing law

What are the requirements for the governing law and jurisdiction in insurance policies?

Generally speaking, Colombian law is applicable to insurance policies.

Limitation

What is the limitation period applicable to a re/insurance contract in the jurisdiction?

For direct insurance, two years from the moment the insured knew or ought to have known of the event that gives rise to the claim. For reinsurance, probably two years from the reinsured’s ascertainment of its underlying liability by judgment, award or settlement.

When does limitation start running?

See above.

Conditions, conditions precedent and warranties

Are these types of terms of re/insurance contracts recognised in the jurisdiction?

Breach of condition is fact sensitive depending on the wording of the condition. Conditions precedent are not a specific legal category for insurance law. Warranties exist and may or may not be material to the risk. Breach of warranty will lead to avoidance or termination of the contract depending on the timing of the breach (i.e. before or after the inception).

What is their status and what is the effect of breach?

See above.

Non-disclosure/misrepresentation

What are the remedies for non-disclosure or misrepresentation?

There is a pre-contractual duty to declare, honestly, the facts and circumstances that determine the status of the risk and to notify insurers/reinsurers of a change in circumstances. The obligation is less strictly construed where there is no proposal form. Breach will lead to avoidance of the policy. However, where there is a material non-disclosure or misrepresentation then, if this arises from a non-culpable mistake then the remedy is the reduction of the indemnifiable amount by the percentage that corresponds to the actual premium that would have been charged had the fact or circumstance been disclosed.

Late notification

Is there a statutory timeframe within which an insured must notify a claim?

The insured must provide notice of a loss to the insurer within three days of its occurrence. This time period may be modified to the insured’s benefit. If the insured does not comply with timely notice of a loss, the insurer may deduct the damages it suffered from late notice (which, in practice, are extremely difficult to determine). The insurer does not have a specific obligation to answer the notice of loss however usually the insurer sends some type of note to the insured acknowledging receipt.

What are the consequences of late notification of a claim?

See above.

Late payment

Is there a specific timeframe within which re/insurers must respond to the insured?

One month after the insurance claim is filed by the insured or the policy beneficiary.

What are the consequences of late payment of a claim?

Failure to reject coverage or to pay the claim will cause default interest to accrue on the claim (33.32% per annum, as at August 2022, although this may vary on a monthly basis) and the insured may file an ‘expedited’ judicial action against the insurer. A failure to reject the claim does not immediately provide the insured with the right to indemnification (there must still be a valid claim in light of the insurance contract).

In a reinsurance context, if the parties to the reinsurance contract have not agreed otherwise, the same time period and consequences should be applied, although this point is controversial.

Fronting requirements

What are the fronting requirements in the jurisdiction?

Law 1328 of 2009 allows foreign insurers to offer insurance on a direct basis in limited scenarios, namely the international maritime transport, international commercial aviation and space launch and transportation (known as “MAT” insurance).

Under Law 1328 of 2009, all Colombian residents (natural persons and corporations) are now able to purchase insurance directly from international markets – without any requirement for fronting – save for in certain limited circumstances. However, the Colombian Financial Regulator (Superintendencia Financiera de Colombia) has stated that the Colombian resident must be physically out of the country at the time of purchasing the insurance abroad. Therefore, this rule prevents the contracting of insurance from abroad via the internet or any other mechanism, if the persons are physically located in Colombia.

Foreign insurance companies are also allowed to establish branches in order to operate as a local insurer and conduct the business of insurance, subject to various regulatory requirements.

Are foreign companies permitted to issue a local reinsurance policy?

Please see above and the section on regulation.

Jurisdiction and governing law

What are the requirements for the governing law and jurisdiction in reinsurance policies?

Generally speaking, Colombian law applies.

Follow the settlement/follow the fortunes

Does the jurisdiction recognise the concepts of follow the settlements/follow the fortunes?

The Commercial Code implies a ‘follow the fortunes’ clause irrespective of whether an express clause is contained in the reinsurance contract. Pursuant to this clause, the reinsurer must follow the reinsured’s financial fortune. The reinsured must act professionally and in good faith in settling the claim. The burden is on the reinsurer to prove otherwise.

Claims cooperation clause/claims control clause

Are claims cooperation/control clauses recognised in the jurisdiction?

Claims control/cooperation clauses are valid unless they are designed to interfere with or modify the underlying insurance relationship (i.e. the privity of contract that exists between an assured and its insurer). Absent a claims control clause, an insurer should still notify the reinsurer of a loss and provide information the reinsurer requires.

How are they interpreted?

See above. However, it should be noted that claims cooperation/control clauses have not been considered by Colombia’s Supreme Court.

Role of the reinsurance broker (placing and producing)

What is the role of the reinsurance broker?

In the Colombian legal system, reinsurance brokers are independent entities whose main purpose is to offer and promote reinsurance in order to conclude or renew this type of contract; reinsurance brokers act as intermediaries between insurers and reinsurers. From a regulatory point of view, the reinsurance broker must be independent from the parties to the reinsurance contractual relationship. Therefore, under Colombian Law reinsurance brokers do not represent the cedant company, nor the reinsurer. The broker will not be deemed to be the agent of the reinsured or of reinsurers.

Notwithstanding the foregoing, the reinsurance broker is the usual communication channel between the reinsurer and the cedant company.

Is there a requirement for brokers to be authorised by a statutory body?

Yes, brokers must register with the Financial Superintendence.

Is the knowledge of the broker imputed to the principal?

In principle, the information known by the reinsurance broker is not imputed to the parties. As noted, reinsurance brokers do not possess powers of representation, so in the case of a non-disclosure, the knowledge of the intermediary should not be imputed to the original insurer or reinsurer.

This is a matter that has generated discussion. Strictly speaking, there is no representation, however the nature of the contractual relationship between the broker and the parties to the reinsurance contract may impose certain duties relating to information and non-disclosure. For example, occasionally one may find that the parties to the reinsurance contract agree that the information provided to the reinsurance broker is understood as being provided to the parties. There is, however, no ruling on the legality of this type of agreement.

What are the sources of insurance and reinsurance law in the jurisdiction?

The sources of insurance and reinsurance law, are essentially two laws, namely: (1) The Contract of Insurance incorporated in the Commerce Code, containing the elements and object of the insurance contract, the rights and obligation of the parties and in general the contractual rules of the insurance policy.

(2) The General Law of Insurance containing regulation on the incorporation, organization, activities, operation and extinction of insurance companies and other companies that form part of the private insurance system.

Finally, the control authority, Superintendence of Companies, Securities and Insurance (“SCSI”), from time to time, issues special Regulations on specific issues or topics that need to be clarified or regulated.

How is the insurance and reinsurance market regulated?

The insurance and reinsurance market are controlled by the SCSI. This public entity approves the incorporation of insurance and or reinsurance companies; brokers, and of Surveyors. SCSI requests information from these companies from time to time, and it can also intervene in these companies if it considers that they have violated the law. Insurance companies have also the obligation to register their policies with the SCSI, which has the authority to reject the wording of a policy if believes that its contents are illegal or prejudicial to the public.

SCSI also has the jurisdiction to hear claims filed by insureds against insurance companies if those companies violate article 42 of the General Insurance Law, which requires insurance companies to answer claims within a period of 30 days after receiving all the documents relevant to the claim. The decision of the SCSI can be appealed before the Superintendent of Companies, Security and Insurance, and his decision has to be executed and fulfiled by the insurance company in a maximum of 10 days or it could be forced to close its operations.

As mentioned above, the two important laws that regulate the operation of insurance and reinsurance companies and the elements of the contract of insurance are, The General Law of Insurance and The Contract of Insurance incorporated in the Commerce Code.

Burden of proof

Who has the burden of proof when a claim is made?

The insured has the burden of proving the existence of the loss and the quantum of the loss. And the insurance companies have the burden of proving any exceptions to their responsibility.

Does the burden of proof switch to the other party and if so, at what point?

See above.

Effect of a reservation of rights and without prejudice correspondence

What is the effect of a reservation of rights? Does the jurisdiction recognise the concept of without prejudice correspondence?

The concepts of reservation of rights or without prejudice correspondence do not exist under Ecuadorian law in the form and/or with the usage in English laws. In particular, there are certain provisions in our new Commerce Code that provide that the exchange of communications may be considered by a Court of Law as proof that time-bar and other provisions may be suspended by the parties, if they are engaged in cross communications. But, Ecuadorian legislation does not provide for the concepts of reservation of rights or without prejudice correspondence.

Privilege

Does the jurisdiction recognise the concept of legal privilege? In what circumstances?

Under Ecuadorian law, all communications between a lawyer and their client are private and confidential and are not required to be disclosed, unless ordered by a Court of Law.

Disclosure

Is there a duty of disclosure in litigation?

Ecuador does not have a similar concept of disclosure, as it is understood in English law. However, under our Civil Procedure Code, a plaintiff wishing to file a claim has to file with its demand all evidence and documents required to prove its claim. On the other hand, the defendant in its answer to the claim, has to enclose all documents and evidence that support its defence. This is not disclosure, as it is understood in English laws. Also, it is also possible that one of the parties may request through the Court the possibility of seeing a document. The Court will review the petition and if it agrees, it will order the presentation of the document.

Interest

Is there a statutory interest rate in commercial matters?

The payment of interest will be ordered by the Court, and will be calculated at the official rate defined regularly by the Central Bank of Ecuador, and interest will accrue for all the period between the time the insurance company should have paid the claim, until the payment has been made.

Costs

Does the losing party of a legal action bear the costs of the successful party?

Ecuadorian laws allow the Court to decide whether the losing party will bear all litigation costs. It is not always the case that the Court will order the payment of costs. In most cases, the Courts will order the losing party, to pay only a portion of the total costs.

Monetary correction

Is monetary correction applied in the jurisdiction? If so, how is it calculated?

Since 2001 the Ecuadorian national currency is the US Dollar, therefore, monetary correction is not an issue as all transactions are made in US currency.

Punitive damages

Does the jurisdiction recognise punitive damages?

Ecuadorian legislation does not provide punitive damages.

Moral damages

Are moral damages available?

Ecuadorian legislation provides for the possibility of claiming for moral damages. Usually individual persons are more likely to be subject to suffering moral damages, rather than a company.

Expected length of case

What is the usual timeframe from the filing of a claim to judgment at first instance?

An insurance matter taken to litigation in Court, could take up to one year to conclude in first instance. But may take three to four years to be resolved, if the matter is taken up to the Supreme Court.

Arbitration and alternative dispute resolution (ADR)

Are arbitration clauses enforceable in an insurance or reinsurance contract?

The parties are entitled to choose arbitration if they do not want to submit their disputes to a Court of Law. The parties are entitled to submit their disputes to arbitration, locally or abroad, under local arbitration legislation or under foreign arbitration legislation. Freedom of contract should apply.

Is ADR (e.g. mediation) compulsory or encouraged within the jurisdiction?

Mediation is not compulsory, but it is becoming more and more popular.

Jurisdiction and governing law

What are the requirements for the governing law and jurisdiction in insurance policies?

Under Ecuadorian Law, the insurance contract has to be governed by Ecuadorian law and jurisdiction and subject to the control of the SCSI.

Limitation

What is the limitation period applicable to a re/insurance contract in the jurisdiction? When does limitation start running?

A time bar of three years applies for a claim against a local underwriter, and it will run from the date of the occurrence of the loss. There is no legal provision with regard to time bar in reinsurance contracts and, as such, if the reinsurance contract is subject to Ecuadorian law, the same three year period should probably apply, from the date on which the reinsurer becomes aware that its reinsured (underwriter) is obliged to pay, by settlement or award or final judgment.

Local insurers have the duty to respond to a claim within 30 days, after all relevant documents are delivered to the insurer. If the underwriter does not provide an answer to the claim within the 30 day period, the assured can file a petition to the Superintendence of Companies, Securities and Insurance. The Control Authority will hear the claim and can order and force the insurer to pay the claim.

Conditions, conditions precedent and warranties

Are these types of terms of re/insurance contracts recognised in the jurisdiction? What is their status and what is the effect of breach?

The relevant concept under Ecuadorian law is “Condición Suspensiva”. According to this concept, an obligation is not due until a condition is performed, therefore the insurance contract is not a pure and simple obligation to pay compensation. The compensation is due to be paid, only if the assured has complied with the duties set forth in the contract and in the law of the contract of insurance. If there is a breach of ‘condición suspensiva’, the insurer is discharged from liability and its obligation to pay.

Under Ecuadorian law, there is no difference between obligations and warranties. However, not all breaches of an obligation will have the same effect on the contract. Some breaches of obligations cause the nullity of the contract, others could lead to the termination of the contract and others to allow the insurer to reject a claim.

Non-disclosure/misrepresentation

What are the remedies for non-disclosure or misrepresentation?

Ecuadorian insurance law places an obligation on the assured to disclose material information to the underwriter. Material information is that which could make the insurer increase the premium or decline the cover. The law of contract of insurance provides rules for breach of the assured’s duties to disclose all relevant information to the insurance company. Some violations of this rule may cause the nullity of the contract and others may cause the right of the insurer to reject the cover.

Late notification

Is there a statutory time frame within which an insured must notify a claim? What are the consequences of late notification of a claim?

The insured has five working days to notify the loss to the insurer after the occurrence of an incident. Failure to notify the insurer within five working days may lead to the insured losing the right to claim under the policy, unless the insurer and the insured have agreed to an extension, either expressly in the policy or by way of side-agreement. Also, if the parties have agreed in the policy to increase the period of time for notification, that period or time will prevail over the period of five days provided for in the law.

Late payment

Is there a specific timeframe within which re/insurers must respond to the insured? What are the consequences of late payment of a claim?

The period of time within which the insurer is obliged to provide an answer to the insured that has filed a claim, is 30 days. The time starts running from the presentation of all the relevant documents supporting the claim. If the claim is declined, an explanation of the grounds for refusing the claim must be provided.

Insurance companies are subject to the jurisdiction of the Superintendency of Companies. Consequently, if the insurer rejects the claim, notification must be made by the insurer to the Superintendent of Companies. In this scenario, unless an agreement is reached between the parties, the Superintendent will assess the merits of the objections within 30 days and will order either the payment of the claim, or will accept the insurer’s decision to reject the claim. If the Superintendent orders payment of the claim, the insurer has 10 days to comply with the order.

The decision of the Superintendent can be further appealed before the Superintendency of Companies within 10 days. Once the decision is confirmed in appeal, the insurer has a further 10 days to make the payment (including any interest ordered). Failure to comply with payment, may result in sanctions.

