The Standard Formula: Encyclopaedia of Prudential Solvency – Chapter 11: Prudential Solvency Regimes in Latin America

See all chapters of Encyclopaedia of Prudential Solvency and
A Guide to Solvency II.

Introduction 

This chapter discusses select prudential solvency regimes in Latin America, covering Brazil, Chile, Mexico, Argentina and Colombia. These five jurisdictions offer instructive comparative perspectives on the trajectory of regulatory modernisation in the region’s insurance markets.

Historically, insurance penetration in the Central and South American region has been lower than other areas such as Europe, North America or Asia. Many in the region still lack access to insurance products, with limited awareness of the benefits — or indeed need — for such products.

For example, Mexico has one of the largest markets in the region, but its insurance penetration rate lags far behind the global average. Profitability in some parts of the market is also still volatile, especially in the non-life segment, despite seeing a rise in demand for property and casualty insurance.

While the Central and Latin American market may be considered relatively less developed, it is certainly vibrant and growing. Digital platforms are transforming the insurance industry in the region by making insurance more accessible and affordable, and in 2025 it was found that while Latin America accounts for just 3% of the global insurance market, the region’s total written premiums grew at an impressive rate of 11% annually between 2019 and 2024.

The projections for 2026 and beyond are for this number to increase even further. These statistics are a strong signal for international insurers and investors considering entering or expanding within the region.

A common theme across all five jurisdictions examined in this chapter is the progressive move towards risk-based regulatory frameworks broadly aligned with, or inspired by, the European Union’s Solvency II Directive.

Solvency II represents a landmark piece of European insurance regulatory architecture, built around three pillars:

• Pillar I: Quantitative capital requirements
• Pillar II: Governance, risk management and internal self-assessment
• Pillar III: Disclosure and supervisory reporting

Each of the jurisdictions examined in this chapter has adopted, or is in the process of adopting, elements of this tripartite approach, albeit at different speeds and with important local adaptations.

For professionals advising clients with interests in the region, an appreciation of both the structural parallels and the material deviations from the Solvency II framework is essential.

1. Brazil

Background

Brazil is by far the largest insurance market in Latin America and has robust regulatory architecture. The primary regulator is the Superintendência de Seguros Privados (SUSEP), overseen by the Conselho Nacional de Seguros Privados (CNSP), both of which sit within Brazil’s Ministry of Economy.

The foundational legislative basis for Brazil’s insurance regulatory system is Decreto Lei nº 73/1966,¹ which established the National System of Private Insurance (Sistema Nacional de Seguros Privados, or SNSP²). CNSP and SUSEP work together within this system:

• CNSP issues policies and regulations, which are then supervised and implemented by SUSEP.
• SUSEP supervises all insurance and reinsurance companies, other than health insurers which are overseen by a separate agency, the Agência Nacional de Saúde Suplementar (ANS).

The reinsurance market was opened to private competition by Lei Complementar nº 126/2007,³ which ended the historical monopoly of the government-controlled Instituto de Resseguros do Brasil (IRB). This liberalisation was a significant structural change that opened Brazil to international reinsurance capacity and marked the beginning of a period of sustained regulatory modernisation.

Brazil has undergone, and continues to undergo, major reforms to its prudential landscape. In December 2024, Brazil’s Insurance Contract Law (Lei nº 15.040/2024)⁴ was enacted, coming into force on 11 December 2025. The law replaces the insurance contract chapter of the Brazilian Civil Code and introduces substantial updates, including stricter response deadlines for insurers, enhanced claims transparency and restrictions on unilateral policy modifications.

Additionally, the law creates specific circumstances where the interpretation of a policy must be in the insured’s favour and requires increased risk governance requirements through the Own Risk and Solvency Assessment (ORSA).⁵

From an international perspective, the Insurance Contract Law has expressly imposed limits on counterparties’ ability to designate foreign law and jurisdictions in local insurance disputes. The new law contains 134 articles structured across six titles covering the core aspects of the insurance relationship and leaves significant scope for complementary regulation to be issued by SUSEP and CNSP.

Slowly but surely, Brazil is shifting from a rules-based regime to a European or Bermudian-style risk-based system, akin to Solvency II. CNSP and SUSEP supplement the primary legislation with extensive secondary regulation through resolutions (resoluções) — formerly circular letters (circulares) in the case of SUSEP — together forming the operational body of prudential rules applicable to market participants.

Operating as an Insurer or Reinsurer

In Brazil, all entities must be a Brazilian company authorised by SUSEP to operate in the insurance market. Legal authorisation is given in two stages under CNSP Resolution 422/2021 and SUSEP Circular No. 700/2024:

• Stage 1: A prior approval (autorização prévia) requesting SUSEP approval to constitute the company.
• Stage 2: A ratification (homologação) once established.

Generally speaking, an insurer or a local reinsurer must be a joint-stock corporation, but insurers may also be a cooperative insurance society. If an international insurer wishes to operate in the insurance market, they must do so as a Brazilian insurer with international investment.

It is not possible for a foreign insurer to write risks on a non-admitted basis, and there is no authorised foreign branch arrangement for direct insurance, save for in very limited circumstances.

In respect of reinsurance, Brazil has three categories of reinsurer under Lei Complementar nº 126/2007:

1.  Local reinsurers: those incorporated in Brazil.
2. Admitted reinsurers: foreign reinsurers with a representative office in Brazil and certain capital deposits.
3. Occasional reinsurers: foreign reinsurers without a local presence.

Foreign reinsurers headquartered in places considered by Brazilian law as tax-favourable jurisdictions cannot be licensed as occasional reinsurers and, therefore, must be Admitted Reinsurers. Listed jurisdictions currently include Bermuda, the Cayman Islands, Gibraltar and the Channel Islands.

Foreign reinsurers (i.e., both admitted and occasional) must demonstrate, amongst other requirements:

• At least five years of experience in reinsurance in the country of origin in the intended lines.
• A minimum credit rating (S&P: BBB; Fitch: BBB; Moody’s: Baa2; AM Best: B++).⁶
• A net worth of at least $150 million.
• A willingness to submit financial statements to SUSEP upon request.

