Brazil Enacts Landmark Insurance Legislation: The Brazilian Insurance Act (Law No. 15.040/2024)

The new insurance regulation in Brazil enters into effect today, 11 December 2025.

Following several years of extensive consultation, the Brazilian government enacted the new Insurance Act (Law No. 15.040/2024) (the “Brazilian Insurance Act”) in 2024. This legislation marks a significant development in the Brazilian (re)insurance market.

Impact and Scope of the Brazilian Insurance Act.

The Brazilian Insurance Act is the first insurance law in the country's history and effectively revokes the provisions of the Brazilian Civil Code that previously governed insurance contracts. In our experience, we have seen that many countries in Latin America have taken this approach, issuing a specific law to regulate (re)insurance contracts.

Effective Date and Key Substantial Changes Introduced by the Act.

The Brazilian Insurance Act will become effective on Thursday, 11 December 2025.

The key and most substantial changes introduced by the Brazilian Insurance Act are as follows:

I. Pro-policyholder interpretation

The Act establishes a pro-policyholder approach for all types of insurance, including large commercial risks. Policy wording must be unambiguous, clear, and complete and any ambiguity will be resolved in favour of the Insured.

II. Duty of Initial Disclosure

The duty of initial disclosure is now strictly evaluated based on the specific questions asked by the Insurer within a Questionnaire. Consequently, the Insurer bears a heavy burden in preparing precise Questionnaires. Conversely, the Insured's burden has also increased, requiring disclosure not only of facts they know but also those they should know.

III. Aggravation of risk

The Act makes denying coverage based on risk aggravation significantly more challenging. To justify the loss of coverage, Insurers must now demonstrate that the aggravation was intentional, material, and recurrent (i.e., occurred multiple times).

IV. Claims Adjustment Time Limits (Large Risks)

For large commercial risks, Insurers have a deadline of 120 days to provide a coverage decision (acceptance or denial) once the Insured has submitted all relevant documentation.

Failure by the Insurer to establish a clear position on coverage within the initial 120-day period results in the loss of the right to deny coverage. The SUSEP will also clarify in supplementary regulations which contracts are considered large commercial risks and are therefore subject to a 120-day period to adopt a position on cover.

A separate, subsequent 120-day deadline applies for determining the quantum of the loss.

V. Requests for Further Information

The Brazilian Insurance Act limits Insurers' ability to continuously request documentation during the claims adjustment process. For large risks, Insurers may request additional information two times only.

VI. Binding Effects of Denial Grounds

Once coverage is rejected, Insurers are bound to the grounds stated in the declination. No new arguments can be subsequently introduced unless they were unknown at the time of denial.

VII. Documentary transparency in claims adjustment process

Loss-adjustment reports are now considered a "document common to the parties". However, only the Final Adjustment Report will be shared with the Insured. Preliminary Adjustment Reports will remain confidential and will not be disclosed.

VIII. Salvage and mitigation expenses and standalone limits

The Act's provisions require separate, standalone limits for the indemnity payment and for salvage/mitigation and defence costs in underlying policies.

IX. Tacit Acceptance from Reinsurers

The Act introduces a new regime of "tacit acceptance" whereby a reinsurance agreement is deemed concluded if the Reinsurer remains silent for 20 days after receiving a proposal or relevant documents from the Cedant. This rule means Reinsurers will need to provide timely, explicit rejections of proposals to avoid inadvertent acceptance.

A major concern with this rule is the lack of clarity regarding the commencement of the 20-day period, as the Act does not clearly define which documents qualify as a formal reinsurance proposal. The SUSEP will issue future regulation addressing the content of the reinsurance proposal.

X. Notification of a Claim to the Reinsurance

The Cedant is obligated to notify the Reinsurer immediately upon receipt of a claim notification. Since the Brazilian Insurance Act does not stipulate the consequences of non-compliance with this duty, any resulting sanctions will be determined solely by the terms and conditions outlined in the reinsurance agreement. This rule only applies to facultative reinsurance.

XI. Arbitration, governing law and forum

The Brazilian Insurance Act establishes that arbitration seated in Brazil and governed by Brazilian law is mandatory for insurance contracts (underlying policies).

In regard to reinsurance contracts, Reinsurers retain the freedom to choose the governing law and jurisdiction. Furthermore, arbitral awards will be notified to interested parties and made available in an easily accessible repository. The SUSEP is conducting an extensive public consultation on reinsurance contracts, including whether arbitration seated in Brazil and governed by Brazilian law will also be mandatory for such contracts. If the SUSEP addresses this issue, it may give rise to arguments of unconstitutionality, as the regulation would exceed the scope of the Brazilian Insurance Act.

XII. Limitation periods

Claims between Cedants and Reinsurers are now subject to a one-year limitation period running from the "triggering event."

While the Act clarifies that the trigger for claims between the Insured and the Cedant is the date of the denial of coverage, the precise trigger for the reinsurance claim (denial of coverage or date of the loss) remains unclear.

XIII. Scope of reinsurance

The Brazilian Insurance Act establishes the "Follow the Fortune" principle, which mandates that, unless explicitly excluded, reinsurance coverage must be back-to-back with the underlying policy.

This principle extends the Reinsurer's obligation to cover not only the underlying coverage but also the associated loss adjustment and salvage expenses. Consequently, Reinsurers are required to scrutinise underlying policy terms carefully to understand the full scope of their assumed liabilities.

XIV. Non-Retroactivity

The Act does not apply retroactively to contracts signed or losses which occurred prior to its enforcement date (11 December 2025).