Importantly, the procedure outlined is an administrative one. Thus, the assured may still opt to enforce its rights, before the courts.

The 30 days rule does not apply to reinsurance contracts, however the rule and the procedure described above can create a number of problems for underwriters with a claims control clause in the relevant policy, as reinsurers may take more time to decide on the merits of a claim.

There is no express provision in Ecuadorian laws with respect to the time a reinsurer company has to answer a claim by the insurer. But we have to presume that if the Superintendent of SCSI resolved that the local insurer company has to pay a claim, that decision should have the same effect against the reinsurer company, if the reinsurance contract is subject to Ecuadorian laws and jurisdiction. The sanction for failing to pay the claim could be to deregister the reinsurer company from the list of authorised reinsurers able to do business in Ecuador.

Fronting requirements

What are the fronting requirements in the jurisdiction?

Reinsurance companies have to be registered with the Superintendence of Companies, Insurance and Exchange, in order to be able to sign reinsurance contracts with Ecuadorian insurance companies.

It is prohibited to issue a policy on a 100% reinsurance fronting basis, but there is no specified minimum percentage to be retained by a local underwriter. Therefore, in practice, a 1% retention would be enough for reinsurance purposes.

Jurisdiction and governing law

What are the requirements for the governing law and jurisdiction in reinsurance policies?

Under Ecuadorian Law, only the insurance contract has to be governed by Ecuadorian law and jurisdiction. Reinsurance contracts can be governed by the law of a foreign country and may be subject to a foreign jurisdiction. But reinsurance can also be subject to Ecuadorian law and jurisdiction, under the latter, the contract will be interpreted and executed under Ecuadorian laws.

Also, as set out above, the parties are entitled to choose arbitration if they do not want to submit their dispute to a Court of Law. In the case of insurance contracts, the arbitration should be held in Ecuador and subject to Ecuadorian law and arbitration or abroad if the parties so choose. In case of reinsurance contracts, freedom of contract should apply.

Follow the fortunes/settlements

Does the jurisdiction recognise the concepts of follow the settlements/follow the fortunes?

Follow the fortunes and follow the settlement provisions are not specifically provided for under Ecuadorian law. If the contract of reinsurance contains clear follow the fortunes and/or follow the settlements clauses, the parties to the contract should comply with those agreements, in accordance with the express wording, terms and conditions. Freedom of contract will apply, but also will apply the agreement of the parties to submit the contract to local or foreign jurisdiction, as well as to local or foreign laws.

Claims co-operation/claims control

Are claims cooperation/control clauses recognised in the jurisdiction? How are they interpreted?

Despite the fact that Ecuadorian legislation does not provide special provisions for claims control or cooperation clauses, the parties are free to agree to include these in the terms and conditions of the reinsurance contract.

Role of the reinsurance broker (placing and producing)

What is the role of the reinsurance broker? Is there a requirement for brokers to be authorised by a statutory body?

There are no comprehensive regulations regarding reinsurance brokers under Ecuadorian law.

Is the knowledge of the broker imputed to the principal?

In the author’s opinion, the laws and rules of agencies and mandate can be easily applied to the concept of insurance brokers. However, Ecuadorian insurance laws have not developed much regulation in this area.

What are the sources of insurance and reinsurance law in the jurisdiction?

The sources of insurance and reinsurance law in El Salvador are as follows: the Insurance Companies Law, the Development Regulation of the Insurance Companies Law, the Supervision and Regulation of the Financial Services Law, the Technical Regulation of the Insurance Market, the regulations set by the Superintendence of the Financial System and the Commercial Code.

How is the insurance and reinsurance market regulated?

The Insurance and Reinsurance market is a regulated market supervised by the Superintendence of the Financial System. Insurance and Reinsurance Providers, as well as intermediaries and brokers in the market must all comply with insurance regulations set by the Superintendence of the Financial System.

Burden of proof

Who has the burden of proof when a claim is made?

When a claim is made, the burden of proof falls on the policyholder. The insured must prove that the accident, damage, or loss happened.

Effect of a ‘reservation of rights’ and ‘without prejudice’ correspondence

What is the effect of a reservation of rights?

A reservation of rights would notify the insured that a claim may not be covered. The insurer will have the right to determine if there is coverage and the insured can challenge the insurer by way of providing evidence that coverage does apply.

Does the jurisdiction recognise the concept of without prejudice correspondence?

There is no regulation regarding Without prejudice correspondence. It is market practice to engage in Without Prejudice correspondence and the insurer’s position would not be affected if the WP exchanges are done to reach an agreement.

Privilege

Does the jurisdiction recognise the concept of legal privilege? In what circumstances?

There is no regulation regarding legal privilege. It can be added as part of the provisions of the insurance contract.

Disclosure

Is there a duty of disclosure in litigation?

In case of judicial claims, a duty of disclosure exists regarding all elements related to the claim. The insurer and the insured must disclose information regarding coverage and the claim, damage or loss.

Are parties obliged to disclose documents that are unfavourable to its own case?

There is no obligation to disclose documents unfavourable to one’s own case, save if requested by the court.

Interest

Is there a statutory interest rate in commercial matters?

Yes, the Salvadoran Commercial Code establishes a statutory interest rate to be determined by the Ministry of Economy. As at the date of writing the statutory interest rate is 12% per annum.

Can parties contract out of this?

Yes, parties can contract out of this by establishing their own interest rate. The statutory interest rate will only apply when no interest rate was contractually agreed.

When does interest start to accrue?

The Commercial Code establishes that once the claim has been submitted, the Insurer has one month to make the payment, so the legal interest begins to be counted from the moment this term ends.

Costs

Does the losing party of a legal action bear the costs of the successful party?

Usually, in El Salvador there is no claim for “Procedural Costs” so each party pays its costs unless a new process is initiated where the damages suffered are claimed.

Monetary correction

Is monetary correction applied in the jurisdiction? If so, how is it calculated?

There is no monetary correction applied in the jurisdiction.

Punitive damages

Does the jurisdiction recognise punitive damages?

Salvadoran law recognises punitive damages as consequential damages and loss of profits. Punitive damages must be proved under a court of law to be claimed.

Moral damages

Are moral damages available?

Moral damages are available to claim under the provisions of Salvadoran Moral Damages Repair Law. They are not usually claimed, since there is no jurisprudence regarding their monetary quantification.

If so, in what circumstances?

The following circumstances allow a claim for moral damages: (a) Any unlawful, intentional or culpable act or omission, in the civil, commercial, administrative, criminal or other areas that affects a person’s human rights, or their personality rights; (b) Any abuse of the limits of good faith in the legitimate exercise of a given right that causes harm to another party; (c) Injurious, slanderous, or defamatory allegations against a person’s honour or privacy, unless the truth of the allegation is proven; and (d) The substantial effects to a person’s ‘life project’. Breaches of contract do not give rise to moral damages.

Expected length of case

What is the usual timeframe from the filing of a claim to judgment at first instance?

Approximately one and a half years.

What about the timeframe for appeal proceedings?

For the first appeal, six to eight months. For a second appeal, before the High Court Chambers, a further two years approximately.

Arbitration

Are arbitration clauses enforceable in an insurance or reinsurance contract?

Yes, but arbitration must be subject to the laws of El Salvador.

Alternative dispute resolution

Is ADR (e.g. mediation) compulsory or encouraged within the jurisdiction?

The Law of Insurance Companies establishes the mandatory conciliation prior to the start of any type of Judicial or Arbitration procedure, the Super intendency of the Financial System is in charge of carrying out this process.

Jurisdiction and governing law

What are the requirements for the governing law and jurisdiction in insurance policies?

Policies granted in El Salvador by registered insurers must be subjected to Salvadoran law and subjected to the jurisdiction of the Salvadoran courts.

Limitation

What is the limitation period applicable to a insurance contract in the jurisdiction?

Three years.

When does limitation start running?

Three years from the date on which the cause of action occurred.

Conditions, conditions precedent and warranties

Are these types of terms of re/insurance contracts recognised in the jurisdiction?

Salvadoran law does not regulate these types of terms. It is market practice to include conditions precedent and warranties in the contract, to reject a claim if the insured breaches a certain contractual term. The usual practice involves rejecting claims if premium payment is not up to date or there are conditions precedent that invalidate the claim.

What is their status and what is the effect of breach?

These terms are commonly used as market practice and the effect of breach is generally the rejection of the claim.

Non-disclosure/misrepresentation

What are the remedies for non-disclosure or misrepresentation?

Normal remedies for non-disclosure or misrepresentation may include termination of the contract and in some circumstances, the affected party may claim damages.

Late notification

Is there a statutory timeframe within which an insured must notify a claim?

Yes, unless otherwise agreed or provided, written notice must be given within five days.

What are the consequences of late notification of a claim?

If the insured or the beneficiary does not comply with the obligation to report the claim in the above terms, the insurer may proportionally reduce the indemnity, in order for it to correspond to what it would have been if the notice had been given in a timely manner.

Late payment

Is there a specific timeframe within which re/insurers must respond to the insured?

Compensation will be due 30 days after the date the company has received the documents and information that allow it to know the basis of the claim.

What are the consequences of late payment of a claim?

Late payment will enable the insured to request payment in court. Legal interest may be accrued.

Fronting requirements

What are the fronting requirements in the jurisdiction?

All reinsurers who intend to do fronting must be registered at the Reinsurers Registry of the Superintendence of the Financial System.

Are foreign companies permitted to issue a local reinsurance policy?

Only if the foreign company is registered at the Foreign Reinsurers Registry of the Superintendence of the Financial System.

Jurisdiction and governing law

What are the requirements for the governing law and jurisdiction in reinsurance policies?

Disputes arising from reinsurance contracts will be subject to Salvadoran law and jurisdiction. Any agreement to the contrary will be invalid.

Follow the settlement/follow the fortunes

Does the jurisdiction recognise the concepts of follow the settlements/follow the fortunes?

These concepts are not regulated under Salvadoran law, but these types of clauses are considered valid, if contractually agreed.

Claims cooperation clause/claims control clause

Are claims cooperation/control clauses recognised in the jurisdiction?

These clauses are not regulated under Salvadoran law, but these types of clauses are valid if contractually agreed.

How are they interpreted?

Generally, courts allow the party not directly involved (e.g. a reinsurer) in the claim to act as a contributing third-party if this clause has been incorporated.

Role of the reinsurance broker (placing and producing)

What is the role of the reinsurance broker?

Reinsurance brokers act as intermediaries, who are paid a fee or commission to find and place new business on behalf of both the insured client and insurer.

Is there a requirement for brokers to be authorised by a statutory body?

Yes, brokers must be authorised by the Superintendence of the Financial System. To be authorised, brokers must be able to comply with: (a) being a company with legal capacity to intermediate reinsurance; (b) file audited financial statements and; (c) pass the sufficiency exam carried out by the Superintendence of the Financial System.

Is the knowledge of the broker imputed to the principal?

There is no regulation under Salvadoran law.

What are the sources of insurance and reinsurance law in the jurisdiction?

Guyana is a “territorial collectivity” of the French Republic governed by article 73 of the Constitution. French law is therefore applicable.

As in metropolitan France, the principal sources of law for insurance and reinsurance activities are as follows:

• Insurance Code. This also incorporates the principal EU Directives governing the administrative and financial regime of insurance and reinsurance companies which have been transposed into French law:
  • Directive 2009/138/EC of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II Directive).
  • EU Life and Non-Life Insurance Directives.
  • Insurance Distribution Directive.

• Civil Code.
• Case law, in particular Cour de cassation rulings.
• Monetary and Financial Code.
• Contractual agreements between insurance company members of the FFA.
• Professional custom.

How is the insurance and reinsurance market regulated?

The Insurance and reinsurance market is regulated by the French Prudential Supervision and Resolution Authority, an independent administrative authority which exercises prudential supervision of regulated French financial firms such as banks and insurance companies. It operates under the aegis of the Bank of France.

Managing claims

Who has the burden of proof when a claim is made? Does the burden of proof switch to the other party and if so, at what point?

Article 1353 of the Civil Code provides that anyone who claims the performance of an obligation must prove it. Thus, the burden of proof falls initially on the claimant, who bears the burden of establishing the reality of the facts which he alleges in support of his claim.

Conversely the same article also provides that those who claim to be released from an obligation must prove why. Thus, once the claimant has proved an allegation, the burden of proof rests on the defendant.

Effect of a ‘reservation of rights’ and ‘without prejudice’ correspondence

What is the effect of a reservation of rights?

When a claim declaration is made by an insured under a policy, the insurer may have insufficient information or evidence to take an immediate position on the claim. The insurer may thus reserve its position in relation to cover, allowing it initially to deal with the loss without committing the company.

Does the jurisdiction recognise the concept of without prejudice correspondence?

There is no disclosure obligation in French proceedings equivalent to that in the UK or the US. Thus the concept of “without prejudice” correspondence is not strictly necessary, since parties to a dispute are free to choose what to communicate.

Nevertheless French courts recognize the concept of confidential correspondence aimed at seeking to achieve a commercial settlement.

Thus, the insurer may benefit from this rule in the context of an offer of compensation to its insured, provided that this compensation is granted “without recognition of liability” (French Supreme Court, Civ. 2^ème 5 March 2020, 18-26.826).

It should also be noted that all discussions (out of court) between French avocats are confidential, and all correspondence between avocats is also confidential, save in relation to procedural issues.

Privilege

Does the jurisdiction recognise the concept of legal privilege? In what circumstances?

As mentioned above, there is no general disclosure obligation in French proceedings. As a result there is no strictly equivalent concept of legal privilege as in the UK or US.

Nevertheless all consultations sent by the lawyer to their client, correspondence exchanged between the client and his lawyer, interview notes and, more generally, all documents in the file are in any event covered by professional secrecy and may remain confidential, unless they are marked “official”.

Disclosure

Is there a duty of disclosure in litigation? Are parties obliged to disclose documents that are unfavourable to its own case?

As seen above, there is no discovery or disclosure obligation under French law that would oblige the parties voluntarily to reveal all the documents relevant to a given case.

Document requests from other parties are possible, but the documents requested must be identified.

Courts may invite or order the parties to produce certain specific documents.

Such compulsory production may only be ordered if the application is sufficiently precise, with a detailed list of the documents requested. In addition, the request must be necessary for the resolution of the dispute and must originate from a party not holding these documents. Fishing expeditions are not allowed.

