Brazil: An Insurance Overview

A New Law to Care About

For decades, the Brazilian rules governing insurance contracts were mainly contained in a chapter of the Civil Code, complemented by regulatory provisions and sector-specific legislation. That structure has now changed. Law No 15,040 created a comprehensive statutory framework for insurance contracts and has become an essential reference for insurers, reinsurers, policyholders, brokers and service providers operating in Brazil.

The importance of the new law goes well beyond replacing a few provisions of the Civil Code. It establishes a detailed regime governing the formation and performance of insurance contracts, claims handling, payment of indemnities, duties of the parties, intermediaries, third-party rights and reinsurance-related issues. In practice, it creates a broad insurance-law microsystem, interacting with civil, commercial, procedural and regulatory rules and, in some situations, other areas of law.

A law still in its infancy

The new framework was received with considerable interest, but also with criticism. One recurring concern in the market is that the original proposal did not emerge from a broad-based commission composed of academics, practitioners and representatives of the different sectors affected by the legislation. At the same time, the bill went through a legislative process lasting more than 20 years and was amended on several occasions.

Many of those amendments improved the text. However, they also produced a statute that is not always as coherent or integrated as a modern insurance code might ideally be. The result is a complex set of rules that must now be interpreted by courts, regulators, insurers, reinsurers, policyholders and other market participants.

This is particularly important because, once enacted, legislation acquires a life of its own. The intention of those who drafted or promoted a provision will not necessarily determine how its wording is interpreted. Some rules may therefore produce effects that were not originally anticipated.

There is also a question of timing. The law had a very long gestation, while the insurance market became increasingly technological, international and dynamic. Digital distribution, sophisticated risk modelling, large cross-border programmes and increasingly complex industrial risks make today’s market very different from the one that existed when the first version of the bill was conceived. The statute will therefore need to evolve through interpretation, regulation and, where necessary, legislative correction.

Claims handling: where the pressure will be greatest

Some of the most debated provisions concern claims handling. Article 86 establishes a short period for insurers to make a coverage decision, with potentially severe consequences for delay. Speed and certainty are legitimate objectives, but rigid timelines can be difficult to reconcile with the investigation of highly complex claims.

Catastrophic events, aviation accidents and major industrial losses are obvious examples. These cases may require extensive technical investigation, multiple expert reports, analysis of causation and review of substantial documentation. If the applicable period is insufficient for a responsible assessment, insurers may feel driven towards defensive coverage denials simply to avoid the consequences of missing a statutory deadline.

The legislation also raises practical questions about when the submission of documents should be considered complete. Documents must not merely be delivered; they must be sufficient and capable of proper analysis. If the parties need to exchange repeated notices simply to record the beginning, interruption or resumption of statutory periods, a system designed to accelerate claims may end up adding bureaucracy to the process.

Article 88 adds further consequences for delay in payment, including a statutory penalty and potential liability for losses and damages. Taken together, these provisions create a strong incentive for insurers to closely monitor claims timelines and internal decision-making.

Another provision receiving attention is Article 67, which deals with mitigation and salvage expenses. Its paragraph 5 provides that an insurer may have to bear the full cost of measures expressly recommended to the insured, even when those costs exceed the agreed limit. This makes the wording, scope and documentation of recommendations during a claim especially important.

The relationship between claims adjusters and accounting professionals also deserves attention. Article 78 separates their functions, yet its sole paragraph creates joint liability in circumstances involving delay. The interaction between these roles will probably generate debate, particularly because the statute itself distinguishes their responsibilities.

These rules make close co-ordination among insurers, claims professionals and legal counsel increasingly important from the earliest stages of a significant loss.

Insurers, reinsurers and decision-making

Reinsurance is another area in which the new law will require careful interpretation. A relevant discussion concerns claims co-operation and claims control clauses.

Co-operation does not mean decision-making. The more difficult question is the extent to which an insurer may contractually share claims control with a reinsurer. Article 76 should not be understood as preventing the insurer from involving an important commercial partner in decisions concerning a claim in which the reinsurer may bear substantial financial exposure.

What the insurer cannot do is transfer to the reinsurer its responsibility towards the policyholder. In that sense, Article 76 is best understood as addressing the external relationship: the insurer remains accountable to the insured for the coverage and indemnity decision. It does not necessarily regulate – or prohibit – the internal arrangements agreed between insurer and reinsurer.

Alternative dispute resolutions will also be closely watched. Article 129 establishes rules concerning alternative dispute resolution in insurance contracts, including requirements connected with Brazil, Brazilian law and the publication of disputes and decisions in a public repository without identifying the parties. The provision appears more naturally directed to the insurer–policyholder relationship than to reinsurance contracts, which have their own commercial nature and structure.

Even in direct insurance, however, disclosure of mediation outcomes may create concern. In specialised markets, anonymity does not always prevent participants from being identified, and confidentiality is one of the principal reasons why businesses choose mediation.

A year of adjustment

The new law has important positive aspects. It defines more clearly the rights and duties of participants in the insurance relationship and addresses questions that previously depended heavily on contractual drafting, regulation or judicial interpretation. In several areas, this should improve legal certainty.

At the same time, critics argue that the statute is strongly protective of policyholders and does not always distinguish sufficiently between mass-market insurance and large corporate risks. Supporters may see that protection as a necessary rebalancing of the insurance relationship. The practical answer will emerge from the way the law is applied.

For insurers, reinsurers, brokers and policyholders, the immediate challenge is therefore operational as much as legal. Claims procedures, internal protocols, communications, policy wording, reinsurance arrangements and dispute-resolution clauses all need to be reviewed in light of the new framework.

Law No 15,040 is still in its infancy, despite a gestation of more than two decades. The coming year will be decisive in defining the real meaning of many of its provisions. Some interpretations will confirm the expectations of its authors; others will not. What is already clear is that the new law has become a central element of doing insurance business in Brazil – and one that every market participant now needs to care about.