Insurers and reinsurers may only contract with foreign reinsurers that are not registered in Brazil in very specific circumstances, which includes a lack of capacity offered by local, admitted and occasional reinsurers.

Several further points of operational significance arise under the Brazilian framework:

• Insurance products with survival benefits or pension plans may only be carried out by local reinsurers, who may then further retrocede to foreign reinsurers.
• Local reinsurers may not retrocede more than 70% of premiums issued annually, save for financial, agricultural and nuclear risks.
• In the case of an extrajudicial liquidation of a Brazilian insurer, the direct and indirect controlling shareholdings will have unlimited liability for the insurer’s liabilities regardless of fault. Similarly, management will also be held responsible, but in each case only to the extent of their individual respective faults. In instances where a manager’s fault is not clear, their assets will remain frozen. This provision presents significant personal liability exposure for controllers, officers and directors and is an important consideration in any due diligence exercise concerning a Brazilian insurance entity.

Capital Requirements and Own Funds

Insurers in Brazil are classified in four tiers, with S1 being the largest insurers and S4 the smallest.

Brazil’s regime, under CNSP Resolution 432/2021, does not have both a Solvency Capital Requirement (SCR) and a Minimum Capital Requirement (MCR), as one would expect in Solvency II-aligned regimes. Rather, Brazilian insurers are subject to a MCR, which is the minimum shareholders’ equity and which, subject to certain accounting adjustments, must be held by the relevant insurer at all times.

The MCR corresponds to the greater of either an insurer’s “base capital” or its “risk capital.”

The base capital consists of both:

• A fixed amount applicable to all insurers.
• A variable portion, depending on the geographic region of operation or the classification of the insurer.

An S1 insurer with authority to operate across Brazil will need to have base capital of 15 million Brazilian reals (approximately $2.8 million). An S2 insurer will require 8.1 million Brazilian reals, an S3 insurer 3.96 million Brazilian reals and an S4 insurer 3 million Brazilian reals.

By contrast, an insurer’s risk capital is intended to reflect the specific risks to which that specific insurer is exposed, including underwriting, credit, market and operational risk. The risk capital calculation employs a modular approach broadly analogous to the standard formula under Solvency II Pillar I.

In practice, an insurer’s risk capital will generally exceed the base capital, meaning the MCR will be the risk capital amount and must be fully paid in.

Technical Reserves and Investments

In addition to the MCR, there is also the technical provisions or own funds to consider. Insurers must set aside technical provisions in accordance with CNSP criteria, and investments that back those reserves must satisfy diversification, liquidity, solvency and security criteria.

Brazil has strict and detailed rules on what type of assets may be invested by insurers and local reinsurers, such rules being set by Brazil’s National Monetary Council and reviewed periodically. These rules impose investment limits per class of asset and issuer.

For example, property and casualty (P&C) insurers and local reinsurers can invest 100% of the assets backing their liabilities in fixed-income investments, 100% of which may be in government treasury bills.

However, they can only invest: (i) 49% in variable-income investments; (ii) 20% in real estate linked investments (though not direct brick-and-mortar assets); and (iii) 10% in foreign currency denominated investments, which may include certain types of investments abroad.

A further consequential regulatory development concerns SUSEP’s 2025 public consultation on the draft resolution that will replace CNSP Resolution nº 451/2022 governing reinsurance and retrocession operations, co-insurance and foreign currency insurance contracts. The draft emerged from changes introduced by Lei nº 15.040/2024 and Lei Complementar nº 213/2025, the latter of which governs cooperative and mutual insurance companies.

One of the most contentious aspects of the consultation concerns the exclusion of claims control and cooperation clauses, reflecting SUSEP’s interpretation of Article 76 of the Insurance Contract Law as vesting exclusive claims adjustment authority in the insurer. The international reinsurance market has expressed significant concern about this position, and resolution through future regulation or judicial interpretation will be closely watched.⁷

2. Chile

Background

The insurance sector in Chile is regulated by the Comisión para el Mercado Financiero (CMF). The CMF is the primary insurance regulator and oversees insurers and reinsurers pursuant to varying statutes and regulations.

The CMF is responsible for ensuring the proper functioning, development and stability of the financial market, promoting market participation and safeguarding public trust. Its broad authority extends to:

• Insurance companies
• Investment funds
• Banks
• Stock exchanges
• Publicly traded corporations

The CMF exercises regulatory, supervisory and sanctioning powers, including issuing binding rules, monitoring compliance such as reporting and disclosure obligations, and imposing sanctions for violations of laws or regulations at its discretion.

Solvency II insurance companies must prepare public reports disclosing information on their solvency, risks, governance and capital. The CMF requires insurance companies to prepare reports on their solvency, risks, governance and capital, but unlike Solvency II insurers there is no obligation to make this information public.

Although Chile is moving towards a risk-based supervision system for insurance companies akin to Solvency II, the specific bill to further enact these provisions has been pending since 2011, with no signs that it will be fully enacted in the near future.

Notwithstanding this legislative stasis, the CMF has issued several general rules (Normas de Carácter General, or NCG) which govern, amongst other things, stronger risk management and corporate governance for insurers, and provide guidance on improving an insurer’s risk management systems and solvency assessment.

Capital Requirements and the Unidad de Fomento

Under Chilean insurance law,⁸ insurers must maintain paid-in and subscribed capital expressed in Unidades de Fomento (UF), a unique financial unit used in Chile. Unlike traditional currencies, a UF is not a physical currency but an inflation-indexed unit that adjusts daily based on the Chilean Consumer Price Index (CPI). A singular UF is worth approximately $44 as of June 2026.

For insurers, this means their MCRs are expressed in UF and not Chilean pesos. The range of UF required starts at 90,000 UF for insurers undertaking either life or P&C insurance (approximately $4 million), through to 120,000 UF for reinsurers (approximately $5.3 million).

The use of UF as the unit of account for regulatory capital is a sophisticated feature of the Chilean framework. By expressing minimum capital, reserves and technical obligations in UF, the real value of regulatory thresholds is maintained regardless of inflation.