Interest

Is there a statutory interest rate in commercial matters? Can parties contract out of this? When does interest start to accrue?

Since Order No. 2014-947 of 20 August 2014 on the “legal” interest rate, two legal interest rates are calculated each half-year: one for non-commercial claims, and the other for all other cases. The method of calculation is set by decree no. 2014-1115 of 2 October 2014 (Les taux d’intérêt légal | Banque de France (banque-france.fr). These rates are applied by the courts on judgment debts.

Parties may, however, agree an interest rate which they freely fix and which may be higher than the legal interest rate, subject to such rate not being usurious.

The Courts generally set the date from which interest is to accrue; this will often be the date of the first letter before action or formal claim notice.

Costs

Does the losing party of a legal action bear the costs of the successful party?

There is no automatic costs recovery in France similar to the UK, save in relation to limited fixed court costs (“dépens”), which may include the cost of court ordered expert investigations.

The standard position is that each party bears its own lawyer’s fees. Courts nevertheless have a discretion to award a contribution to costs under article 700 of the French Code of Civil Procedure. The costs awarded seldom reflect the costs actually incurred in defending or pursuing a court action.

Monetary correction

Is monetary correction applied in the jurisdiction? If so, how is it calculated?

Under French law, when the performance of the obligations of the contract has become excessively onerous for the debtor, the latter may request renegotiation of the contract on the basis of revision for unforeseeability, in accordance with article 1195 of the Civil Code.

A renegotiation of the contract on the basis of unforeseeability requires the meeting of three cumulative conditions:

• The change in circumstances must have been unforeseeable at the time the contract was concluded;
• The performance of the contract must have become excessively onerous for the debtor;
• There must not be a contractual clause preventing the implementation of the revision for unforeseen circumstances.

In case of refusal or failure of the renegotiation, the parties may agree to terminate the contract, at the date and under the conditions they determine, or ask the court to adapt it by mutual agreement. If no agreement is reached within a reasonable period of time, the court may, at the request of a party, revise the contract or terminate it, on the date and under the conditions that it determines.

The court is free to determine the method of calculation.

Punitive damages

Does the jurisdiction recognise punitive damages?

Punitive damages are prohibited under French law. They are considered to be contrary to the principle of compensation for the loss suffered, whereby the victim is only to be restored to the position he would have been in had a contract been performed, or had no tort been committed. Punitive damages are in effect viewed as a form of unjust enrichment for the victim, and are therefore not allowed.

Moral damages

Are moral damages available? If so, in what circumstances?

In France, the victim has the possibility of obtaining damages to compensate the moral damage suffered, in case of pain or injury to affection, honour or reputation.

Nevertheless, the assessment of moral harm is difficult, since it is not possible to calculate a monetary sum to compensate moral suffering or loss.

In the context of personal injury cases, courts often consider that moral harm is included in bodily harm, aesthetic harm or loss of amenity, which consists for example in the impossibility of practising a sport or artistic activity. Case law has established certain guidelines for compensating such losses.

Expected length of case

What is the usual timeframe from the filing of a claim to judgment at first instance? What about the timeframe for appeal proceedings?

Commercial cases greatly vary in length, in particular if court ordered expert investigations (“expertises judiciaires“) are ordered; these can last several years.

Leaving aside such investigations, the timeframe from issuing proceedings to judgment at first instance is on average between 18 months to two years before commercial courts.

Appeals on all issues (including the facts) to the local Court of Appeal tend to last around 2 years.

Appeals to the Cour de Cassation on points of law and procedure usually take around 18 months to two years.

Where the Cour de Cassation annuls (partially or wholly) an appeal court judgment, the matter will be remitted to another appeal court to deal with those issues which are still “live”.

Arbitration

Are arbitration clauses enforceable in an insurance or reinsurance contract?

In accordance with article 2061 of the Civil Code, arbitration clauses are valid in contracts concluded “in relation to a professional activity”, subject to special legislation.

Arbitration clauses are in practice rarely found in insurance policies governed by French law, including for professional or commercial risks.

In contrast, reinsurance agreements subject to French law invariably contain an arbitration clause, stipulating that the arbitrators are to rule as “amiables compositeurs“, namely without strict reference to the law.

Alternative dispute resolution

Is ADR (e.g. mediation) compulsory or encouraged with the jurisdiction?

The use of mediation is not compulsory but is encouraged by the courts, especially with the aim of relieving congestion in French courts.

Jurisdiction and governing law

What are the requirements for the governing law and jurisdiction in insurance policies?

In principle, insurance policies are governed by the law and subject to the jurisdiction chosen by the parties, save where compulsory rules apply. In cases where no choice is made, the governing law and jurisdiction will be determined by European or French laws, based on the risk involved and the status of the insured (consumer or professional).

Limitation

What is the limitation period applicable to an insurance and a reinsurance contract in the jurisdiction?

The standard limitation period for claims under insurance policies is two years under Article L. 114-1 of the Insurance Code, but there are certain exceptions. For example, in life insurance, the limitation period is extended to ten years where the beneficiary is a person separate from the policyholder.

Reinsurance contracts fall outside the scope of the Insurance Code. The standard five year limitation period under the Civil Code applies to such contracts.

When does limitation start running?

In general, the starting point for the limitation period is either the day of the occurrence of the loss giving rise to a claim or when the insured becomes aware of such occurrence. This may depend on the specific definition of an occurrence or claim in the policy.

Conditions, conditions precedent and warranties

Are these types of terms of re/insurance contracts recognised in the jurisdiction? What is their status and what is the effect of breach?

Warranties, as understood by English law, are not recognised under French law.

Conditions and conditions precedent are generally recognised, and upheld in French law.

However conditions that are dependent on the sole will of one of the parties are not allowed. Such clauses would be null and void as having a “potestative” character, but it can nevertheless depend on both the will of a party and that of a third party.

In case of a breach, forced execution, termination of the contract and compensation by means of damages are the three main sanctions provided by French law.

In the insurance context, the sanction for breach of a condition of cover will be that the policy’s cover does not apply.

Non-disclosure/misrepresentation

What are the remedies for non-disclosure or misrepresentation?

The insured must provide the insurer with an accurate statement of the risk.

In cases of intentional (i.e. fraudulent) misrepresentation, Article L. 113-8 of the Insurance Code provides that the sanction is the nullity of the contract.

It is for the insurer to establish the bad faith of the insured, namely the latter’s intention to deceive.

Where the misrepresentation is innocent and this inaccuracy is discovered before a claim, the insurer is entitled to maintain the contract, subject to an increase in premium, or to terminate the contract within ten days of notification to the insured by registered letter.

If the misrepresentation is discovered after a claim has arisen, the indemnity will be reduced proportionately to the difference between the rate of premium paid as opposed to that which would have been appropriate had the risk been fully and accurately declared.

Late notification

Is there a statutory timeframe within which an insured must notify a claim?

In principle, Article L. 113-2 of the French Insurance Code provides that the insured must declare to the insurer within a minimum period of 5 business days any loss likely to give rise to an indemnity claim, subject to any longer contractual period.

What are the consequences of late notification of a claim?

The insured may forfeit the right to indemnity in the event of late declaration, provided that forfeiture is expressly stipulated in the contract, in very apparent print, and that the insurer can demonstrate that delay has prejudiced its position.

Late payment

Is there a specific timeframe within which re/insurers must respond to the insured?

There are specific time frames, depending on the type of cover.

In the case of compulsory building insurance, Articles L. 242-1 et seq. of the French Insurance Code provide that the insurer has a period of 60 days from the claim notice to give the insured an answer on coverage. The insurer then has 30 additional days to determine the amount of the indemnity payable. With the agreement of the insured, this period may be extended, with a maximum limit of 135 days. Once the offer is accepted by the insured, the insurer has 15 days to pay the indemnity. In the event of delay, interest accrues at a rate equal to twice the legal interest rate.

What are the consequences of late payment of a claim?

In addition to the payment of penalties, late payment may give rise to damages for loss caused to the insured by delayed payment, and exposure to claims in tort by third parties who suffer loss as a result of the late payment.

Fronting requirements

What are the fronting requirements in the jurisdiction?

There are no specific requirements on fronting in France for reinsurers.

As regards insurers, those operating in France must comply with all relevant regulations, in particular Solvency II, and provide sufficient protection to the insured. Non-admitted insurance is not allowed in France, with certain limited exceptions.

Jurisdiction and governing law

What are the requirements for the governing law and jurisdiction in reinsurance policies?

Reinsurance agreements fall outside the scope of the Insurance Code. The parties are free to choose the law applicable to their agreement, and the competent jurisdiction. As seen above, parties to reinsurance agreements subject to French law invariably incorporate an arbitration clause.

Follow the settlement/follow the fortunes/claims cooperation clause/claims control clause

Does the jurisdiction recognize the concepts of follow the settlements/follow the fortunes?

Are claims cooperation/control clauses recognized in the jurisdiction? How are they interpreted?

There is little established case law on reinsurance in France.

There is therefore no legal definition of “follow the settlements”, “follow the fortunes”, or claims cooperation/control clauses, although reinsurance arbitrators and practitioners are familiar with these terms. Reinsurance arbitrators will interpret these clauses in accordance with standard rules of contractual construction, but will also take into account international practice when applying these.

Role of the reinsurance broker (placing and producing)

What is the role of the reinsurance broker? Is there a requirement for brokers to be authorised by a statutory body?

In the context of reinsurance distribution, a reinsurance broker is an intermediary who carries out his distribution activities without any exclusive agency agreement or any other legal commitment requiring him to place all or a specific part of his production with one reinsurance company or several reinsurance companies belonging to the same group.

A reinsurance broker declares on his honour that he is not exclusively linked to a reinsurance undertaking and that he has no obligation to place his production with a specific reinsurance undertaking or with several reinsurance undertakings of the same group. As soon as he is exclusively linked to an undertaking or obliged to place his production with one or more undertakings of the same group, he can no longer act as a broker.

In accordance with article L. 513-3 of the French Insurance Code, like insurance brokers, reinsurance brokers are required to register with the Trade and Companies Register and with the Single Register of Insurance, Banking and Finance Intermediaries (Orias). They must also join a professional association in charge of monitoring their activity and supporting their members.

What are the sources of insurance and reinsurance law in the jurisdiction?

The main source of insurance and reinsurance law in Guatemala is the Insurance Activity Law, Decree 20-2010 of the Congress of the Republic of Guatemala.

How is the insurance and reinsurance market regulated?

The insurance and reinsurance market in Guatemala is highly regulated by the Superintendence of Banks (Superintendencia de Bancos – “SIB”), a body of the Bank of Guatemala. This regulator is eminently technical, and it acts under the direction of the Monetary Board. The Superintendence of Banks sets the insurance and reinsurance regulations, prudential rules and guidelines.

Burden of proof

Who has the burden of proof when a claim is made?

In Guatemala, pursuant to the article 126 of the Civil Procedure Code, the general principle is that each party has the burden of proof regarding its respective factual propositions. On the one hand, the claimant has the burden of proving the loss and that it falls within the scope of the insurance or reinsurance policy. On the other hand, the insurer or reinsurer has the burden of proving the contrary.

Does the burden of proof switch to the other party and if so, at what point?

No, when the case is related to insurance/reinsurance matters, the burden of proof does not switch.

Effect of a ‘reservation of rights’ and ‘without prejudice’ correspondence

What is the effect of a reservation of rights?

‘Reservation of Rights’ is not regulated under Guatemalan law; however, the contract can include this type of clause if agreed by the parties. There is no relevant precedent on how the courts will rule on the interpretation of these contractual clauses. According to general commercial law, the courts will rely on the drafting of the clause and regularly accepted market practices to rule on a case when there is a legal gap or an absence of law.

Does the jurisdiction recognise the concept of without prejudice correspondence?

No, it does not.

Privilege

Does the jurisdiction recognise the concept of legal privilege? In what circumstances?

All communications (and the contents therein) between a lawyer and their client and/or third parties are privileged, if they relate to legal services provided by the lawyer. There are exceptions to this general rule, including for example when a court order requests the lawyer to disclose some or all communications exchanged with a client.

Disclosure

Is there a duty of disclosure in litigation?

In Guatemala, each party in a legal procedure must disclose the evidence that it intends to rely on to the opposing party.

There is a special proceeding for obtaining pre-action disclosure of documents, e.g. where a party needs to access a specific document before filing a claim. The party will need to provide detailed reasons about the relevance of the document and why it requires access to said document.

To prepare a proceeding, a party may apply for an order for disclosure of specific documents or other evidence from its proposed opponent. To obtain such order, the interested party must prove that the document is in possession of the potential opposing party and provide, in general terms, the content of the documents that are to be disclosed by the potential opponent.

Are parties obliged to disclose documents that are unfavourable to its own case?

Parties do not have to disclose documents that can be helpful to the other party. However, if one of the parties has knowledge that the other party has a document that could be helpful and it has not already been disclosed, that party has the right to request that document.

Interest

Is there a statutory interest rate in commercial matters?

There is no statutory interest rate in commercial matters in Guatemala. There are no regulations in Guatemala that establish limitations to interest rate calculation. The parties may freely agree the interest rate to be paid. However, when the interest rate agreed upon by the parties is disproportionate to the interest rate in the market, a competent court may reduce the contractual rate, considering the legal interest rate and the circumstances of the case. Legal interest is equal to the weighted average of the lending rates published by the banks of the financing system of Guatemala on the day before the date of fixation, reduced in two percentage points. If there is no publication, or in case of doubts or discrepancy, a report issued by the Banks’ Superintendence must be required and its response is considered as definitive. The legal interest rate as of July 2023 was 9.98% for operations in Quetzals and 4.59% for operations in foreign currency.

Can parties contract out of this?

Yes, see the answer immediately above.

When does interest start to accrue?

Interest starts to accrue from the time the debt crystallises and becomes payable.

Costs

Does the losing party of a legal action bear the costs of the successful party?

At the judge’s discretion, the losing party may have to cover the successful party’s costs.

Monetary correction

Is monetary correction applied in the jurisdiction? If so, how is it calculated?

Not applicable.

Punitive damages

Does the jurisdiction recognise punitive damages?

Punitive damages are not recognized in Guatemala.

Moral damages

Are moral damages available?

Moral damages are available under Guatemalan laws, but only for cases of defamation or slander. However, there is no jurisprudence (precedent) establishing moral damages.

Expected length of case

What is the usual timeframe from the filing of a claim to judgment at first instance?

