Insurance regulatory developments in Venezuela



During the last year, Venezuelan regulations regarding insurance and reinsurance matters have changed considerably. Since a few years ago, the insurance and reinsurance business in Venezuela had been regulated mainly by two laws, namely the Insurance Contract Law (Venezuelan Official Gazette Extraordinary No. 5.553, dated 12 November 2001) and the Insurance Activity Law (Venezuelan Official Gazette No. 39.481, dated 5 August 2010).

However, on 30 December 2015 the new Insurance Activity Law (Venezuelan Official Gazette Extraordinary No. 6.211) was passed on using an Enabling Act. So far it has been highly criticised by the Venezuelan insurance industry.

Given some of the regulations established therein, the insurance industry has stated that the new Insurance Activity Law (IAL) has worsened their situation. Therefore, it has been declared unwelcome by insurers.

The IAL establishes higher parafiscal taxes and substantially increases fines and administrative penalties in order to have more control over insurers. Also, the new legislation significantly increases the minimum capital that insurers and reinsurers must hold.

In the same way, the law shows how an exaggerated attempt to protect the insured results in a crisis that affects both insurers and the insured. The IAL has not only established the insured’s right to ask for the indexation of the amount of debt by the insurer for compensation denied or belatedly paid, but has also granted the Insurance Activity Superintendency the power to establish the parameters that insurers have to take into account when setting prices for their services.

Moreover, the IAL has granted the Insurance Activity Superintendency the power to order the payment of losses or service provisions to insurers. Although these orders may only be issued after following administrative proceedings, these provisions modify the traditional view in accordance with which the Insurance Activity Superintendency is only a regulatory entity and, consequently, should be a judge who have the power to decide whether insurers have to pay any compensation under the provisions of Venezuelan insurance laws.

It is worth mentioning that the IAL includes 25 definitions related to the insurance industry and also adds new stakeholders to the Venezuelan insurance business, including insurance-related trusts and risk management companies.

A point of great concern relates to the repeal of the Insurance Contract Law. The IAL establishes that regulations related to insurance contracts will be approved by the Insurance Activity Superintendency within 180 days of the promulgation of the IAL.

Since then, the Venezuelan insurance industry had been working for more than six months without a main rule regarding insurance contracts.

Recently, the ‘Regulations that Governs the Contractual Relationship in the Insurance Activity’ was passed (Official Gazette 40.973, dated 24 August 2016). Although it is a very recent regulation, it appears to offer a chance to improve the impaired Venezuelan insurance industry.

Through several articles, the new regulations establish rules in relation to insurance contracts that are more beneficial for insurers. For example, Article 32 of the regulations establishes that insurers do not assume the risk of the insurance contract if the insured does not pay the premium in a timely fashion. Moreover, in this case, insurers can rescind the contract or claim payment of the premium. Giving insurers the ability to rescind a contract in this scenario demonstrates that the regulations intend to protect the insurer against any contractual relationship that might be considered abusive.

On a related note, the same Article 32 establishes that the premium finance is only a payment facility and cannot be considered a modification to the period of the policy. In this case, if the insured does not pay the corresponding part of the premium within five days from the end of the period previously paid, the insurer can claim the payment or request the resolution of the contract.

Similarly, Article 34 of the regulation establishes that if a loss occurs during the grace period, the insurer will pay the compensation but has the right to deduct from the compensation the amount corresponding to the renewal premium. Under the previous Insurance Contract Law, the insurer only had the right to deduct the amount of the previous premium.

In relation to the reinsurance market, the regulations incorporate new rules regarding reinsurance and retrocession contracts that were totally ignored in the previous law. This development in legal matters, together with some favourable economic conditions, might encourage the growth of the reinsurance market in the near future.

Besides the above, other rules contained in the regulations seem to offer a hopeful future for the insurance and reinsurance market in Venezuela. Even though the path to stabilising the market is long, and presents obstacles to overcome, these changes to the rules regarding insurance contracts might be considered a first step toward improving the Venezuelan insurance industry.


Andrea Cruz Suarez is an attorney at Torres, Plaz & Araujo. She can be contacted on (+58) 212 9050260 or by email:

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Andrea Cruz Suarez

Torres, Plaz & Araujo

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