New Rules for Remuneration Policy for Insurance Companies, Open Supplementary pension entities (EAPCs), capitalization companies and local reinsurers
On 27th December 2024, Resolution No. 476 by the National Council of Private Insurance (CNSP) was published to establish new rules for remuneration policy for insurance companies, open supplementary pension entities (EAPCs), capitalization companies and local reinsurers. Companies classified in segment S4 are not subject to this regulation.
The regulation will come into effect on 2 January 2026, and the supervised entities classified in segment S2 must make certain specific adjustments until 4 January 2027. It is the result of the necessary adoption of an appropriate remuneration policy based on the principles of the Financial Stability Board (FSB). It constitutes a good practice that has been implemented internationally by regulators and supervisors from various relevant jurisdictions, and in Brazil, reflects an existing regulation within the Central Bank since 2010.
The remuneration policy must apply at least to (i) the administrators; (ii) other positions in senior management that are not statutory, including at least vice presidents and directors; (iii) managers in control functions, including at least the heads of risk management, compliance, and internal audit units; and (iv) other managers whose actions, in the assessment of the supervised entity, may have a material impact on the entity’s exposure to risks.
Furthermore, the remuneration policy must contribute to risk management, internal controls, and sustainability; be formalized in writing and approved by the Board of Directors or the General Assembly; and with a reassessment at least every two years. It is prohibited for the variable remuneration of the director responsible for internal controls and managers in control functions to be linked to the financial performance of the units they control or evaluate or that engage in activities directly related to the business.
The regulation also provides guidelines for variable remuneration, regulating complementary mechanisms of variable income referred to as long-term incentives (LTI), according to the variable remuneration and the degree of responsibility of the worker, with definitions of the respective criteria for payment, risk adjustment, deferral, and vesting, that is defined as the process by which the supervised entity becomes obligated to make a certain remuneration payment or transfer assets related to the remuneration, or by which the assets assigned to the beneficiaries are released from lock-up or other trading restrictions, upon meeting conditions such as the passage of time or achievement of goals.
It is possible to guarantee the payment of minimum amounts of bonuses or other incentives to workers in an exceptional manner in light of certain situations provided for in the regulation. The supervised entities classified as S1 and S2 must establish a Remuneration Committee to assist it in carrying out its duties related to the remuneration policy with minimum competencies outlined. The Committee will be exempted for S3, and for S2, another Committee may assume the functions of the Remuneration Committee, provided that certain requirements stipulated in the regulation are met.