The length of lawsuits in Guatemala varies depending upon the location in which the claim is filed. Normally, first instance judgments may take around two to three years.

What about the timeframe for appeal proceedings?

For appeal proceedings, the usual timeframe to a decision may take from one to three years.

Note that in litigation, timeframes are difficult to estimate, since it will depend on the court where the claim is filed, the complexity of the case and the pro-activity of the parties.

Arbitration

Are arbitration clauses enforceable in an insurance or reinsurance contract?

Yes, arbitration clauses are enforceable in insurance and reinsurance contracts.

Alternative dispute resolution

Is ADR (e.g. mediation) compulsory or encouraged within the jurisdiction?

ADR is not compulsory or encouraged within the jurisdiction. However, the use of ADR methods in Guatemala is legally recognized.

Jurisdiction and governing law

What are the requirements for the governing law and jurisdiction in insurance policies?

The governing law in insurance policies must be Guatemalan Law. If no provisions are included in the insurance policy regarding the jurisdiction, disputes arising from insurance policies must be resolved judicially before local competent courts. If the parties have entered into an arbitral agreement, the arbitral procedure shall be the only way to resolve the disputes.

Guatemalan courts will not uphold a jurisdiction clause that specifies a jurisdiction outside Guatemala. In other words, if disputes arising from insurance policies are submitted to ordinary judicial process, such process must be carried out before Guatemalan judicial courts. On the contrary, Guatemalan courts will uphold an arbitration clause that provides for arbitration abroad.

Limitation

What is the limitation period applicable to a re/insurance contract in the jurisdiction?

Article 916 of the Guatemalan Commercial Code is applicable to direct insurance which provides for a 2-year limitation period for any claim arising out of an insurance contract.

When does limitation start running?

The limitation period starts running from the date on which a claim arises, that is the date of the incident that is insured.

Conditions, conditions precedent and warranties

Are these types of terms of re/insurance contracts recognised in the jurisdiction?

No, these terms are not recognised under Guatemalan law. However, the parties are free to agree on them under the relevant agreement. The agreement between the parties should expressly state in as much detail as possible what terms are applicable and what are the consequences of any breaches.

What is their status and what is the effect of breach?

Not applicable.

Non-disclosure/misrepresentation

What are the remedies for non-disclosure or misrepresentation?

In case of non-disclosure or misrepresentation, the insurer may terminate the insurance contract within a month of having knowledge of the undisclosed information or any misrepresentation.

If the insurance coverage extends to various objects or individuals, or protects against several risks, and the omission or misrepresentation only refers to one of them, the insurance will be valid for the others, unless the insurer proves that it would not have insured them separately.

Late notification

Is there a statutory timeframe within which an insured must notify a claim?

The insured must notify any claim within five business days of having knowledge of the loss.

What are the consequences of late notification of a claim?

The insurer may reduce the indemnity to the amount that would have been due if the notice had been given in a timely manner, in accordance with article 914 of the Guatemalan Commercial Code.

Late payment

Is there a specific timeframe within which re/insurers must respond to the insured?

The general rule is that the insurer must pay the claim within 30 days after receiving the information and documents that allow the insurer to fully evaluate the events.

What are the consequences of late payment of a claim?

The insured party may file a claim for the damages arising from the late payment of a claim.

Fronting requirements

What are the fronting requirements in the jurisdiction?

The only requirement for a local fronting company, or for the risk to be ceded to a foreign reinsurance company, is that the foreign reinsurance company must be registered at the SIB.

Are foreign companies permitted to issue a local reinsurance policy?

Foreign companies are permitted to issue a local reinsurance policy, subject to their compliance with the requirement to be registered as a foreign reinsurance company at the SIB.

Jurisdiction and governing law

What are the requirements for the governing law and jurisdiction in reinsurance policies?

The parties are free to choose the governing law and the jurisdiction for reinsurance policies. For insurance policies, refer to the Insurance Section above.

Follow the settlement/follow the fortunes

Does the jurisdiction recognise the concepts of follow the settlements/follow the fortunes?

Guatemalan law does not recognize follow the settlements/follow the fortunes doctrines, however in matters not foreseen by the parties in the contract, the internationally recognized standards for reinsurance will apply.

Claims cooperation clause/claims control clause

Are claims cooperation/control clauses recognised in the jurisdiction?

There is no claim cooperation or control clause recognized under Guatemalan Law.

Role of the reinsurance broker (placing and producing)

What is the role of the reinsurance broker?

According to the Insurance Activity Law, the role of the reinsurance intermediary is to bring together the insurance company and the reinsurance company to secure a contract of reinsurance on terms agreeable to both parties. The reinsurance intermediaries assist the insurance companies in: (i) the selection of the reinsurance company for the handling/transferring of their risks; (ii) the presentation, follow up and collection of the claims against the reinsurance companies; (iii) the verification of the fulfilment of the registration requirement applicable to the foreign reinsurance companies; (iv) keeping the insurance companies informed on the changes and trends in the reinsurance markets that could determine the convenience of amending reinsurance programs; and (v) preparing reinsurance slips.

Is there a requirement for brokers to be authorised by a statutory body?

Yes, insurance and reinsurance brokers (or intermediaries) must be registered with the SIB.

Is the knowledge of the broker imputed to the principal?

There is no provision under the Guatemalan laws that states that the knowledge of the broker must be imputed to the principal.

What are the sources of insurance and reinsurance law in the jurisdiction?

Mexico has a codified legal system. The applicable laws are:

• Insurance and Bonding Institutions Law
• Insurance Contract Law
• Commercial Code
• Federal Civil Code

How is the insurance and reinsurance market regulated?

Insurance is a highly regulated industry in Mexico. Reinsurers must be registered in Mexico to take reinsurance from Mexican cedents.

Insurance and Bonding Commission (Comisión Nacional de Seguros y Fianzas) is the regulator.

Regarding regulatory and corporate matters, the regulator must approve almost every change within the insurer or bonding company. Also, insurance contracts must be registered and approved by the regulator before they are completed. Insurance contracts must comply with several requirements issued by the regulator. In contrast to insurance contracts, reinsurance contracts are not regulated. Therefore regular commercial practice applies.

Also insurers are subject to the Financial Users Defence and Protection National Bureau (CONDUSEF), where policy holders can file claims against insurers and bonding companies. This Bureau carries a Adhesion Contract Registration, where all the insurers must register their contracts.

Burden of proof

Who has the burden of proof when a claim is made?

The insured must prove the extent of the loss.

The courts have said that where the insurer asserts that the claim is not covered, it is for the insurer to prove this.

Does the burden of proof switch to the other party and if so, at what point?

Yes. The burden of proof switches from insured to insurer at trial. Insurer must prove that the claim is not covered by the policy.

Effect of a ‘reservation of rights’ and ‘without prejudice’ correspondence

What is the effect of a reservation of rights?

Parties can agree to exchange information or discuss settlement of the case on the basis that their rights are reserved to file a claim in court if agreement is not reached.

Does the jurisdiction recognise the concept of without prejudice correspondence?

No. In general, opposing sides communicate freely with each other and parties are meant to file all documents to prove their case in Court, regardless of whether the information was exchanged as part of a discussion about settlement.

However, it is possible to indicate on the documents that they are being provided in order to facilitate settlement discussions, and when those documents are looked at by the court, it can take into consideration the document as a whole, including the fact that it was provided as part of settlement negotiations.

Privilege

Does the jurisdiction recognise the concept of legal privilege? In what circumstances?

No.

Disclosure

Is there a duty of disclosure in litigation?

No. Both parties are obliged to prove their allegations. It is possible to request disclosure through the court.

Are parties obliged to disclose documents that are unfavourable to its own case?

No. Obtaining documents from the other side can only be done by way of a court order.

There are some case law precedents saying that insurers should disclose all the information related to the case but they are not mandatory yet.

Interest

Is there a statutory interest rate in commercial matters?

Commercial matters have a statutory interest rate of 6%, annually.

Insurance matters accrue monetary interest with the interest rate to be determined, on the basis of the best rate in the market, times 1.25.

Can parties contract out of this?

Not in insurance matters. It would be possible to agree a higher rate, but not one lower than the law provides.

It is possible to contract out of this in commercial matters.

When does interest start to accrue?

In insurance matters, 30 days after the insurer has all information needed to pay or decline the claim. Thus, there is a case precedent saying that the monetary interest starts to accrue, 30 days after the insured advances a claim for payment from the insurer. This case precedent is mandatory in court.

Costs

Does the losing party of a legal action bear the costs of the successful party?

Yes, as long as the court makes an award on this basis. When the court makes a costs award, it will take into account whether the losing party lost on every point.

Monetary correction

Is monetary correction applied in the jurisdiction? If so, how is it calculated?

No.

Punitive damages

Does the jurisdiction recognise punitive damages?

Yes. Punitive damages were created by the Supreme Court as a Moral Damage spin-off. So it is possible to claim punitive damages, however there are no parameters given to determine the amount.

Moral damages

Are moral damages available?

Yes.

Moral Damages are awarded to compensate for the impact on a person’s self-esteem, feelings, beliefs and reputation, as a consequence of the actions of another. However, since the 2011 constitutional amendment, “fair indemnification” has been introduced to the schedule of compensation. “Fair indemnification” can include the lost project of life, indemnification for life expectancy, punitive damages, etc.

If so, in what circumstances?

The law provides that moral damages can be claimed when someone has been affected in his/her integrity, feelings, self esteem, etc.

It is not necessary to provide proof to be awarded moral damages occasioned by bodily injuries. For example, a victim of a car accident will be awarded direct damages, bodily injuries and moral damages. For other cases, it is necessary to prove them.

Expected length of case

What is the usual timeframe from the filing of a claim to judgment at first instance?

Two years.

What about the timeframe for appeal proceedings?

One more year.

In Mexico, there is an Amparo trial to challenge the appeal sentence. That can take one more year.

Arbitration

Are arbitration clauses enforceable in an insurance or reinsurance contract?

Yes.

Alternative dispute resolution

Is ADR (e.g. mediation) compulsory or encouraged within the jurisdiction?

No.

Jurisdiction and governing law

What are the requirements for the governing law and jurisdiction in insurance policies?

Governing law will always be Mexican Law. Jurisdiction is a Mexican Court, to be chosen by the insured, as long as there is a CONDUSEF office in the jurisdiction.

Insurance cases are all deemed to be commercial cases. As a commercial matter, an insured can choose to issue a claim in federal or local courts, as long as there is a CONDUSEF office in that state or county.

Recently jurisprudence has been issued saying that a Civil Liability case that is covered under an Insurance Policy, always must be delivered to a Civil Court, to a Civil Trial, also where a CONDUSEF office is in that state or county.

Limitation

What is the limitation period applicable to a re/insurance contract in the jurisdiction?

Statute of limitations are 2 years for non-life insurance and 5 years for life insurance.

Reinsurance is deemed a commercial contract. Therefore the statutes of limitation for any action arising from a reinsurance contract, is 10 years.

When does limitation start running?

From the last point at which the insured or reinsured becomes aware of the facts underlying the claim.

Conditions, conditions precedent and warranties

Are these types of terms of reinsurance contracts recognised in the jurisdiction?

No. However, the courts will usually uphold the express wording of the contract, provided that the clause does not offend public policy. Therefore these concepts can be included in the contract or interpreted as being in the contract.

What is their status and what is the effect of breach?

The effect of the breach, in most of the cases, can be the rescission of the re/insurance treaty or to release the re/insurer.

Non-disclosure/misrepresentation

What are the remedies for non-disclosure or misrepresentation?

The principle of good faith is implied into all insurance contracts. If this is breached by the insured, the insurer has the right to rescind the contract within 30 days of learning of the breach.

Late notification

Is there a statutory timeframe within which an insured must notify a claim?

No. The insured must notify the occurrence of any circumstance that may result in a claim under the policy, as soon as possible. Statute of limitations are 2 years for non-life insurance and 5 years for life insurance.

What are the consequences of late notification of a claim?

If notice is not given in that time frame, the insurer can deduct from the indemnification the difference in the amount that would have been payable if the notice was given on time.

Late payment

Is there a specific timeframe within which re/insurers must respond to the insured?

No. However, courts have said that if the insurer does not respond to the insured within 30 days, the claim will be deemed covered and accepted.

What are the consequences of late payment of a claim?

There are no legal consequences other than the monetary interest, but those must be awarded by a court.

Fronting requirements

What are the fronting requirements in the jurisdiction?

Fronting is a non-regulated contract. It is possible for an insurer to cede 100% of the risk.

Are foreign companies permitted to issue a local reinsurance policy?

Yes, as long as they are registered with the Foreign Reinsurers National Registration carried by the regulator.

Jurisdiction and governing law

What are the requirements for the governing law and jurisdiction in reinsurance policies?

Mexican Law will be the governing law.

Jurisdiction is to be chosen by the insured. It is possible to contract out by including an arbitration clause.

Follow the settlement/follow the fortunes

Does the jurisdiction recognise the concepts of follow the settlements/follow the fortunes?

No. However, a court will usually uphold the wording of such clauses.

Claims cooperation clause/claims control clause

Are claims cooperation/control clauses recognised in the jurisdiction?

No. However, a court will usually uphold the wording of such clauses.

How are they interpreted?

They are to be interpreted as a regular commercial contract.

Role of the reinsurance broker (placing and producing)

What is the role of the reinsurance broker?

They can only act as reinsurance brokers and they cannot do anything but that. They can intermediate in allocating portions of the risk to reinsurers around the world.

Is there a requirement for brokers to be authorised by a statutory body?

Yes. They should comply with a number of requirements as set out in the Insurance and Bonding Companies Law.

Is the knowledge of the broker imputed to the principal?

Yes.

What are the sources of insurance and reinsurance law in the jurisdiction?

There are a number of specific regulations, including those which create the regulatory body known as the Superintendence of Insurance and Reinsurance (‘SIR’). Other relevant statutes include the Reinsurance Law and the Captive Insurance Law, Law 12 of 2012. Additionally the SIR can issue instructions addressing specific matters as per their administrative and regulatory powers.

How is the insurance and reinsurance market regulated?

The insurance and reinsurance market is regulated by SIR, which issues and enforces rules applicable to the insurance and reinsurance market SIR.

Burden of proof

Who has the burden of proof when a claim is made?

According to Panamanian legislation, the claimant has the obligation to provide sufficient evidence to prove the facts which support its claim.