As UF increases in line with CPI, the predictability for supervision is smoother, reducing the need for constant regulatory changes in response to peso volatility. For example, if the numbers were set in U.S. dollars, the peso’s exchange rate fluctuations could cause volatility unrelated to the insurer’s underlying solvency.

The UF therefore acts as a real-value anchor that keeps regulatory thresholds stable in terms of purchasing power — a design feature of considerable elegance from a regulatory architecture standpoint.

Beyond the MCR, insurers must also maintain:

• A solvency margin based on technical reserves and risk factors.
• A risk-based capital requirement defined as the greater of two calculations — a premium-based and a loss-based formula — designed to capture exposure through volume and loss experience. In the case of life products that do not generate mathematical reserves, the law bases risk capital on “capital at risk,” with a factor capped at one per thousand, differentiated by branch or risk type.

Chilean law distinguishes between two categories of insurance companies:

• Those that insure risks of loss or damage to property or assets.
• Those that cover personal risks or provide guarantees to individuals.

Insurers are not permitted to cover both categories of risk.

Solvency Requirements and Investment Eligibility

Chilean insurance solvency is structured around a statutory minimum floor and two legal concepts: net equity (patrimonio neto) and risk-based capital (patrimonio de riesgo). In accordance with the Chilean regulatory framework, an insurer’s risk-based capital cannot be lower than its net equity, and net equity must not fall below the statutory minimum floor.

With respect to investment eligibility, both technical reserves and risk-based capital must be fully backed by eligible assets that meet the CMF’s diversification and quality standards under NCG no. 152 (as amended).⁹

Although the list of permitted assets is broad, the eligibility criteria are strict:

• Domestic fixed income must meet minimum credit ratings.
• Domestic equities and mutual fund units must be registered in the securities registry.
• Foreign assets must comply with international rating or listing standards, and the use of derivatives is tightly restricted to hedging purposes only.
• Foreign investments are allowed up to a ceiling set by the Central Bank, which by law cannot be lower than 20% of reserves and risk capital. The CMF further provides detailed guidance on how this limit is applied, including exceptions for collateral used in hedging operations.

The CMF’s risk management and solvency assessment framework was further reinforced by NCG no. 325/2011, as amended in 2023,¹⁰ which introduced a Prudential Supervision Model integrating an assessment for anti-money laundering and counterterrorist financing risks. The 2023 amendment also seeks to harmonise the CMF’s supervisory approach across various regulated sectors.

Foreign Insurers and Investors

Similar to other jurisdictions in Latin America, insurers in Chile must be incorporated as public corporations. Foreign insurers are generally not permitted to underwrite risks in Chile, with exemptions in place to cover international maritime, commercial aviation and goods in transit.

An important development was the 2007 amendment to DFL 251, which permitted companies incorporated abroad to establish branch offices in Chile.

The Chilean insurance market is reasonably open to international reinsurers and foreign investment, with some standard regulatory overlay. Foreign reinsurers can operate directly in Chile provided they meet certain conditions:

• They must have a risk rating of at least BBB (or equivalent).
• They must have an appointed representative present in Chile.

Chile has no mandatory cession to local reinsurers and relies on market forces. However, the CMF does monitor reinsurance counterparty risk, and insurers must report their exposures and ensure foreign reinsurers meet certain credit quality standards.

There is no general prohibition on foreign ownership of local insurers, nor are there different rules in place (for example, with respect to capital requirements) in respect of foreign-owned Chilean insurers.

However, the CMF distinguishes between general P&C insurers and life insurers, and Chilean law provides that no insurance company may cover risks included in both categories. Therefore, if an investor wanted to enter the insurance business in Chile in both P&C and life, they would have to establish two separate companies, each with capital of at least 90,000 UF fully subscribed and paid in — an investment of approximately $8 million in aggregate as of current values.

3. Mexico

Background

Mexico is the second-largest jurisdiction based on premium volume. Mexican insurance and reinsurance is governed by the:

• Insurance and Surety Companies Law (Ley de Instituciones de Seguros y de Fianzas, or LISF).
• Insurance Contract Law (Ley sobre el Contrato de Seguro, or LCS).
• Consolidated regulatory framework set out in the Unified Regulations on Insurance and Bonds (Circular Única de Seguros y Fianzas, or CUSF).

Insurance and reinsurance entities are regulated by the Comisión Nacional de Seguros y Fianzas (CNSF), an independent agency of the Ministry of Finance and Public Credit (Secretaría de Hacienda y Crédito Público, or SHCP). The CNSF is Mexico’s insurance supervisory authority and is a member of the International Association of Insurance Supervisors (IAIS).

The LISF, enacted in 2013 and effective from 2016, was explicitly designed to be broadly equivalent to the EU’s Solvency II regime, though there are some important structural and methodological differences. Notably, the CNSF has discretionary authority to grant or refuse authorisations, and this discretion extends to the approval of internal actuarial models for SCR calculation.

Like so many other jurisdictions globally, insurance and reinsurance companies require authorisations to carry on their lines of business. In Mexico, such licences fall into three broad categories:

1. Life
2. Accident and health
3. Property and casualty

Interestingly, no entity may hold a licence for more than one category (with the exception of insurance companies operating in all three categories that were grandfathered under the previous Insurance Law) — a differentiator in comparison to many other jurisdictions.

Any insurer may also carry out reinsurance in the same lines of business as the underlying insurance, provided that it remains within its licensing permissions, without the need to further apply for a reinsurance licence. However, it is possible for an insurer to be licensed exclusively for reinsurance activities.

Capital Requirements

Mexico overhauled its prudential regulatory regime in 2013 (with the new regime coming into effect in 2016) with a regulatory philosophy closely aligned with Solvency II. Both are risk-based, principles-oriented systems in which the LISF requirements replicate the three pillars of Solvency II: quantitative requirements, governance and risk management, and disclosure and supervisory review.

Pursuant to the LISF,¹¹ Mexican insurers must maintain risk-based capital to satisfy an SCR and a lower MCR. The SCR is calculated by applying a standard formula prescribed by the CNSF, which reflects underwriting, market, credit, operational and catastrophe risks.

