In order to write insurance in Peru, insurers must be authorised and regulated by the Superintendencia de Banca, Seguros y AFPs (SBS) (Superintendence of Banks, Insurance and Private Pension Funds). Regulated insurers are able to place their reinsurance in the international markets. It is not necessary for the reinsurers to be registered with the SBS, as long as they have a credit rating of Baa3 / BBB- or higher. All contracts of insurance in Peru are governed by Insurance Contract Law No. 29946 (the Law).
The Law was first published in November 2012 and came into effect on 26th May 2013 to replace the Código de Comercio (Code of Commerce) of 1902. The Law is founded on the principal of utmost good faith and comprises 139 Articles. In respect of claims, the Law is accompanied by SBS Resolution No. 3202-2013 (the Resolution) – Reglamento para la Gestión y Pago de Sinestros (Regulations for the Management and Payment of Claims). The Resolution comprises 19 Articles and also came into effect on 26th May 2013. Article 3 of the Resolution stipulates that claims must be notified by the insured, or the broker acting on their behalf, as soon as reasonably possible. Unless the policy states otherwise, this notification must be within no more than three days for property claims and no more than seven days for personal insurances. Failure to comply with these timescales does not give the insurer grounds to reject the claim, unless the late notification is a deliberate act or gross negligence by the insured.
However in the event of gross negligence, the insurer only has grounds to reject the claim if the late notification has affected their ability to determine the cause and extent of the loss and they were not made aware of the incident by other means. If the failure was as the result of unforeseeable circumstances, force majeure or factual impossibility, the insurer may not reduce the indemnity due to the insured.
For all other circumstances, the insurer is able to reduce the indemnity in proportion to the amount that their interest has been affected by the delay. For claims that warrant the involvement of an adjuster, the choice of the adjuster made by the insured from a shortlist provided by the insurer. The appointment of the loss adjuster is to be made within three calendar days of the notification of the claim. If the insured does not select an adjuster within this time, the choice of adjuster from the shortlist rests with the insurer. The exception to this is when the choice of adjuster has been pre-agreed and is written into the policy. Adjusters acting in Peru must be authorised by the SBS and Article 38 of the Law specifies that they must be competent, independent and impartial. The SBS monitors the performance of the adjusters and they have powers to impose sanctions against those found to be in violation of their regulations. Repeated violations by an adjuster can lead to the revocation of their SBS authorisation. Article 10 of the Resolution states that that the adjuster is to be independent of the insured and the insurer. The adjuster’s reports are to be issued simultaneously to both the insured and the insured; and their report is not binding on either party. The adjuster must also make available to the SBS proof that the reports have been submitted within the required timescales. Article 74 of the Law and Articles 4, 8, 9 and 11 of the Resolution; specify the criteria for the settlement of claims involving an Adjuster.
The insured is to allow the adjuster to perform all of their necessary enquiries and is to provide to the adjuster all of the information / documentation that is stipulated in the policy to determine when the incident occurred, the cause and circumstances of the incident and to quantify the amount of their loss. Under Article 78 of the Law, the period of limitation in which the insured has to present their claim is ten years from the date of loss. Once the Insured has provided all of the necessary information / documentation, the adjuster has twenty calendar days to issue their adjustment report. This report should set out the adjuster’s views on policy coverage and propose a quantified settlement or repudiation of the claim. If the adjuster requires further clarification on the information / documentation provided, they must request these details from the insured before the expiry of the twenty day period. Requesting further clarification suspends the twenty day period and it resumes once the insured has provided the required additional information / documentation.
When the adjuster is in possession of the complete information, they must inform the insurer within twenty four hours of receipt of the information. If the adjuster requires additional time to complete their adjustment report, they may apply to the SBS for a one time extension of the twenty day period. The adjuster must advise the SBS of the technical reasons for which an extension is required and the extension period that they require. The insured must also be informed of request with three calendar days of it being issued to the SBS. The twenty day period is suspended when the request is issued to the SBS. If the request is accepted the period of time is extended accordingly; however if the request is rejected the twenty day period resumes. The adjuster must inform the insured of the SBS decision within three calendar days. If the adjuster fails to provide their adjustment report within twenty calendar days and the insurer does not challenge or reject the claim within thirty calendar days of the adjuster receiving all of the documentation, then the insured’s claim will be considered to be covered.
Assuming that the adjustment report has been issued within the twenty day period, the insurer has ten calendar days to approve or reject the adjustment report. If the insurer does not respond within this ten day period, the insured’s claim will be considered to be covered. With regards to payment of any indemnity due to the insured by insurers, Article 74 of the Law and Article 13 of the Resolution state that the settlement must be paid to the insured within 30 days of acceptance by insurers. Failure by the insurer to comply with this timescale results in the insurer becoming liable to pay the insured default interest for the whole period of delay. The rate of interest payable is 1.5 times the average lending rate in Peru for the currency stipulated in the policy. If the insurer rejects the adjustment report within the ten day period they then have thirty calendar days to reject the claim, accept the claim and propose a revised adjustment or to take the claim to arbitration or before the courts. With regards to an insurer’s reinsurance arrangements, Article 139 of the Law states that the payment of a loss cannot be affected by an insurer’s contract of reinsurance. Once a claim has been settled, Article 99 of the Law recognises insurers’ subrogation rights against a third party.
These rights are exercised in the name of the insurer rather than the insured. Reinsurers are also therefore able to issue proceedings in their own name once they have paid a claim. Unless otherwise agreed, any subrogated recovery is shared proportionally between insurers and reinsurers in accordance with their share of the claim settlement.
Andrew Davies can be contacted at email@example.com
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