Does the burden of proof switch to the other party and if so, at what point?

The burden of proof will ordinarily fall on the claimant. Depending on the nature of the case, however, the burden of proof may be transferred to the defendant. If the claimant can provide evidence “prima facie“, then the burden of proof should fall to the defendant and the courts will determine the shifting of the burden of proof. This principle is more likely to apply to criminal, labour and family cases, rather than civil or commercial cases.

Effect of a ‘reservation of rights’ and ‘without prejudice’ correspondence

What is the effect of a reservation of rights?

Reservation of rights are not binding in Panamanian law. Its use is uncommon, and since it is not regulated by law, its use does not create legal consequences.

Does the jurisdiction recognise the concept of without prejudice correspondence?

Without prejudice correspondence between parties is recognized in Panama and is integrated as part of the country’s commercial practice.

Privilege

Does the jurisdiction recognise the concept of legal privilege? In what circumstances?

Legal privilege between client and legal advisors and/or consultants is recognized in Panama, and is comparable to the duty of confidentiality.

Legal Privilege applies to any professional in Panama with a client, especially lawyers, accountants, and insurance companies. In insurance matters, information relevant to medical and psychological data, intimate life, including family matters, marital activities or sexual orientation of the contracting party or insured, as well as information relevant to minors in these same aspects, must be safeguarded.

Disclosure

Is there a duty of disclosure in litigation?

Panamanian Legislation does not recognize disclosure as an obligation. Nonetheless, there are legal remedies which may force a party to provide evidence that might be used in court for a future case. In order to proceed with this action, a separate motion has to be filed before a Court, detailing the evidence requested for disclosure and its purpose.

Are parties obliged to disclose documents that are unfavourable to its own case?

The parties are not obliged to disclose documents. For a party to be obliged to disclose a document, the opposite party must file a motion at the specific time and phase to request that evidence to be disclosed and a Court order must be issued and served.

Interest

Is there a statutory interest rate in commercial matters?

There is no legally mandated statutory rate, although in practice judges commonly use a 6% annual rate.

Can parties contract out of this?

Legal interest is not mandatory, however, in case of breach of contract where legal interest must be established, judges set it at a default rate of 6%.

When does interest start to accrue?

Interest starts to accrue from the moment in which the court decision that admits the claim is served on the defendant.

Costs

Does the losing party of a legal action bear the costs of the successful party?

Depending on the decision granted by the Judge, the losing party may be ordered to pay the successful party an amount of money to be determined by the Court. This is the case if the Judge determines that the losing party acted in bad faith or in evident disregard of the law on that specific matter.

Monetary correction

Is monetary correction applied in the jurisdiction? If so, how is it calculated?

Panamanian legal tender is the US Dollar.

Punitive damages

Does the jurisdiction recognize punitive damages?

Panama recognizes punitive damages, which are estimated by the Judge, depending on the interpretation given to the losing party’s actions.

Moral damages

Are moral damages available?

Moral damages are also recognized by Panamanian law.

If so, in what circumstances?

Courts may determine that moral damages are paid in cases in which the claimant provides sufficient evidence to prove the emotional repercussions of the actions of the defendant. Claimants also need to provide a credible estimate of the actual damages caused by the emotional repercussions of such acts.

Expected length of case

What is the usual timeframe from the filing of a claim to judgment at first instance?

The timeframe from the filing of a claim to judgment at first instance will depend on the nature and/or complexity of the case. The usual timeframe is between 24 and 30 months.

What about the timeframe for appeal proceedings?

Depending on the nature and/or complexity of the case, timeframe for appeal proceedings is usually between 12 to 18 months.

Arbitration

Are arbitration clauses enforceable in an insurance or reinsurance contract?

Yes, arbitration clauses are recognized and enforceable in Panama, including in cases of insurance and reinsurance contracts.

Alternative dispute resolution

Is ADR (e.g. mediation) compulsory or encouraged within the jurisdiction?

The only compulsory Alternative Dispute Resolution are the cases in which the parties have contracted with an arbitration clause. Panamanian commercial courts do not have the authority to promote settlements or alternative methods of negotiation.

Jurisdiction and governing law

What are the requirements for the governing law and jurisdiction in insurance policies?

Panamanian Insurance Law asserts that any policy issued by a Panamanian licensed company over national assets or Panamanian nationals or residents is governed by the law of the place of issuance, in this case Panama . Any policy must be previously approved by the SRI. Choice of law clauses are recognised, especially for international contracts , such as reinsurance.

Should a choice of jurisdiction clause be in dispute , for example : arbitration in London, the Panama Courts will normally uphold the validity of the clause and instruct the parties to resolve the matter as per contract choice of law.

Limitation

What is the limitation period applicable to a re/insurance contract in the jurisdiction?

One year.

When does limitation start running?

According to Panamanian case law, limitation starts to run from the moment the risk has occurred. However, there is additional case law that considers the time bar to start running according to special policy provisions which may determine that limitation is triggered at a later date, most commonly since the claim was presented.

Conditions, conditions precedent and warranties

Are these types of terms of re/insurance contracts recognised in the jurisdiction?

Correct.

What is their status and what is the effect of breach?

Panama acknowledges private agreements that do not exceed the regulations set by Panamanian consumer law and Panamanian insurance law and its specific regulations.

The effect of breach may result in the suspension or nullity of the insurance contract.

Non-disclosure/misrepresentation

What are the remedies for non-disclosure or misrepresentation?

Remedies for non-disclosure/misrepresentation include cancellation of the policy. If there has been an economic loss, the affected party may claim damages in the Civil Courts.

Late notification

Is there a statutory timeframe within which an insured must notify a claim?

The expected time for notification of a claim is within a reasonable time after the risk has occurred, save if the policy established a specific timeframe for notification.

What are the consequences of late notification of a claim?

Late notifications may be penalized in accordance with the terms of the policy. Exceptions may arise when technical verifications needed in order to formalize a claim cannot be effected, in which case notification may be made at a later date.

Late payment

Is there a specific timeframe within which re/insurers must respond to the insured?

Unless there is a clause established in contract, the insurer must respond within a reasonable time after the claim has been received.

Exceptions may arise due to the complexity of loss adjustment procedures, in circumstances where a particular risk may demand more time to evaluate a claim once it occurs.

What are the consequences of late payment of a claim?

A late payment may generate a complaint before the Local Regulator and/or the Consumer Protection Office.

The one-year time bar for claims may be interrupted when a complaint is made to the Consumer Protection Office at the SRI.

There is jurisprudence that a time bar may be interrupted if there is evidence of an offer or a negotiation by a representative.

Fronting requirements

What are the fronting requirements in the jurisdiction?

Fronting is a common practice of insurance law in Panama, however, it is not regulated by law. The superintendency only requires insurers to register reinsurance contracts with them.

Are foreign companies permitted to issue a local reinsurance policy?

Foreign Companies are permitted to issue a local reinsurance policy, as long as they are licensed to do so by the local Regulator, in accordance with the Insurance and Reinsurance Law. Or they may issue a policy via an association with a Panamanian licensed company.

Jurisdiction and governing law

What are the requirements for the governing law and jurisdiction in reinsurance policies?

Panamanian Insurance Law asserts that any policy issued by a Panamanian licensed company over national assets or Panamanian nationals or residents is governed by the law of the place of issuance, in this case Panama.

For contracts where a choice of law clause establishes a different jurisdiction Courts will recognize its validity and instruct parties to attend the dispute as per the contract applicable law.

Follow the settlement/follow the fortunes

Does the jurisdiction recognise the concepts of follow the settlements/follow the fortunes?

This will mostly depend on the reinsurance contract and the type of risks as this is a matter of contractual practice.

Claims cooperation clause/claims control clause

Are claims cooperation/control clauses recognised in the jurisdiction?

Yes, claims cooperation/control clauses are applied and recognised in Panama.

How are they interpreted?

These clauses have rarely been disputed in the Panamanian Courts.

Role of the reinsurance broker (placing and producing)

What is the role of the reinsurance broker?

Panamanian law determines that the main role of the reinsurance broker is to act as intermediary between the insurance company and the reinsurer.

Is there a requirement for brokers to be authorised by a statutory body?

The reinsurance broker’s activity requires a special license and is regulated by the SIR.

Is the knowledge of the broker imputed to the principal?

Not necessarily. In these situations, the common international practices will prevail, unless there is proof of unethical actions that may lead to such conclusion. These actions are also contemplated in the Panamanian Reinsurance Law.

What are the sources of insurance and reinsurance law in the jurisdiction?

The Civil Code generally governs substantive aspects of insurance contracts and the Insurance Law regulates the insurance supervising authority and insurance and reinsurance companies.

The Civil Code provides that the rules for insurance contracts extend to reinsurance contracts, when applicable.

How is the insurance and reinsurance market regulated?

The Insurance Superintendent – SIS – regulates the market. SIS is a technical body of the Central Bank of Paraguay, which is the monetary authority. Enforcement of the Insurance Law is vested onto SIS. The Insurance Law sets out the rules for the registration and operation of insurance and reinsurance companies, mergers and liquidations, insurance agents and brokers, claims adjusters, and the administrative procedure to impose sanctions on companies or individuals operating in the insurance market.

Burden of proof

Who has the burden of proof when a claim is made?

The insured has the burden of proof when a claim is made. The general rule under the Civil Procedure Code is that the burden of proof rests with the party who asserts the existence of a disputed fact or a legal provision. Notorious facts are not required to be proved and the judge will determine what constitutes a disputed fact.

Does the burden of proof switch to the other party and if so, at what point?

The burden of proof will switch to the subrogating insurer in a recovery claim against the party that caused the loss or damage.

Effect of a ‘reservation of rights’ and ‘without prejudice’ correspondence

What is the effect of a reservation of rights?

These concepts will have a very limited effect in a case, as they are not concepts set out in Paraguayan law. As a rule, rights can be exercised even if no reservation has been made.

Does the jurisdiction recognise the concept of without prejudice correspondence?

No.

Privilege

Does the jurisdiction recognise the concept of legal privilege? In what circumstances?

Legal privilege is not expressly protected by Paraguayan law. Except where disclosure is required, for example by anti-money laundering regulations, the Criminal Code punishes the breach of confidentiality by professionals.

Disclosure

Is there a duty of disclosure in litigation?

Parties must disclose documents on which the claim or defence is based, i.e. the documents on which the party relies to prove their case. If the documents are not in the party’s possession, the party must indicate the location of the documents, i.e. the public registry or other entity, or person, holding the document.

Are parties obliged to disclose documents that are unfavourable to its own case?

No.

Interest

Is there a statutory interest rate in commercial matters?

The Central Bank of Paraguay sets the maximum interest rates chargeable for compensation for late payment and punitive interest for breach of obligations. These rates are given both in local and foreign currency. The rates are available at www.bcp.gov.py.

Can parties contract out of this?

Parties can contract rates up to the maximum rates set by the Central Bank of Paraguay.

When does interest start to accrue?

Interest starts to accrue from the due date of an obligation, when the debt should have been paid, or from the filing of the claim.

Costs

Does the losing party of a legal action bear the costs of the successful party?

Yes. However, the Court may exempt the losing party or partially reduce costs if it finds a good reason to do so. The reasons must be stated in the decision. Bad faith or an abusive exercise of rights would lead to an award on costs, whilst in cases where the subject matter is complex, the losing party may be considered to have litigated in good faith, trusting it had a legitimate right to litigate. In these latter circumstances, costs are usually exempt.

Monetary correction

Is monetary correction applied in the jurisdiction? If so, how is it calculated?

No.

Punitive damages

Does the jurisdiction recognise punitive damages?

No.

Moral damages

Are moral damages available?

Yes.

If so, in what circumstances?

Moral damages are available to the injured person only, or the heirs of the person if the injury resulted in death. Courts will generally recognise as moral damage injuries to sentiments, affections, reputation, good name.

Expected length of case

What is the usual timeframe from the filing of a claim to judgment at first instance?

Approximately 1 year.

What about the timeframe for appeal proceedings?

Approximately 1 year.

Arbitration

Are arbitration clauses enforceable in an insurance or reinsurance contract?

Arbitration clauses are not permitted in an insurance policy.

Alternative dispute resolution

Is ADR (e.g. mediation) compulsory or encouraged within the jurisdiction?

Mediation is not compulsory, except in limited family law disputes.

Jurisdiction and governing law

What are the requirements for the governing law and jurisdiction in insurance policies?

The Insurance Law requires that insurance policies be submitted to Paraguayan jurisdiction, except where an international agreement, between Paraguay and other jurisdictions, allows otherwise.

Limitation

What is the limitation period applicable to a re/insurance contract in the jurisdiction?

The statute of limitation for actions arising from an insurance contract is 1 year. The law does not make a specific reference to reinsurance contracts.

When does limitation start running?

Limitation for insurance contracts starts running (a) from the date when the claim was notified – or (b) from the date when the insurer denied the claim. In life insurance, limitation begins when the party to be indemnified became aware of the existence of the insurance, however, the maximum period is limited to 3 years from the date of death.

Conditions, conditions precedent and warranties

Are these types of terms of re/insurance contracts recognised in the jurisdiction?

The terms of re/insurance contracts with regard to conditions must be within the rules of the Civil Code and the Insurance Law.

What is their status and what is the effect of breach?

The imposition of conditions in breach of the rules established by the Civil Code and the Insurance Law may determine that these conditions are void.

Non-disclosure/misrepresentation

What are the remedies for non-disclosure or misrepresentation?

Non-disclosure or misrepresentation entitles the insurer to terminate the contract. The insurer must challenge the contract within 3 months of becoming aware of the non-disclosure or of the misrepresentation.

Late notification

Is there a statutory timeframe within which an insured must notify a claim?

The insured must notify a claim within three days after becoming aware of the incident. The insurer cannot raise a delay or omission objection if, within the three-day period, the insurer intervenes in salvage operations and/or commences loss adjustment proceedings.

What are the consequences of late notification of a claim?

The insured will lose the right to be indemnified, unless it can evidence that the late notification arose from a fortuitous event, force majeure or other facts which prevented it from notifying the claim through no fault of its own.

Late payment

Is there a specific timeframe within which re/insurers must respond to the insured?

Insurers must respond within 30 days. The 30-day term is counted from the receipt of complementary information necessary for the claim. Failure to respond is deemed acceptance. Refusal must be in writing and contain all the facts on which it is based.

What are the consequences of late payment of a claim?

The insurer will be liable for the late payment.