In calculating their SCR, each insurer may deploy an internal actuarial model based on its own risk experience and exposure, with a proper system for evaluating shocks and change, and with the ability to implement any variations required by the CNSF. While the model is developed internally, its implementation is subject to the prior approval of the CNSF.

However, the current trend within the CNSF as of late 2025 is not to approve such internal models, meaning the standard formula remains the operative basis for SCR calculation in practice.

The LISF also requires insurers to conduct regular stress tests under different scenarios to evaluate capital adequacy, with results reviewed by the board of directors and submitted to the CNSF. Article 332 of the LISF empowers the CNSF to revoke an insurer’s authorisation for serious and repeated violations, including deficits in capital requirements and solvency deficiencies.

Own Funds

Mexican own funds are classified by tiers (niveles) in a similar style to Solvency II,¹² comprising three tiers which map closely onto each Solvency II tier. In practice, Mexican rules are more conservative and simpler, reflecting local market conditions: There is less reliance on market-consistent valuation, more limited eligibility of subordinated instruments, and the CNSF retains discretionary approval over non-standard items.

Each tier is subject to limits to cover an insurer’s SCR:

• Tier 1 must represent at least 50% of the insurer’s SCR.
• Tier 2 covers items such as subordinated debt, hybrid instruments and preference shares and cannot exceed 50% of the SCR.
• Tier 3 covers items such as deferred tax and other assets specifically permitted by the CNSF and cannot exceed 15% of the SCR.

The combined total of tiers 2 and 3 cannot exceed a specified percentage, usually around 50%, of the total own funds. This tiering structure broadly replicates the eligibility constraints in Solvency II, with the key difference being that the CNSF exercises a more active and discretionary gate-keeping function over the composition of eligible own funds.

Environmental, Social and Governance Factors

One further notable feature of the Mexican regulatory framework concerns environmental, social and governance (ESG) factors. Whilst many jurisdictions globally encourage a consideration of ESG factors, in Mexico it is a requirement for Mexican insurers and reinsurers to consider their ESG impact when making insurance-related and investment decisions, forming a core part of their business plans.

This mandatory ESG integration represents a more prescriptive approach than is currently required in most developed insurance markets and has implications for investment governance frameworks and board-level oversight obligations.

Foreign Insurers and Investors

From a regulatory perspective, Mexico requires that direct risks based in Mexico are underwritten within Mexico and by a Mexican insurer. The starting point is that foreign insurers cannot write direct risks based in Mexico, and acting as an unauthorised insurer attracts criminal liability for the individuals involved.

This “non-admitted” principle is reflected in the LISF and the CUSF, and its practical effect is that any international insurer seeking to access the Mexican market must do so through a locally incorporated and CNSF-authorised entity.

There are very limited exceptions to the general rule under which foreign insurers are allowed to enter into insurance contracts in Mexico. Such situations include covering risks that can only occur in foreign countries where:

• The foreign insurer is already authorised.
• Foreign insurers may directly ensure the movement of goods, ships, aircraft and vehicles into and out of Mexico.
• There is no domestic Mexican insurance company that offers the relevant coverage.

Risks insured by a Mexican insurer may be reinsured in their entirety to a foreign reinsurer, provided that such foreign reinsurer is registered with the Reinsurers’ Registry.

A more unusual feature of the Mexican regime is that there is a maximum retention limit per line of business, calculated annually using a formula set by the LISF. Any risks over this retention limit must be ceded to reinsurers. However, there is no minimum retention requirement in Mexico, and Mexican reinsurers may reinsure all risk to a foreign reinsurer, registered with the Reinsurers’ Registry, under “fronting” schemes.

Despite the general localisation of underwriting risks, a foreign investor can control the entire capital stock of a Mexican insurer or reinsurer, though there are controller notification and approval requirements similar to those found in other jurisdictions.

However, the acquisition of interests by foreign governments and authorities is generally prohibited. Acquisition of more than 5% of the capital stock will require prior approval from the CNSF, whilst the transfer of more than 2% will require written notice within three business days following the transaction.

In those situations where there is a domestic Mexican insurer or reinsurer contracting with a foreign registered reinsurer, there are naturally questions around group supervision and regulation. The Mexican insurance legal framework does not generally incorporate or regulate “group supervision.”

A relevant consideration for where a Mexican insurance undertaking is a subsidiary of a foreign parent is that although the Mexican regulator does have authority under certain statutory and regulatory provisions to request information of the shareholders and related entities of insurance companies (as well as from third-party service providers), this applies only in select, limited scenarios and may not be deemed a “group supervision” framework per se.

Any foreign reinsurer is subject to a withholding income tax of 2% in Mexico on paid or assigned premiums received from any Mexican tax resident.¹³ This applies to the gross amount paid to the foreign reinsurer without any deduction. However, Mexico has double tax treaties with many jurisdictions, including the UK, the US and various countries in the European and Latin American community, which may serve to reduce or exempt the withholding tax altogether.

Own Funds Investment Classes

While the regimes between Mexico and Europe are closely aligned from a prudential capital perspective, there are some important differences in how investment governance is structured.

Under Solvency II, there is no prescriptive list of requirements for investments in assets made by insurers and reinsurers. Instead, conduct and decision-making is governed with reference to the Prudent Person Principle, a risk-driven approach which requires assets to be invested in a manner that ensures the security, quality, liquidity and profitability of the portfolio as a whole, with asset-liability matching as a central objective.

The European framework trusts the insurer to make sound investment decisions within a risk-governance framework, subject to regulatory scrutiny.

In contrast, the Mexican prudential regime is explicitly prescriptive. The primary source of investment rules for Mexican insurers and reinsurers is Chapter 8.2 of the CUSF, which sets out the vehicles, securities and assets in which insurance and reinsurance companies may invest, together with the concentration and portfolio limits applicable to each category.

Investments must be approved by the insurer’s investment committee in accordance with a formal internal investment policy approved by the board of directors, and they may only be made in instruments, assets or securities traded in the Mexican financial market or in foreign regulated financial markets recognised by the CNSF.

