The most important change brought about by the Law-Decree is the repeal of the entire Insurance Contract Act. The Law-Decree states that the Superintendence of Insurance will issue the provisions that will rule insurance contracts, but this has not happened yet. Whether these new rules would be in accordance with the Constitution seems questionable, because by having the Superintendence issuing these regulations, the Superintendence would be, in practice, taking on the Congress’ role.
From an insurance perspective, the general principles of contract law stated in the Civil Code should apply until there is a new Insurance Contract Act. From the reinsurance perspective, the repeal does not seem to be significant because the provisions contained in the now abolished Insurance Contract Act were very limited and, in Venezuela, reinsurance issues are ruled by the provisions contained in the reinsurance contract.
Powers of the Superintendence of Insurance
Article 8 of the new Insurance Activity Act grants two new powers to the Superintendence of Insurance. The Superintendence can now order the payment of claims, and calculate the “monetary correction” (a mix of interest and inflation adjustment) to which the payment will be subject. Also, it must authorize the sale or encumbrance by an insurance companies of any property considered to be salvage. More regulation of these new powers granted to the Superintendence is expected.
The new Act creates two — Argentina-like — obligatory contributions for insurance companies: a Social Development tax, which is an annual contribution ranging from 1% to 3% of the premium income, and, the Investigation and Development of the Insurance Activity tax, which is an annual contribution of up to 5% of the carrier’s profit. More regulation on these new taxes is expected, as there are too many uncertainties as to how these contributions will work in practice.
Exchange control system
As indicated by the Venezuelan government’s recent announcements, the country now has only two exchange rates instead of the previous three. The official rate, which was Bs. 6,30/USD, is now Bs.10/USD. The SIMADI rate which fluctuates daily and it is around Bs. 203/USD. The SICAD rate will no longer exist.
The official exchange rate will only be available for essential public needs and the SIMADI rate will apply to everything else.
Many questions still remain since the recent announcements as to how the SIMADI rate will be determined. It is expected that the government will soon issue regulations on this.
From the insurance perspective, given that the SICAD rate was eliminated, subject to the contractual terms in relation to exchange rates, it seems that the applicable rate for conversion purposes will be the SIMADI rate.
Qualified in Venezuela
Lorena is a qualified professional with a wide range of experience in the legal insurance sector. Previous to join Kennedys’ Miami office in June 2012, Lorena worked in a boutique law firm in Venezuela for 6 years.
She has been assisting our director on international major reinsurers and insurers on large and complex claims in Venezuela and Latin America. Lorena has experience on regulatory matters and providing legal assistance to international banks, multinational agencies and corporations, drafting legal opinions regarding to corporate, tax and labour matters such as, foreign investments regulations, agreements to avoid double taxation, income tax, among others and corporate due diligences to oil and steel companies.
Lorena is a Spanish native speaker and is fluent in English; she is the main researcher of the 3rd edition of The Guide of insurance and reinsurance law in Latin America and Iberian Peninsula.
Qualified in Spain, England and Wales
Alex Guillamont is the head of the Latin America and Caribbean practice at Kennedys. He handles disputes on behalf of leading international insurers and reinsurers, having represented clients across the region. With 15 years of experience, Alex is an acknowledged leading expert on insurance and reinsurance matters regionally. After serving the market with claims in Iberia from our London and Madrid offices, he relocated permanently to Miami in June 2010. The industry has voted him year on year into the LATAMIR Power 50 list, Latin American insurance sector most influential professionals. Also, Alex has been awarded as Insurance & Reinsurance Attorney of the Year in Latin America 2014 by Global Law Experts. His team in Miami has been awarded the 2013, 2014 and 2015 Reactions Latin America Awards for best reinsurance Law Firm.
Alex is involved in complex losses on major environmental and natural disasters, contractors all risk, political and trade risk, financial institutions and D&O claims, energy losses, regulatory compliance and third party administration schemes and political risk in the entire region—most recently in Argentina, Bolivia, Bahamas, Brazil, Chile, Central America, Colombia, Costa Rica, Ecuador, Haiti, Mexico, Panama, Peru and Venezuela. He and his team advise carriers on regulatory issues and strategic deployment of offices, wordings and claims handling procedures, audits of ceding companies and underwriting agents.
He is fluent in English, Spanish and Portuguese and has conversational French. Alex s is author of The Guide of insurance and reinsurance law in Latin America, Caribbean and Iberia and is finalising its 3rd edition. He is also a regular contributor to insurance press like Financier Worldwide, Insurance Day Magazine, Intelligent insurer, Latin Lawyer, Latino Insurance, etc. and is asked frequently to speak at Latin American & Caribbean industry events.