Fronting requirements

What are the fronting requirements in the jurisdiction?

Re/insurance companies are required to be licensed by the insurance authority to operate in the country. Foreign reinsurers are required to register with the insurance authority to operate in the country.

Fronting is defined as an operation whereby an insurer writes a risk however in fact passes it in full or in a large portion to other insurers or reinsurers.

Fronting operations with a single reinsurer require the reinsurer’s rating to be higher than the minimum required for registration. The following ratings are not acceptable: S&P BBB, AM Best B+, Moody’s Baa, Fitch BBB.

Insurers are required to prepare an annual schedule of Reinsurance and Retrocession Policies and submit it to the SIS along with evidence of renewal of automatic reinsurance contracts.

Insurers must report policies issued with foreign back-to-back reinsurance attaching copies of cover notes for amounts of US$100,000 or over or the equivalent at the time of issue in local currency. Copies must be signed by an authorised person of the insurer.

Cover notes or contracts must at least set out:

1. jurisdiction of Paraguayan courts, in case of liquidation of cedant, the reinsurer must pay directly to the liquidator any outstanding amount in accordance with the contract regardless of fulfillment of the obligations of the insurer with the insured or the stage of liquidation;
2. in case of liquidation of the insurer or reinsurer any outstanding amount shall be offset between the parties;
3. coverage is granted back-to-back;
4. the reinsurer follows the fortune of the cedant as regards fulfillment of insurance contract coverage.

No retroactive changes affecting reserve levels or technical provision of the cedant are allowed.

If slips or cover notes are dated after issuance of the policy, the insurer must give evidence of prior agreement otherwise reinsurance coverage will start to run from the date of the slip or cover note.

No limitation or restriction of the direct relationship between insurer and reinsurer is permitted in brokers’ contracts.

Insurers must have in place internal procedures that operate effectively to report claims to the reinsurer.

Insurers’ information technology must allow monitoring of reports and reinsurance management.

Are foreign companies permitted to issue a local reinsurance policy?

No.

Jurisdiction and governing law

What are the requirements for the governing law and jurisdiction in reinsurance policies?

The Insurance Law requires submission to Paraguayan jurisdiction, except where an international agreement allows otherwise.

SIS Resolution 179/17 requires that reinsurance cover notes or contracts must establish the jurisdiction of Paraguayan courts, among other requirements.

Follow the settlement/follow the fortunes

Does the jurisdiction recognise the concepts of follow the settlements/follow the fortunes?

There are no express provisions regarding these concepts.

Claims cooperation clause/claims control clause

Are claims cooperation/control clauses recognised in the jurisdiction?

There are no express provisions regarding these concepts.

How are they interpreted?

They would be interpreted as obligations between the parties, which would not necessarily bind third parties.

Role of the reinsurance broker (placing and producing)

What is the role of the reinsurance broker?

According to the Insurance Law, a reinsurance broker’s role is to act as an intermediary providing technical advice to clients and obtaining coverage that is adequate for clients’ interests, acting within legal and ethical standards governing reinsurance business. A broker shall not withhold anything for his own account and shall issue cover notes certifying the placing and distribution of risks of the contract at hand.

Is there a requirement for brokers to be authorised by a statutory body?

According to SIS Resolution 214/17, brokers are required to register with the SIS. Among other requirements, brokers must hold policies for US$500,000 each, for life and for property insurance.

Is the knowledge of the broker imputed to the principal?

There are no express provisions covering this. However, SIS Resolution 214/17 requires that the broker must be expressly authorised to act on behalf of the reinsurer in the business with insurers.

Under SIS Resolution 214/17, intermediaries act on behalf of the reinsurer if they have special authority to do so.

What are the sources of insurance and reinsurance law in the jurisdiction?

Insurance

The sources of insurance law are laws governing insurance, legal principles, and generally accepted practices, where the concept “generally accepted practices” refers to customary conduct observed in commercial transactions with contracts of a similar nature and, specifically, commercial customary practice. The provisions of civil law are the default rules for insurance contract law, in lieu of statutes of insurance law and of consumer protection law, where applicable. Indeed, with regard to those insurance contracts in which insureds qualify as consumers, the provisions of the Consumer Protection Code apply instead of the rules contained in the Insurance Contract Law (ICL) with regard to the matters at question.

Reinsurance

In principle, the sources of insurance law apply to reinsurance law. It is also considered that, in addition to those sources, reinsurance law can also be applied with reference to international practices, as according to local regulations on reinsurance, reinsurance contracts must adopt forms and methods generally accepted by said international practices.

How is the insurance and reinsurance market regulated?

Insurance

The Superintendence of Banking, Insurance and Private Pension Fund Administrators (hereinafter, SBS) is the entity in charge of regulating the insurance and reinsurance market. The General Banking and Insurance Law, Law No. 26702 (hereinafter, B&IL) is the legal framework that governs the operation of the companies in the insurance system (including intermediaries and adjusters), including reinsurance companies, as well as internal matters relating to the SBS’ scope of authority.

In turn, the ICL contains the general rules regarding insurance contracts, including the rules that regulate the contractual relationship between insurers and the insured. In addition, the ICL regulates the terms applicable to specific types of insurance contracts.

Furthermore, the SBS has issued a series of resolutions regarding different aspects of the insurance market, including the organization of insurance companies, the role of brokers, commercialization of insurance, protection of the insured, and most recently, market conduct practices, among others.

Reinsurance

Despite the fact that the SBS, the B&IL and the ICL also regulate reinsurance, this is performed to a lesser degree. Certainly, regulatory emphasis is focused more on insurance than on reinsurance, which is confirmed by the fact that there are not as many regulations issued by the SBS concerning the reinsurance market, as there are with regard to the insurance sector.

Among the main resolutions issued by the SBS concerning reinsurance, we may find the regulations related to the procurement and management of reinsurance contracts, which set out the rules regarding the content of reinsurance contracts, among others (the Regulations for the Contracting and Management of Reinsurance and Coinsurance, SBS Resolution No. 4706-2017, hereinafter, RR&C). There are also regulations in place regarding the operations of reinsurance companies established in Peru, intermediation of reinsurance, and registration of foreign reinsurers with the SBS.

Burden of proof

Who has the burden of proof when a claim is made?

Article 196 of the Peruvian Civil Procedure Code establishes that “unless there is a different legal provision, the burden of proof corresponds to the party who states facts that sustain his/her claim, or to the one who challenges those facts alleging new facts”. Also, article 200 of the Peruvian Civil Procedure Code sets forth that “if the party does not prove with evidence the facts that sustain his/her claim or counterclaim, these (affirmed facts) will be considered not true and his claim will be dismissed by merits”.

Does the burden of proof switch to the other party and if so, at what point?

In some cases, the burden of proof switches to the other party. For example, according to article 461 of the Peruvian Civil Code, when the defendant does not answer the claim within the legal term, the Judge may apply a rebuttable presumption that the facts alleged in the claim are true.

Effect of a ‘reservation of rights’ and ‘without prejudice’ correspondence

What is the effect of a reservation of rights?

Reservation of rights is not contemplated under Peruvian law.

Does the jurisdiction recognise the concept of without prejudice correspondence?

“Without prejudice” correspondence is not recognised by Peruvian legislation. The parties may disclose correspondence to the Court despite the fact that it is marked ‘without prejudice’. However, parties may enter into non-disclosure agreements whereby information exchanged between them cannot be shown to third parties.

Privilege

Does the jurisdiction recognise the concept of legal privilege? In what circumstances?

In Peru the term “privilege” is referred to as “professional secrecy”, which is the duty a lawyer owes to his or her client not to disclose information received from him/her. Lawyers cannot be compelled to hand over information which they received in confidence.

Disclosure

Is there a duty of disclosure in litigation?

There is no duty of disclosure (or discovery) at any stage in a proceeding in Peru. Disputes will be resolved by taking into account the information provided by the parties during the judicial hearing or arbitration. If a party is aware of information or documents relevant to the dispute and held by the other party, a request can be made to the judge or arbitrator to obtain such information/documents.

Are parties obliged to disclose documents that are unfavourable to its own case?

If a judge orders a party to disclose any information or documents, then that party must comply with that order, even if the document is unfavourable to that party. Article 261 of the Peruvian Civil Procedure Code establishes that non-compliance with such an order will be taken into account by the judge when resolving the case. This is not withstanding the potential imposition of a fine not less than three or greater than five units of procedural reference (in 2022, each unit of procedural reference equals PEN 460.00 or USD 118.00). Also, article 261 of the Peruvian Civil Procedure Code states that the fine will be applied without prejudice to the criminal liability that may arise from the infringement.

Interest

Is there a statutory interest rate in commercial matters?

Peru’s Central Bank fixes a legal interest rate, and a maximum interest rate, which are published every day by the SBS.

Can parties contract out of this?

Yes. According to the Peruvian Civil Code, when interest must be paid, and parties have not agreed on the interest rate, the legal interest rate is applicable. However, parties are free to agree on a different rate, although they cannot contract above a maximum interest rate.

When does interest start to accrue?

Peru’s civil law differentiates between compensatory interest and default interest rates. Compensatory interest compensates for the loss of use of the money (for example, money granted by virtue of a loan agreement) and starts to accrue from the moment that it is fixed by the parties. Default interest results from the delay in payment, and starts to accrue from the moment that the debtor is in arrears due to the delay in the performance of its obligation.

Costs

Does the losing party of a legal action bear the costs of the successful party?

The general rule is that the losing party will bear the costs of the dispute. However, parties may agree to apportion costs in an alternative manner and the judge or arbitrator has the power to award costs at his or her discretion. In exercising their discretion, judges have to explain why they came to their decision. In arbitration, arbitrators may distribute and pro-rate the costs between the parties, taking into consideration the circumstances of each case.

Monetary correction

Is monetary correction applied in the jurisdiction? If so, how is it calculated?

Monetary correction is available under Peruvian law. However the parties must expressly agree to it in the insurance or reinsurance contract. Otherwise, payment will be calculated according to the currency’s worth on the day the payment is due.

Punitive damages

Does the jurisdiction recognise punitive damages?

Punitive damages are not available under Peruvian law. Damages are only awarded on a compensatory basis, according to actual damages suffered by victims.

Moral damages

Are moral damages available?

Yes. The Peruvian Civil Code expressly sets forth the right of claimants to request compensation for moral damages.

If so, in what circumstances?

The Peruvian Civil Code does not regulate the circumstances for a claim for moral damages. However, a request for this kind of compensation requires a causal connection between the event and the damage caused.

Expected length of case

What is the usual timeframe from the filing of a claim to judgment at first instance?

The length of the proceedings at first instance will depend on the complexity of each case. An arbitration usually lasts between 8 to 15 months. Court proceedings generally last between three to eight years (if appealed), until a final decision is issued.

What about the timeframe for appeal proceedings?

Court proceedings generally last between four to ten months.

Arbitration

Are arbitration clauses enforceable in an insurance or reinsurance contract?

The ICL provides that parties to an insurance contract may agree, once the loss has occurred, whether they refer the dispute to a court proceeding, arbitration or any other means of dispute resolution, insofar as the amount of the loss exceeds approximately USD 23,500 (S/ 92,000).

With regard to reinsurance contracts, Peruvian legislation does not regulate the requirements that reinsurance contracts must follow with respect to arbitration clauses.

Alternative dispute resolution

Is ADR (e.g. mediation) compulsory or encouraged within the jurisdiction?

Conciliation is a mandatory requirement before starting some judicial proceedings.

Jurisdiction and governing law

What are the requirements for the governing law and jurisdiction in insurance policies?

The ICL does not set out requirements in relation to the governing law and jurisdiction in insurance policies. However, it is forbidden to include clauses whereby the insured and/or beneficiaries waive their right to have the claim heard in the jurisdiction and/or under the law that favours them.

Limitation

What is the limitation period applicable to a re/insurance contract in the jurisdiction?

The applicable regulations for reinsurance companies do not state a specific limitation period. Hence, in principle the applicable period shall be as set forth in the Peruvian Civil Code, which timeframe varies depending on the type of cause under question. For instance, a claim for damages in torts has a limitation of two (2) years.

Notwithstanding the above, the ICL does state a specific limitation period for insurance contracts, which is 10 years from the occurrence of the loss.

When does limitation start running?

The term by which the limitation starts running will depend on the kind of obligation to which the claim is related.

Conditions, conditions precedent and warranties

Are these types of terms of re/insurance contracts recognised in the jurisdiction?

Conditions and warranties are terms recognised in Peru for contracts.

Peruvian legislation does not expressly recognise the term “conditions precedent” per se, although based on the specific wording of the contracts, a condition precedent may be valid and have contractual consequences which may be enforceable under Peruvian law. Do note that, as mentioned above, according to the RR&C, reinsurance contracts must be drafted including conditions generally accepted by the international practice.

What is their status and what is the effect of breach?

The effect of a breach of a certain condition or warranty will depend on the terms set forth in the corresponding contracts or law. In the case of warranties, according to the ICL, in order to determine the compliance with a warranty, substantial compliance and effectiveness is more important than its literal compliance.

Non-disclosure/misrepresentation

What are the remedies for non-disclosure or misrepresentation?

The ICL establishes the same treatment for non-disclosure and misrepresentation. The insurer has a term of 30 days, counted from the date in which it becomes aware of the non-disclosure or misrepresentation, to avoid the policy on the basis of the improper disclosure or misrepresentation, provided that the misrepresentation or the improper disclosure was made by wilful misconduct or gross negligence.

If the insured was not acting with wilful misconduct or gross negligence, and the insurer notices the improper disclosure or false statement prior to the occurrence of a loss, the insurer must offer a new policy with a revised premium and/or risk coverage. If the improper disclosure or false statement is detected after the occurrence of a loss, then the insurer may reduce the compensation due in proportion to the difference between the agreed premium and the one that would have applied if the insurer had known the real status of the risk.

Late notification

Is there a statutory timeframe within which an insured must notify a claim?

According to Peruvian law, there is a requirement to notify insurance claims “as soon as reasonably possible”, but no later than three days after the insured has knowledge of the occurrence of such event for property damage and seven days for personal insurance, unless a longer term is specified in the policy. In case of events covered under a transport policy, the claim shall be notified at the earliest possible time.

What are the consequences of late notification of a claim?

Failure to comply with such terms enables the insurer to reject coverage, if the failure in doing so is due to wilful default of the insured. If the insured has been grossly negligent, the insurer may reject the claim, but only if the failure to comply has an effect on the assessment of the loss and the insurer was not made aware of the circumstances through another source.