The eligible asset classes under Chapter 8.2 of the CUSF¹⁴ include the following principal categories:

• Mexican federal government securities. This category encompasses the principal government debt instruments issued by the Mexican federal government and managed by Banco de México, including: CETES (Certificados de la Tesorería de la Federación), which are short-term zero-coupon treasury bills issued at a discount with maturities of 28 to 728 days; BONOS (Bonos de Desarrollo del Gobierno Federal), which are long-term fixed-rate development bonds paying interest semi-annually and issued for terms of up to 30 years; BONDES F, which are floating-rate government development bonds benchmarked to the overnight equilibrium interbank interest rate (TIIE); and UDIBONOS, which are inflation-linked bonds denominated in Unidades de Inversión (UDIS), an inflation-indexed accounting unit similar in function to the Chilean UF. Given the long-term nature of many insurance liabilities, insurers are natural and major participants in the market for long-term government bonds and UDIBONOS, which provide a natural hedge against inflation for life insurers with annuity or long-term savings product exposure.
• State and municipal debt securities. Insurers may invest in debt issued by Mexican states and municipalities, subject to applicable concentration limits, provided that such instruments are issued in accordance with applicable Mexican public finance law and are traded through recognised markets.
• Debt securities issued by financial institutions and development banks. This category includes bonds and other debt instruments issued by Mexican commercial banks, development banks (banca de desarrollo) such as NAFIN and BANCOMEXT, as well as other financial institutions authorised in Mexico. These instruments are subject to both per-issuer concentration limits and aggregate limits as a proportion of total technical reserves.
• Corporate bonds and other private sector debt securities. Insurers may invest in corporate debt instruments registered in the National Securities Registry (Registro Nacional de Valores, or RNV) and traded through a Mexican Stock Exchange (either Bolsa Mexicana de Valores, or BMV, or Bolsa Institucional de Valores, or BIVA) or through the International Quotation System (Sistema Internacional de Cotizaciones, or SIC). Asset-backed securities, structured instruments and trust certificates (certificados bursátiles) are also eligible, subject to the minimum credit rating requirements specified in the CUSF. Per-issuer and per-sector concentration limits apply.
• Equity securities. Shares of Mexican companies listed on the BMV or BIVA are eligible investments, subject to aggregate equity limits and per-issuer concentration thresholds. Given the volatility risks associated with equity, the CUSF imposes tighter limits on equity as a proportion of technical reserves than on fixed-income investments, reflecting the regulatory preference for liquidity and capital preservation in the backing of insurance liabilities.
• Investment funds (sociedades de inversión). Eligible investment fund types include money market funds, debt funds, equity funds and mixed funds. Insurers may invest in funds regulated by the CNBV under the Mexican Investment Funds Law (Ley de Fondos de Inversión). Specialised retirement investment funds (SIRVs) and certain other collective vehicles are also eligible.
• Real estate and real estate-linked instruments. Direct investment in real estate is permitted, as is investment in real estate investment trusts and fideicomisos de infraestructura y bienes raíces (FIBRAs), Mexico’s listed real estate investment trust vehicles. Introduced in 2011, FIBRAs are listed on the BMV and represent one of the more sophisticated investment structures available to Mexican institutional investors. Investment in direct real estate is subject to liquidity and valuation requirements, and concentration limits apply both on a per-property and aggregate basis.
• Loans and mortgages. Mortgage loans secured on Mexican real estate and policy loans (loans to policyholders secured against cash values in life policies) are eligible, subject to the collateral quality and loan-to-value limits specified in the CUSF.
• Derivatives. The CUSF permits the use of financial derivatives — including futures, options, swaps and other instruments traded on MexDer (the Mexican Derivatives Exchange, Mercado Mexicano de Derivados) — but strictly limits their use to hedging purposes. Speculative use of derivatives is not permitted. This restriction broadly mirrors the approach taken in most regulated insurance frameworks globally, including the hedging-only derivatives carve-out under Solvency II’s Prudent Person Principle, though the Mexican rules are expressed as a positive prohibition rather than as a governance expectation.
• Cash and deposits. Balances held in Mexican bank accounts and term deposits with CNBV-authorised institutions are eligible and typically form a component of the liquid assets backing short-tail liabilities.

A critical structural constraint of the Mexican investment framework, and one that represents a significant divergence from the Solvency II model, is the restriction on international investment. Insurance and surety companies domiciled in Mexico may not invest directly outside the country. This means that, as a default position, investments must be made in instruments traded within the Mexican domestic financial market.

However, an important exception exists: Insurers may invest in foreign securities that are traded through the SIC of the BMV. The SIC is a platform operated by the BMV and BIVA that allows trading of foreign-listed securities on Mexican soil, including a broad range of international equities and exchange-traded funds (ETFs).

Because these securities are technically “traded in Mexico” (even though their underlying issuers are foreign entities), they fall within the eligible investment universe. This mechanism provides insurers with a degree of international diversification that the strict letter of the domestic investment restriction might otherwise preclude, without requiring CNSF approval for foreign investment.

The investment framework also imposes diversification rules at an aggregate portfolio level. The CUSF establishes maximum concentration limits both by asset class and by individual issuer or counterparty, broadly designed to prevent an insurer from holding excessive exposure to any single risk factor. These limits are calibrated differently depending on the type of insurer (for example, life insurers with long-term liabilities and P&C insurers with shorter-tail obligations have differing investment profiles) and the nature of the liability being backed.

Another notable feature is the treatment of Investment Units (Unidades de Inversión, or UDIS). UDIS are an inflation-indexed accounting unit, denominated in Mexican pesos but adjusted daily in line with Mexico’s CPI. They serve a function broadly analogous to Chile’s UF — and indeed the mechanisms were inspired by similar concerns about inflation eroding the real value of long-term financial obligations.

For life insurers with long-dated liabilities denominated in UDIS (for example, inflation-linked annuities), UDIBONOS and UDIS-denominated assets provide a natural asset-liability matching tool that does not require foreign currency exposure. This is a practical and important feature of Mexican fixed-income investment strategy for life insurers.

