Reforming the Legal Framework of Insurance Activity in Paraguay (Revista Ibero-Latinoamericana de seguro)

Summary

• A bill under legislative consideration in Paraguay would replace Insurance Law N° 827/96.p.3
• The bill does not change the legal regime of the insurance contract, which remains governed by the Civil Code.p.5
• It introduces risk-based supervision, a significant change from the approach of Law N° 827/96.p.6
• Solvency capital would be based on at least underwriting, market, credit and operational risks.p.8
• Prior registration of insurance plans is replaced by a regime of deposit of plans.p.10
• First-demand guarantees must be satisfied within a period of no more than 15 calendar days from receipt of the request.p.11
• Regulatory power is concentrated in the Board of the Central Bank of Paraguay.p.14

Key insights

1. The bill goes beyond updating Law N° 827/96, covering prudential supervision, solvency, corporate governance, market conduct and user protection.p.5
2. Law N° 827/96 focused supervision on equity requirements, technical reserves and admitted investments.p.6
3. Solvency capital requirements would reflect the risks actually assumed by each insurer.p.7
4. New capital sufficiency indices compare adjusted admissible equity with solvency capital.p.8
5. Early regularisation measures make supervision more preventive than under Law N° 827/96.p.9
6. Insurers take greater responsibility for the technical and contractual content of products, with the Superintendency supervising afterwards.p.10
7. The bill introduces a differentiated administrative liability regime for directors and administrators, replacing the joint liability rule of Law N° 827/96.p.15
8. The increase in fines is one of the most debated aspects of the bill in the insurance market.p.14