Late payment

Is there a specific timeframe within which re/insurers must respond to the insured?

Once the claim has been approved, the company has a term of thirty calendar days to proceed with the corresponding payment.

What are the consequences of late payment of a claim?

According to the Management and Payment of Claim Regulations, the company shall pay to the insured or to the beneficiary, an annual moratorium interest equivalent to one point five times the average rate for active operations in Peru for the entire default time, according to the currency agreed in the insurance contract.

Fronting requirements

What are the fronting requirements in the jurisdiction?

There is not much legal development on this matter. According to the RR&C, in order to be considered a fronting agreement, the cedant shall cede 100% of the risks to reinsurers.

Are foreign companies permitted to issue a local reinsurance policy?

No. In order to be able to issue a local reinsurance policy, reinsurers shall be based in Peru. Notwithstanding, residents can enter into a reinsurance contract issued by a foreign reinsurer abroad.

Jurisdiction and governing law

What are the requirements for the governing law and jurisdiction in reinsurance policies?

The ICL sets forth that insurers are prohibited from including in insurance contracts, clauses whereby the insured renounces the jurisdiction and/or applicable law which favours them.

The ICL is silent on whether the above prohibition would apply to reinsurance contracts. As such, the parties to a reinsurance contract can freely determine the applicable law of the reinsurance contract.

Follow the settlement/follow the fortunes

Does the jurisdiction recognise the concepts of follow the settlements/follow the fortunes?

The concepts of follow the fortunes or follow the settlements in a reinsurance contract have no settled meaning in Peru but it is possible to include them based on the fact that they are generally accepted by the international practice. It is likely that a Peruvian Court or Arbitral Tribunal would seek uniformity between insurance and reinsurance policies.

Claims cooperation clause/claims control clause

Are claims cooperation/control clauses recognised in the jurisdiction?

As with follow the fortunes/settlements clauses, Claims Co-operation and Claims Control clauses are not regulated in Peru. However, as mentioned before, the RR&C sets forth that reinsurance contracts should adopt the conditions, forms and methods generally accepted by the international practice.

How are they interpreted?

In case these are governed by Peruvian law, their interpretation shall be in accordance with the rules of interpretation of the Peruvian Civil Code and, arguably, of the ICL.

Role of the reinsurance broker (placing and producing)

What is the role of the reinsurance broker?

According to the B&IL and the Supervision and Control of Reinsurance Brokers Regulations (approved by Resolution SBS No. 810-2019), reinsurance brokers have the general duty to advise insurers on all matters relating to reinsurance contracts.

Is there a requirement for brokers to be authorised by a statutory body?

In order to operate a business in Peru, reinsurance brokers established in Peru and the representatives of foreign reinsurance brokers must be duly registered in the SBS Registry. For that purpose, the reinsurance brokers and representatives of foreign reinsurers shall comply with the submission of certain documents and instruments as set forth in the Registry for Insurance System Companies and/or Cross Border Services Providers Regulations (approved by Resolution SBS No. 808-2019).

Is the knowledge of the broker imputed to the principal?

Based on the aforesaid Supervision and Control of Reinsurance Brokers Regulations, the terms of representation will depend on the delegation of authority given by a cedant to its reinsurance broker. In that regard, reinsurance brokers are forbidden to include in reinsurance agreements, any limitation on the direct relationship between cedants and reinsurers.

What are the sources of insurance and reinsurance law in the jurisdiction?

The insurance and reinsurance contracts are governed by:

1. Insurance Contracts Law No. 19.678;
2. De-monopolization of Insurances Law No. 16.426;
3. Regulatory Decree No. 354/994;
4. Compilation of Regulations of Insurances and Reinsurances of the Central Bank of Uruguay (“Recopilación de Normas de Seguros y Reaseguros – BCU”) and;
5. Uruguayan Commercial Law.

How is the insurance and reinsurance market regulated?

Insurance and reinsurance companies are regulated by the Superintendency of Financial Services of the Uruguayan Central Bank. This authority supervises and regulates the Uruguayan insurance industry and protects consumer interests.

Industry standards are governed by national and global regulators, including the International Association of Insurance Supervisors (IAIS).

Burden of proof

Who has the burden of proof when a claim is made?

According to the Uruguayan Civil Procedure law, the burden of proof is on each of the parties that appear before the Court to submit evidence supporting their allegations.

Generally, in the case of Material Damages’ Insurance, the insured has the burden of proving (i) the occurrence of the incident; and (ii) the amount of damages or losses he seeks to be compensated for.

The insurer has the burden of proof when invoking grounds for an exclusion.

Does the burden of proof switch to the other party and if so, at what point?

It will depend on who alleges the fact or submits the evidence related to the cause. As stated above, the insurer has the burden of proof when invoking grounds for exclusion.

Effect of a ‘reservation of rights’ and ‘without prejudice’ correspondence

What is the effect of a reservation of rights?

Uruguayan law does not contain special regulations on ‘reservations of rights’, which are unlikely to have the same meaning as under English law.

Does the jurisdiction recognise the concept of without prejudice correspondence?

Uruguayan law does not contain special regulations on ‘without prejudice’ communications, which are unlikely to have the same meaning as under English law.

In both cases the general principles of law would be applicable.

Privilege

Does the jurisdiction recognise the concept of legal privilege? In what circumstances?

Uruguayan law does recognise the concept of legal privilege. For instance, correspondence between a lawyer and their client by emails and letters are protected from Court disclosure by virtue of the doctrine of privilege. However, almost all court dockets can be accessed by the public.

Disclosure

Is there a duty of disclosure in litigation?

See below.

Are parties obliged to disclose documents that are unfavourable to its own case?

The parties to proceedings in Uruguay do not have an obligation to disclose to the Court all documents which support and hinder their case (unlike a number of common law jurisdictions), unless the other party requests the Court to order such disclosure, or the Court orders such disclosure by its own initiative.

Interest

Is there a statutory interest rate in commercial matters?

Yes, there is a statutory interest rate for commercial matters. A judge may award interest on a disputed sum which he deems should have been paid, at an annual rate of 6% per year, if no interest has been agreed in the contract.

Can parties contract out of this?

The statutory interest only applies if parties do not establish a different interest rate.

When does interest start to accrue?

As a general rule, from the date of breach of the payment obligation.

In litigation, when the claim is made and submitted before the competent court.

Costs

Does the losing party of a legal action bear the costs of the successful party?

The general rule is that each party is responsible for its own litigation costs regardless of the outcome, save for some limited exceptions. For example, the court may rule that legal fees are to be paid by one of the parties, where such party has litigated in bad faith.

In the case of public liability insurance (“Seguros de Responsabilidad Civil Contractual”) the insurer may agree to bear all the insured’s expenses and fees. Otherwise, if the insured is defended by professionals in Court, the expenses and fees that the defence accrue will be borne by the insured.

Monetary correction

Is monetary correction applied in the jurisdiction? If so, how is it calculated?

In the absence of an express contractual provision, in the case of a judicial claim in local currency, Uruguayan law provides that the Court should award monetary correction on the basis of the applicable monetary correction index, at a legal rate set forth by law. The rate is calculated taking into account the “Consumer Products Index” (Índice de Precios al Consumo) which reflects inflation. This index is updated on a monthly basis.

Punitive damages

Does the jurisdiction recognise punitive damages?

There are no provisions in Uruguayan law on punitive damages, unless the contract expressly states otherwise.

Moral damages

Are moral damages available?

Yes, moral damages are available in principle, however there is scope for argument regarding their applicability in insurance and reinsurance contracts.

If so, in what circumstances?

When someone has suffered more than a material loss, and consequently the situation affects his or her emotions and he or she has incurred pain and/or suffering.

Expected length of case

What is the usual time frame from the filing of a claim to judgment at first instance?

It is difficult to estimate a time frame from the filing of proceedings to the handing down of a first instance judgment. That said, anytime from one to three years is possible, depending on the complexity of the case.

What about the time frame for appeal proceedings?

Appeal proceedings may take approximately one year. Cassation proceedings before the Supreme Court may also take one year.

Arbitration

Are arbitration clauses enforceable in an insurance or reinsurance contract?

Arbitration clauses are enforceable but they are not mandatory in insurance or reinsurance contracts. The parties have the freedom to establish the dispute resolution clause that they consider appropriate.

Alternative dispute resolution

Is ADR (e.g. mediation) compulsory or encouraged within the jurisdiction?

Mediation is compulsory and must take place before the filing of proceedings. If mediation does not take place, proceedings will be suspended until it does.

Jurisdiction and governing law

What are the requirements for the governing law and jurisdiction in insurance policies?

The insurance contracts are governed by the law of the place of performance of the insurance service. This means the location of the branch, agency or office of the insurance company that has performed the contract and issued the policy. This includes all maritime, air, land or multimodal maritime transport insurance, life insurance, pension, retirement in all its varieties, civil liability insurance, among others.

Property insurance contracts are governed by the law of the country where the property, which is subject to the insurance contract, is located at the time of its execution. This includes insurance against fire, explosion, and lightning, among others.

The governing law for jurisdiction in case of litigation shall be the same as the law that governs the provisions of the insurance contract.

However, the claimant can elect to litigate in the Courts of the country where the branch, agency or the insurance company’s office, that has executed the contract and issued the policy, is located.

Limitation

What is the limitation period applicable to a re/insurance contract in the jurisdiction?

In all cases, except for life insurance contracts, the Insurance Contract Law establishes a limitation period of two (2) years.

When does limitation start running?

The limitation period begins to run against an insurer or reinsurer from (i) the moment when the insurance or reinsurance company’s obligations can be demanded, meaning, from the time the insurer or reinsurer accepts or rejects the insurance or reinsurance claim; or (ii) thirty (30) days after the claim has been received by the insurer.

Conditions, conditions precedent and warranties

Are these types of terms of re/insurance contracts recognised in the jurisdiction?

The Insurance Contract Law establishes that the policies will contain general, particular and special conditions.

What is their status and what is the effect of breach?

Breach of conditions or conditions precedent have different effects. In the case of conditions, their breach gives the non-breaching party the right to claim for damages. On the other hand, the breach of conditions precedent will mean the re/insured will lose any and all rights under the re/insurance contract. Uruguay lacks specific legislation on this matter, so the recognition of these concepts derives more from usage and doctrine than from law. The express contractual wording is also very important.

Non-disclosure/misrepresentation

What are the remedies for non-disclosure or misrepresentation?

The good faith obligation is the general standard to be honoured. The insured or reinsured must act with good faith and offer complete and exact information to the insurer or reinsurer. If the insured or reinsured falsifies or conceals relevant information, so as to induce a contract which would not otherwise have been entered into, the contract may be declared null and void.

The falsification, concealment or non-disclosure of information (innocently, negligently or in bad faith) by the insured/reinsured must have induced the insurer/reinsurer to execute a contract which, he or she would not have entered into, or would have done so under different conditions (higher insurance premium or lower insured sum) with full knowledge of the facts. The consequences of breach are that the contract may be declared a nullity.

Late notification

Is there a statutory time frame within which an insured must notify a claim?

Unless the policy provides a different time frame, the time frame within which an insured or reinsured must make a claim would be (i) five (5) calendar days from the moment of the occurrence of the incident; or (ii) as soon as he had knowledge of the incident.

In case of Motor Insurance, the insurer or reinsurer must notify a claim immediately after the incident occurs.

What are the consequences of late notification of a claim?

In case of late notification of a claim, the insurer or reinsurer will not cover the incident. The insured or reinsured can only justify its late compliance in case of ‘force majeure.’

Late payment

Is there a specific time frame within which re/insurers must respond to the insured?

The time frame within which insurers or reinsurers must respond to the insured or reinsured is thirty (30) calendar days from the receipt of the claim issued by the insured or reinsured. If they do not respond within such term, the claim will be understood to have been accepted.

This term could be suspended if the insurer or reinsurer, for external reasons beyond its control, does not have sufficient elements to determine the coverage of the incident.

What are the consequences of late payment of a claim?

The term for the liquidation of the damage will be sixty (60) calendar days from the insurer’s acceptance of the claim, or thirty (30) days after the insurer received the claim and did not respond to it.

In the context of late payment by the insurer, default interest will run from the date of default at the same rate as that stipulated in case of non-payment until the date of payment.

The insurer has also the right to opt for the application of the provisions of the Decree-Law No. 14.500. As set out above. This provides that the Court should award monetary correction on the basis of the applicable monetary correction index, at a legal rate set by law. The rate is calculated taking into account the “Consumer Products Index” (Índice de Precios al Consumo) which reflects inflation. This index is updated on a monthly basis.

Fronting requirements

What are the fronting requirements in the jurisdiction?

Operating requirements for both insurance and reinsurance companies are similar. Authorization must be obtained to operate from the Executive Branch and consent given by the Superintendency of Financial Services of the Central Bank of Uruguay.

Reinsurance companies have a minimum qualification of A- given by an international credit rating company. Reinsurance contracts must adopt the form and conditions generally accepted by international use and practices.

Are foreign companies permitted to issue a local reinsurance policy?

The Central Bank of Uruguay allows local insurers to reinsure directly with foreign reinsurers carrying an A- or better financial strength rating from Standard and Poor’s, Fitch Ratings, Moody’s or A.M. Best.

Jurisdiction and governing law

What are the requirements for the governing law and jurisdiction in reinsurance policies?

The insurance/reinsurance contracts are governed by the law of the place of performance of the service of insurance. This means the location of the branch, agency or office of the insurance company that has performed the contract and issued the policy. This includes all maritime, air, land or multimodal maritime transport insurance, life insurance, pensions, retirement in all its varieties, civil liability insurance, among others.

Property reinsurance contracts are governed by the law of the country where the property subject to the insurance contract is located at the time of its execution. This includes insurance against fire, explosion, and lightning, among others.

In the event of litigation, the jurisdiction shall be the same as the law that governs the provisions of the reinsurance contract.

However, the claimant can choose to litigate in the Courts of the State where the branch, agency or the insurance company’s office that has executed the contract and issued the policy, is located.

Follow the settlement/follow the fortunes

Does the jurisdiction recognise the concepts of follow the settlements/follow the fortunes?