The contrast with Solvency II on investment is therefore not merely philosophical. Under the EU framework, an insurer writing long-term euro-denominated liabilities can construct a diversified, globally invested portfolio subject to the governance requirements of the Prudent Person Principle and its internal risk management frameworks.

A Mexican insurer, by contrast, must route its investments principally through the domestic Mexican financial market, with international diversification available only indirectly via the SIC.

For international insurers or investors operating in Mexico as part of a global group, this domestic investment constraint requires careful consideration in the context of group-level asset-liability management and internal capital allocation, particularly where the group’s central treasury function would otherwise seek to pool and invest insurance entity assets centrally.

4. Argentina

Background

Argentina’s insurance regulator is the Superintendencia de Seguros de la Nación (SSN), an agency of the Argentine Ministry of the Economy, which oversees the activities of insurance brokers, intermediaries, and insurance and reinsurance entities in Argentina.

The SSN monitors, evaluates and inspects the activities of market operators to protect policyholders, ensure compliance with current laws and regulations, and promote the development of a sound, transparent and efficient market.

The SSN has broad-ranging powers, including licensing, approving insurance plans and policies, supervising solvency status, reviewing investments and policies relating to risk-retention, auditing and sanctioning.

The legal framework is rooted in three core insurance laws:

1. Ley no. 17.418/1967 (the Insurance Contract Law), governing the nature and characteristics of the insurance contract.
2. Ley no. 20.091/1973 (the Insurance Companies and Supervision Law), governing the licensing, operation and supervision of insurance entities.
3. Ley no. 22.400/1981 (the Insurance Broker Activities Law), governing the conduct and registration of insurance intermediaries.

These three laws are collectively referred to as the Argentine Insurance Laws. They are supplemented by the Reglamento General de la Actividad Aseguradora (the General Regulation), which supplements and regulates the implementation of the Argentine Insurance Laws and is amended from time to time by SSN resolution.

Historically, a central critique of the Argentine regime has been that, whilst detailed and prescriptive, it has not yet transitioned to a risk-based approach and caters more subtly to the individual requirements of individual reinsurers and insurers. The SSN has acknowledged this limitation and has stated a desire to adopt a framework built around the three pillars of Solvency II, though this reform agenda remained pending as of early 2026.¹⁵

Argentina’s macroeconomic environment — characterised by historically high inflation, periodic currency crises and interest rate volatility — adds a layer of complexity to a regulatory framework that is unique among the jurisdictions examined in this chapter.

The interaction between regulatory capital rules and macroeconomic instability is a live and recurring challenge within the Argentine insurance sector, especially considering the SSN requirement that a given percentage of insurance company reserves be invested in real-economy instruments that are significantly exposed to such instability.

Foreign Insurers and Investors

Under the Argentine Insurance Laws, only entities which are incorporated in Argentina can be licensed by the SSN. An insurer must be:

• A corporation incorporated in Argentina,
• A cooperative or mutual entity, or
• A branch of a foreign insurer that is formally established and registered in Argentina with SSN approval.

Therefore, it is not possible for a foreign insurer to simply write risks in Argentina from abroad or to passport in; it must have a local legal presence. As with other Latin American jurisdictions, there are limited exemptions for areas such as marine and aviation risks.

In considering reinsurance activities, Argentina differentiates between:

• Local reinsurers: those incorporated in Argentina or branches of foreign reinsurers domiciled locally.
• Admitted reinsurers: foreign reinsurers operating from their home jurisdiction that are registered with the SSN.

Foreign reinsurers must be registered with the SSN and meet certain criteria (such as being authorised in their home jurisdiction) for the SSN to authorise a local insurer to cede risks to a foreign reinsurer, where local capacity is insufficient. For example, the SSN may allow the use of foreign reinsurers for risks exceeding certain thresholds or where there is no domestic technical capability for a particular transaction.

Nonetheless, there remain quantitative ceilings on how much premium may be ceded to a foreign reinsurer, and the overriding rationale ensures that a significant portion of risk is retained by local reinsurers (or locally domiciled entities) and not fully substituted by foreign reinsurers. In any event, prior approval for reinsurance placements with a foreign reinsurer, particularly where local capacity does exist, is required.

Capital Requirements

Prudential requirements in Argentina have erred on the side of being rules-based rather than risk-based. There is an MCR that insurers must always maintain, but the exact requirement varies depending on the insurance business involved. The MCR for life insurers differs greatly in comparison to P&C insurers, which differs again in contrast to reinsurers.

Currently, the MCR is expressed in Unidades de Valor Adquisitivo (UVA), which is a unit of measurement determined by the Argentine Central Bank that aims to address the impact of Argentina’s historically high inflation, similar to the Chilean UF.

Generally speaking, there are three key criteria applied in determining the minimum capital thresholds,¹⁶ determined as the higher of:

1. A specific amount determined by the SSN, expressed in UVA, currently equivalent to 1.2 billion Argentine pesos or approximately $832,500.
2. An amount determined as a percentage of premiums for the 12 months immediately preceding the fiscal year end, taking into account different percentages for each line of business.
3. An amount based on the losses of the 36 months immediately preceding the fiscal year-end, also taking into account different percentages for each line of business.

For reinsurers, Argentina requires maintenance of a minimum capital equal to the higher of an amount determined by the regulator (currently expressed in UVA and the equivalent of 6 billion Argentine pesos, or approximately $4.16 million) or an amount determined as a percentage of premiums.

Insurer Asset Mix and Currency Considerations

Argentina provides a prescriptive list of permissible investment assets, set out in the Argentine Insurance Laws, requiring insurers to follow set standards on investment policy, asset mix, valuation, diversification and asset-liability matching. Assets in which insurers may invest should also have an Argentine nexus.

Key categories of permitted investments include:

• Securities of the national government or loans guaranteed by the government of Argentina.
• Property located within Argentina.
• Shares of or securities issued by corporations incorporated in Argentina or abroad that are listed or traded on stock exchanges in Argentina.
• Loans secured by the above securities, debentures and shares (up to certain limits).
• Financial operations fully guaranteed by banks or other financial institutions duly authorised in Argentina.

