Venezuela remains an enticing and daunting jurisdiction in 2010, as the government continues to intervene in the financial services and other major industries and the insurance industry faces the prospect of a new comprehensive insurance law. Counterbalancing these concerns is the country's high premium growth rates, buoyed by untapped demand, petroleum-related industry and an economy with little dependence upon the struggling U.S. and European markets. As a whole, Venezuela remains a study in extreme balancing of potential risk and reward.
New Insurance Law
During 2009, increasingly dire predictions came out of Venezuela concerning the contents and potential impact of a proposed comprehensive new insurance law containing more than 300 new articles governing the authorization of insurers and reinsurers, approval of products and regulation of market conduct. The stated goal of the legislation was consistently promoted by the government as the elimination of past abuses in the market and the mandating of fair treatment of the general population. Not surprisingly, the proposed solutions involved further limitations upon private, and particularly foreign, insurers and reinsurers. The comment period on the bill passed during 2009, and many expected the bill to pass the legislature before the end of the year. Nonetheless, as of the writing of this whitepaper, the law has still not been enacted.
As to foreign insurers and reinsurers, the law contains a prohibition against doing business with such entities as to Venezuelan risks in the absence of authorization of the foreign entities or approval by the Venezuelan authorities on a surplus lines basis. Of far greater concern, however, the proposed legislation provides for policy-by-policy review by the nation's insurance regulator to ensure that premiums charged are "fair." Given the government's greater involvement in the insurance industry, discussed in further detail below, the potential for mischief is nearly endless.
In addition, in December 2009, the government announced that insurers would be required during fiscal 2010 to pay a "special contribution" tax of .30% of their total net premiums for 2009.
Nationalization of Banks/Insurers/Insured Assets
Nationalization of insured assets remained a concern in Venezuela in 2009, particularly in petroleum sector. In June, London's marine insurance market announced that it had withdrawn maritime war-risk coverage for Venezuela (including Lake...