As stated above, reinsurance law in Uruguay is in its infancy. We are not aware of any cases in which these terms have been tested by the Uruguayan Courts. However, ‘follow the settlement’ clauses should bind the reinsurer to the reinsured in circumstances where the reinsured settles a claim. Much will depend on the express drafting of the clause. However, this obligation should stand provided such settlement was done by the reinsured in an appropriate, honest and responsible way. The reinsured must prove that claim is covered by the reinsurance policy, however it does not need to prove that it was declared liable by a Court. If the transaction was effected responsibly and honestly, the reinsured should be able to call upon the reinsurance policy.

Claims cooperation clause/claims control clause

Are claims cooperation/control clauses recognised in the jurisdiction?

Uruguayan law does recognise claims cooperation/control clauses. As addressed below, much will depend on the express drafting of the clauses.

How are they interpreted?

Generally speaking, claims cooperation clauses determine the obligation of the reinsured to notify the reinsurer – within a certain time limit – of the occurrence of an incident, and the obligation of the reinsured to collaborate with the reinsurer in the investigation and analysis of the claim. This clause may also state that the reinsured will not be able to make payments without the reinsurers’ previous approval.

Generally speaking, claims control clauses confer more control on the reinsurer and oblige the reinsured to immediately notify the reinsurer of any circumstances which may result in loss and/or for the reinsured to forward all the documents relating to such loss. Also, these clauses often allow the reinsurer to appoint representatives to follow the adjustment, investigation and approval process.

Much will depend on the express terms of these clauses, which should be binding under Uruguayan law. Even though they are not specifically regulated by Uruguayan law, they should not violate the general rules of Uruguayan law, as a matter of principle.

Breach of these clauses may mean that a reinsured shall lose its right under the reinsurance contract. Even if such clauses are not expressly stated to be a condition precedent, these clauses should state the obligation of the insured/reinsured to cooperate with the insurer/reinsurer, or otherwise lose the rights the insurance/reinsurance contract may have granted.

Role of the reinsurance broker (placing and producing)

What is the role of the reinsurance broker?

In Uruguay, there is no specific legal body regulating the activity of insurance brokers.

Is there a requirement for brokers to be authorised by a statutory body?

Brokers must request authorization from the Superintendency of Financial Services. The information and documentation required by this entity is established in articles 63 and 64 of the Recompilation of Regulations of Insurances and Reinsurances of The Central Bank of Uruguay (“Recopilación de Normas de Seguros y Reaseguros – BCU”).

In order to grant an opinion on the authorization request, reasons of legality, opportunity and convenience shall be taken into account.

Is the knowledge of the broker imputed to the principal?

The knowledge of facts by the insurance broker not revealed to the other parties (e.g. reinsured and/or reinsurer) could potentially result in the broker being liable to the affected parties.

What are the sources of insurance and reinsurance law in the jurisdiction?

The sources are (i) law, meaning the written laws; and (ii) custom, meaning the customary and widely accepted way of behaving in insurance and reinsurance relationships in Venezuela.

This is because insurance and reinsurance contracts are acts of commerce, at least with respect to the insurers and reinsurers, pursuant to Articles 2(12) and 6 of the Commercial Code, and Article 3 of the Rules that Regulate the Contractual Relationship in Insurance Activity (the Rules) issued by the Superintendence of the Insurance Activity (the Superintendence).

Accordingly, insurance and reinsurance law is a part of commercial law and has the same sources. Article 9 of the Commercial Code and Article 4 of the Rules provide that the sources of commercial law are law and custom.

The law applicable to insurance and reinsurance activities is the Law on Insurance Activities Law (the Law), as well as the Rules. The general rules on contracts of the Civil and Commercial Codes may also apply to an insurance or reinsurance contract, provided they do not contradict custom and the more specific rules pertaining to these contracts (Article 4 of the Rules).

How is the insurance and reinsurance market regulated?

The insurance market is regulated by the Superintendence, pursuant to the Law and the Rules (Articles 5, 6 and 8 of the Law). The market does not operate freely. The Rules limit what the insurers may include in their insurance policies. In addition, under the Law, these policies and all the other documents governing the relationship between the insurer and the insured require the approval of the Superintendence (Articles 8(9) and 42 of the Law). The amount of the insurance premiums and the amount of the insurance brokers’ commissions also require such approval (Articles 8(9) and (11) and 43 of the Law). Under the Law, the Superintendence must also approve any changes in the bylaws of the insurers, their publicity, and their yearly balance sheets and other financial statements (Article 8(9) and (15), 44 and 71 of the Law). In addition, the Law forbids bank-assurance, limits the financing of insurance premiums, and requires insurers to invest a large percentage of their reserves in Venezuelan sovereign debt (Articles 41(2), (8), (10), (16) and (17) and 52 of the Law). The Law allows the Superintendence to restrict insurance in foreign currency (Article 37(3) of the Law), which resulted in prohibiting certain hard currency insurance policies, such as life insurance. Thus, the Venezuelan insurance market is highly regulated and the Superintendence plays a very active role. Unfortunately, the Superintendence does not have the personnel to deal efficiently with the many tasks it has undertaken. This has led to considerable delays in the operation of the insurers.

Under the Law, the Superintendence may also regulate the reinsurance market (Articles 74 and 75 of the Law), but, in practice, the Superintendence does not intervene, except that foreign reinsurers who wish to provide reinsurance coverage in Venezuela must be registered annually at the reinsurers’ registry kept by the Superintendence (Article 81 of the Law).

Burden of proof

Who has the burden of proof when a claim is made?

The insured has the burden of proving that the event covered by the policy took place (Articles 24(7) and 41 of the Rules), in which case the court must assume that the policy covers the event (Article 41 of the Rules). If the insurer does not intend to pay the claim, it has the burden of proving that the policy does not cover this event, for instance, that an exclusion applies.

Does the burden of proof switch to the other party and if so, at what point?

Once the insured has proven that the event covered by the policy took place, the burden of proof switches to the insurer, who must prove that the policy does not cover this event (Articles 24(7) and 41 of the Rules).

Effect of a ‘reservation of rights’ and ‘without prejudice’ correspondence

What is the effect of a reservation of rights?

The effect of a reservation of rights in a letter or brief is that the rights thus reserved are not waived. Accordingly, the author of the letter or brief can exercise such rights afterwards, notwithstanding any contradiction within such letter or brief.

Does the jurisdiction recognise the concept of without prejudice correspondence?

Yes, although there is no legal provision recognizing the effect of a reservation of rights or without prejudice correspondence. However, their recognition results from their not being in violation of any public policy rule (norma de orden público).

Privilege

Does the jurisdiction recognise the concept of legal privilege? In what circumstances?

Yes, for instance, the attorney-client relationship is privileged, that is, confidential. The same applies if the parties have a confidentiality agreement.

Disclosure

Is there a duty of disclosure in litigation?

There is no formal disclosure procedure in Venezuela.

However, if one of the parties is in possession of a document and the other party is aware of this, the latter may (i) present to the court proof of the existence of such document, and (ii) require the court to order the other party to present such document to the court. If that party does not present it to the court, and does not prove that it does not exist or that such party does not have it, then the court shall assume that the document exists (Article 436 of the Civil Procedure Code).

Are parties obliged to disclose documents that are unfavourable to its own case?

Yes, in the circumstances outlined above.

Interest

Is there a statutory interest rate in commercial matters?

Under the Commercial Code and in the absence of express contractual provisions to the contrary, the interest rate is the prevailing market rate, up to 12% yearly.

Can parties contract out of this?

Yes.

When does interest start to accrue?

When the obligation is liquid and payable, that is, the amount has been established, and there is no term or the term expired.

Costs

Does the losing party of a legal action bear the costs of the successful party?

Yes. Under the Civil Procedure Code, the limit is 30% of the amount claimed.

Monetary correction

Is monetary correction applied in the jurisdiction? If so, how is it calculated?

Since inflation is very high in Venezuela, if it is a local currency (bolívars) obligation, the courts usually grant an additional amount to compensate for the loss of value of the local currency. The amount should represent the difference between the interest rate and the inflation rate, but sometimes the courts grant both. And sometimes the courts deduct part of the time the case is at court (the rationale behind this is that it is not the defendant’s fault that the litigation may take a long time).

Punitive damages

Does the jurisdiction recognise punitive damages?

No. However, according to court precedents, the amount of the moral damages may be calculated with regard to the degree of negligence of the defendant, or the defendant’s wilful misconduct, if this is the case.

Moral damages

Are moral damages available?

Yes, under Article 1196 of the Civil Code.

If so, in what circumstances?

There must be a tort (hecho ilícito), since Article 1196 is in the torts section of the Civil Code. The existence of a contract does not rule out moral damages, if the defendant’s action or omission could be characterized as a tort anyway.

Expected length of case

What is the usual timeframe from the filing of a claim to judgment at first instance?

It can take many years. There are no statistics. A party could reasonably expect the timeframe to be three years.

What about the timeframe for appeal proceedings?

Again, it can take many years, and there are no statistics. A party could reasonably expect the timeframe to be two years.

Arbitration

Are arbitration clauses enforceable in an insurance or reinsurance contract?

Arbitration clauses are enforceable in an insurance contract, provided that (i) they are agreed to in a text separate from the standard-form contract, pursuant to Article 6 of the Commercial Arbitration Law, and (ii) the Superintendence has approved such text (Articles 8(9) and 42 of the Law). Otherwise, they may be challenged.

Arbitration clauses are enforceable in a reinsurance contract, provided that they are agreed to in a text separate from the standard-form contract. This is assuming that the reinsurance contract is subject to Venezuelan law.

Alternative dispute resolution

Is ADR (e.g. mediation) compulsory or encouraged within the jurisdiction?

No.

Jurisdiction and governing law

What are the requirements for the governing law and jurisdiction in insurance policies?

It is generally accepted that insurance policies must be subject to local law and jurisdiction. Otherwise, the Superintendence would probably not approve them. In fact, most of the provisions of the Law and the Rules are public policy rules, so the parties are not allowed to agree anything to the contrary.

Limitation

What is the limitation period applicable to a re/insurance contract in the jurisdiction?

The limitation period (prescripción) for an insurance contract is three years, under Article 58 of the Rules. Insurance contracts usually expressly state that the limitation period is three years.

If an insurance contract does not mention the limitation period, it can be argued that the general limitation period applies, which is ten years (Article 1977 of the Civil Code), since the Rules do not have the status of law.

There is no legal limitation period for reinsurance contracts, so the ten year general limitation period applies. This is assuming Venezuelan law applies.

When does limitation start running?

The three year limitation period for an insurance contract starts running from the date of the loss (siniestro) (Article 58 of the Rules).

The ten year limitation period for reinsurance contracts starts running when the corresponding obligation is due and payable (Article 1977 of the Civil Code).

Conditions, conditions precedent and warranties

Are these types of terms of re/insurance contracts recognised in the jurisdiction?

Conditions, including Conditions Precedent, and Warranties, are allowed in insurance contracts, to the extent that (i) they have the Superintendence’s approval, and (ii) they are not inconsistent with public policy rules.

This is assuming Venezuelan law applies.

What is their status and what is the effect of breach?

If Conditions, including Conditions Precedent, and Warranties, are not met by the insured under the insurance policy, or by the cedant (reasegurado) under the reinsurance policy, this should result in the release of the insurer under the insurance policy, or the release of the reinsurer under the reinsurance policy. This is assuming that the insurance contract or the reinsurance contract provides for such release. Also, if there is a breach of contract, damages can be claimed.

Arguably and as an alternative to the release of the insurer, the effect of the breach may be to reduce the amount of the insurance or reinsurance payment in order to compensate for the damages caused by the breach, if any. Therefore, much will depend on the express wording of the insurance and reinsurance policies.

Non-disclosure/misrepresentation

What are the remedies for non-disclosure or misrepresentation?

It depends on the contract terms. If the contract provides for a release in the event of breach, then the innocent party may be released.

The insured is required to provide the information required by the insurer. If this information is false and relevant, the insurer may deny the coverage or modify the policy (Articles 26 and 47 of the Rules).

Late notification

Is there a statutory timeframe within which an insured must notify a claim?

Yes. Article 43 of the Rules provides that the insured should notify the insurer within 5 days of the loss.

What are the consequences of late notification of a claim?

The consequences are the release of the insurer from its obligations under the policy (Article 43 of the Rules).

Late payment

Is there a specific timeframe within which re/insurers must respond to the insured?

Yes, the insurers must respond within thirty days following the date on which the loss adjuster presents his final report, or thirty days after the insured presented to the insurer the last document pertaining to the claim (Article 130 of the Law).

What are the consequences of late payment of a claim?

Interest and monetary correction. In addition, if the case reaches the Superintendence and there are repeated delays, additional penalties may be imposed, since Article 173 of the Law provides that insurers that accumulate five or more violations in two years shall be closed down for up to three days, and their directors and executives shall be fined and banned from working in this field for up to ten years.

Fronting requirements

What are the fronting requirements in the jurisdiction?

There are no fronting requirements, that is to say, insurers may act as fronting cedants for reinsurers, and the corresponding reinsurance contracts may cede 100% of the risk (Article 74 of the Law). Please bear in mind, however, that the insurance policy issued by the fronting company must be approved by the Superintendence (Articles 8(9) and 42 of the Law). The insurer must contract with the insured on approved standard terms.

Are foreign companies permitted to issue a local reinsurance policy?

Yes, provided that they are registered in the Superintendence’s registry of foreign reinsurers (Article 81 of the Law).

Jurisdiction and governing law

What are the requirements for the governing law and jurisdiction in reinsurance policies?

Reinsurance contracts may be subject to any law or jurisdiction.

Follow the settlement/follow the fortunes

Does the jurisdiction recognise the concepts of follow the settlements/follow the fortunes?

Yes (Article 133 of the Rules). The follow the settlements/follow the fortunes clauses should be interpreted in accordance with their express terms.

Claims cooperation clause/claims control clause

Are claims cooperation/control clauses recognised in the jurisdiction?

Yes.

How are they interpreted?

In accordance with their terms. Arguably, if their terms are not clear, they must be interpreted in favour of the party that did not draft them.

Role of the reinsurance broker (placing and producing)

What is the role of the reinsurance broker?

To act as an intermediary between the insurer and the reinsurer under the reinsurance contracts (Articles 113 and 114 of the Law).

Is there a requirement for brokers to be authorised by a statutory body?

If they are in Venezuela, yes (Articles 113, 114 and 115 of the Law). Otherwise, no.

Is the knowledge of the broker imputed to the principal?

In insurance, yes (Article 51 of the Rules). In reinsurance, there is the possibility that the same criterion will be applied (Article 79 of the Law).