Recent deregulation means that the SSN now permits insurance contracts to be issued and settled in foreign currency (typically US dollars or euros), provided that a conversion clause approved by the SSN is contained within the underlying contract.¹⁷

However, in these situations, there is an expectation that the insurer maintains investments denominated in, or linked to, that same payment currency. This ensures proper asset-liability matching and avoids the potential for exchange rate risks to undermine solvency concerns. The SSN retains powers to monitor this through quarterly financial reporting and on-site inspections.

Additionally, a reinsurer or branch of a foreign company registered in Argentina may only hold up to 50% of the capital held against its liabilities in foreign assets, and in any event only with SSN approval.

5. Colombia

Background

Colombia is a growing insurance market, has an active regulator pursuing reformatory opportunities and is gradually shifting towards a risk-based model.

Colombia’s insurance sector is regulated by the Superintendencia Financiera de Colombia (SFC), which also regulates other financial institutions such as banks, pension funds, securities and the stock market. The SFC has wide-ranging powers, with responsibility for licensing and supervision but also for consumer protection and regulatory development and enforcement.

The Ministry of Finance also retains policy-making powers and is in charge of broader regulations applicable to the insurance sector.

Colombia has increasingly aligned its supervisory and prudential regulatory systems to international standards in recent years. The SFC became a member of the IAIS’ Multilateral Memorandum of Understanding in 2022.

Accordingly, Colombian regulation follows all of IAIS’ guidelines, specifically regarding prudential supervision, market conduct, corporate governance and risk management. The regulatory framework for the insurance sector in Colombia can be found in a single statutory regime, specifically the Estatuto Orgánico del Sistema Financiera, together with a unified set of decrees compiled by means of Decree 2555 of 2010.

Total gross written premium (GWP) in Colombia is projected to reach $8.9 billion in 2026 — not an insubstantial market — and grow to over $11.5 billion by 2028.

Foreign Insurers and Investors

Colombia’s approach to overseas insurers and reinsurers largely aligns with the market access conditions in other nearby nations. Colombian insurance regulation operates on the principle that only authorised and domiciled insurers may conduct insurance business within Colombia. Insurers operating in Colombia must be locally incorporated and must obtain a licence from the SFC.

Much like other jurisdictions in Latin America, foreign insurers cannot operate in-country without establishing a presence — either by setting up a subsidiary or by registering a branch — and require approval from the SFC to do so. In practice, most foreign entrants form a subsidiary so that they can operate locally.

For any branches of foreign insurers, the underlying capital backing the relevant liabilities must be assets within Colombia. Regarding reinsurers, the SFC also maintains a public registry for reinsurers known as the Registry of Foreign Reinsurers and Reinsurance Intermediaries (the REACOEX) that allows foreign reinsurers to conduct business in Colombia subject to their satisfaction of certain eligibility requirements. Currently, over 200 world reinsurers are part of the REACOEX.

Capital Requirements

Since 2010, Colombia’s insurance regulatory environment has been gradually shifting to a risk-based solvency framework. Insurers must show that their MCR (patrimonio técnico) is at least equal to their SCR (patrimonio adecuado), taking into account underwriting, asset and market risks (and more recently operational risks).

The SFC initially applied fixed MCRs for insurers, which varied depending on the type of insurance business. However, in more recent years, Colombia has transitioned towards a risk-based capital model. This move has meant that insurers in Colombia are able to calculate their required capital based on the risks they face, such as asset risk, underwriting risk and other exposures.

The minimum capital for incorporation of insurers is set by statute from time to time but is comprised of paid-in capital, reserves and retained earnings, less certain applicable deductions. In respect of technical reserves, insurers must also maintain these covering ongoing risks and in force liabilities, outstanding claims, premium deficiency and deviation.

Currently, the insurance sector is working with the Colombian government to migrate to a more extensive adoption of Solvency II, not only regarding the quantitative requirements on financial strength and capital, but also focusing on Pillars II and III regarding governance, risk management, reporting and transparency.

One of the challenges in the full adoption of Solvency II has been the availability of data to assess adequate capital requirements. To prevent risks associated with abrupt adoption, the Colombian government has fostered capacity building within the insurance sector to ensure an ordered transition.

There is also a provision for technical reserves under Colombian regulations, which must be calculated by insurers, established and adjusted on a monthly basis. In addition, Colombia has been introducing legislation to align its method of calculating such technical reserves with international standards.

Recent regulations mandate that insurance companies adopt International Financial Reporting Standards (IFRS) 17 in place of IFRS 4. These regulations were initially scheduled to take effect in January 2027, but in March 2026, the Colombian government extended the adoption deadline to January 2028.

As of 2024, insurers are required to calculate such reserves on a monthly basis and adjust accordingly. The reserves themselves must be backed by appropriate assets, pursuant to an investment policy adopted by the board of each insurance company.

Specifically, under this framework, assets are weighted by credit risk, and factors for underwriting volume with reserves are also included in the calculation. The SFC’s oversight ensures that an insurer’s equity and qualifying subordinated debt cover the required capital.

The Colombian system also emphasises stress testing as part of its regulatory practices — running regular solvency stress tests to gauge the resilience of insurers and the financial system as a whole. While Colombia might not yet have a Solvency II-style model in full, it employs a tailored risk-based approach in practice, which is a significant shift.

Approach to Cross-Jurisdictional Reinsurance

In Colombia, domestic insurers are able to cede risks to foreign reinsurers, but those reinsurers must be registered and listed in the REACOEX. Interestingly, if a Colombian cedent places reinsurance with a foreign reinsurer that is not registered with the SFC, then for regulatory purposes the cedent cannot reduce its provisions for that ceded risk — effectively, it must retain 100% of the risk. This creates a strong incentive to use registered reinsurers.

Foreign reinsurers wishing to establish a local branch in Colombia must comply with prudential requirements similar to domestic reinsurers.

Conclusion

Brazil

The Brazilian regime is, little by little, moving towards a risk-based regulatory approach:

• The “risk capital” model reflects alignment with Solvency II’s Pillar I: quantitative risk-based capital.
• The introduction of ORSA reflects alignment with the Pillar II: governance, risk management and internal assessment.
• Investment rules with diversification criteria, limits and liquidity criteria reflect Solvency II’s requirement that assets backing technical provisions must satisfy quality, liquidity and matching requirements.

For international practitioners, the key operational concerns in Brazil are the:

• Requirement for a local legal presence.
• Complex reinsurance categorisation regime.
• Unlimited liability risk for controllers and management in liquidation scenarios.
• Evolving treatment of claims control clauses.
• Continuing development of secondary regulation.

Chile

The level of specificity imposed by Solvency II on insurance companies is higher than that of the Chilean framework. This is reflected, for instance, in the:

• Requirements for internal self-assessment processes of insurance companies.
• Mechanisms for risk valuation and calibration.
• Level of detail required by the CMF for information reporting.

Chile presents an attractive and accessible market for international reinsurers but requires careful local legal analysis given the:

• Separation of life and non-life businesses.
• UF-denominated capital framework.
• Investment eligibility requirements.
• Pending but uncertain trajectory of further Solvency II alignment.

The absence of a mandatory cession requirement is a notable commercial advantage distinguishing Chile from Argentina and, historically, Brazil.

Mexico

Mexico’s prudential regulation regime is heavily based on Solvency II, which brings familiarity and comfort to investors and insurers who understand that framework. Unlike Solvency II, which is designed to be implemented across the EU member states, Mexico’s system is tailored specifically to the Mexican market.

Key points of divergence include the:

• CNSF’s reluctance in practice to approve internal models.
• Mandatory ESG integration obligations.
• Possibility to cede all risk in reinsurance.
• Prescriptive investment eligibility framework.
• Criminal liability exposure for non-admitted operations.

Argentina

The SSN has stated its desire to move the regulatory regime in the direction of a modern model of risk-based regulation and supervision, built around the three pillars of Solvency II, through the use of risk-based capital and risk-based supervision, licensing, and consumer protection.

As the SSN continues to introduce reforms aimed at international best practices, Argentina remains very much a jurisdiction to watch. Insurers and potential investors in Argentina should pay close attention to Argentina’s macro-environment, including considerations such as:

• Inflation.
• Currency devaluation.
• Interest rate volatility.
• The evolving regulatory landscape.
• The SSN’s treatment of foreign currency contracts and foreign asset limits.

Colombia

Colombia presents a maturing and increasingly sophisticated insurance regulatory environment. The SFC’s broad supervisory mandate, combined with the country’s ongoing transition towards a Solvency II-inspired framework, signals a clear commitment to regulatory modernisation.

While challenges remain, the Colombian government’s measured approach to implementation reflects a pragmatic desire to build capacity and avoid disruption. For foreign insurers and reinsurers, the market offers meaningful opportunities, though market access continues to require attention to compliance with the SFC’s licensing and registration requirements, including the REACOEX regime for reinsurers.

Colombia is, in short, a jurisdiction that warrants close attention as it continues to develop and refine its regulatory infrastructure.

Overall

The prudential solvency regimes examined in this chapter reflect a region in active regulatory evolution.

Each jurisdiction has charted a distinct path and is at a different stage of regulatory development:

• Brazil through incremental transition from a rules-based system to a risk-based model anchored by the new Insurance Contract Law and ORSA requirements.
• Mexico through its comprehensive Solvency II-aligned LISF framework enacted in 2013 and effective from 2016.
• Chile through its sophisticated UF-denominated capital structure and pending but stalled legislative reform.
• Argentina through its stated aspiration to adopt a Solvency II-style framework while managing acute macroeconomic instability.
• Colombia through its phased transition towards risk-based capital and its recent commitment to IFRS 17 adoption.

But the direction of travel is convergent, moving towards risk-sensitive capitalisation, structured governance and enhanced regulatory alignment with international standards.

*      *      *

With special thanks to our friends at Mattos Filho (Brazil), Barros & Errázuriz (Chile), Nader, Hayaux & Goebel (Mexico), Calwaro Capital (Argentina), and Posse Herrera Ruiz (Colombia) for their assistance with research for this chapter.

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¹ Decreto-Lei nº 73/1966 (Brazil) (Sistema Nacional de Seguros Privados).

² Lexology, “In Review: The Legal Framework for Insurance Disputes in Brazil” (24 January 2021).

³ Lei Complementar nº 126/2007 (Brazil) (Reinsurance and Retrocession).

⁴ Lei nº 15.040/2024 (Brazil) (Insurance Contract Law).

⁵ Reinsurance News, “Brazil’s Insurance Reforms Signal Major Institutional Shift Amid Economic Slowdown: AM Best” (13 October 2025).

⁶ BILA Journal, Issue 128, “Notes on the Regulatory Environment of the Brazilian (Re)insurance Market” (April 2019).

⁷ Mattos Filho legal analysis, “Brazilian Insurance Authority Opens Public Consultation on New Regulations for Reinsurance” (10 December 2025).

⁸ DFL 251 (n 17) arts 15-17 (MCRs expressed in UF).

⁹ CMF, NCG no. 152 (as amended 2018) (investment limits for insurance companies).

¹⁰ CMF, NCG no. 325/2011 (as amended 2023) (risk management system and solvency assessment for insurance companies).

¹¹ LISF (n 8) arts 227-241 (SCR); arts 242-249 (MCR).

¹² LISF (n 8) arts 76-84 (Own Funds classification and tier limits).

¹³ Ley de Impuesto sobre la Renta (Mexico) (Income Tax Law, as amended) art 166; applicable double taxation treaties.

¹⁴ Chapter 8.2 of the CUSF.

¹⁵ Global Insurance Law Connect, “Regulator Moves to Prevent Insolvencies in Argentina’s Insurance Market” (15 January 2026).

¹⁶ SSN Resolution (as periodically updated); Reglamento General (n 27) (minimum capital thresholds).

¹⁷ Presidential Decree 70/2023.

This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.