Venezuela: National Assembly reforms the Insurance Activity Law

In brief

The National Assembly issued the Reform Law of the Decree with Rank, Value and Force of Law of the Insurance Activity on 29 November 20231 ("Reform"). The Reform will enter into force on 29 March 2024 (i.e., after 120 continuous days following its publication in the Official Gazette). It repealed the Decree with Range, Value and Force of Law of the Insurance Activity ("Repealed Law")2 and the Decree with Force of Law for the Strengthening of the Insurance Sector3

The Reform establishes the regulatory framework for the authorization, regulation, operation, control, supervision and oversight of insurance activity in Venezuela. Its provisions are applicable to all insurance activity developed in the country or executed abroad that relate to risks or people located in the national territory and performed by the regulated subjects and by all the subjects who develop operations and businesses qualified as insurance activity (Article 1 of the Reform).


Among the most relevant aspects of the Reform are the provisions related to the regulatory framework of the insurance activity (e.g., permits, authorizations, organization and operation of the companies that are part of the sector; authorizations; minimum capital; among others); offer of insurance through alternative channels; use of new technologies; and the calculation method for the payment of registration fees and administrative sanctions.

The Reform merges and modifies several articles of the Repealed Law. In this link, you can access a comparative chart comparing the Repealed Law and the Reform, with details of the amendments and the most relevant new provisions (highlighted in red).

In detail 

The following are some of the most relevant changes introduced by the Reform: 

1. Expansion of the regulated subjects: The Reform expressly establishes that only the regulated subjects listed in Article 3, which have been previously authorized by the Office of the Insurance Activity Superintendent (SUDEASEG, for its acronym in Spanish), may engage in the insurance business. Among the regulated subjects, the Reform added defendants of the policyholder, insured, beneficiary, contracting party, user and affiliate; and compliance officers and external auditors, including those who perform functions in the area of information assets and risk management of money laundering, financing of terrorism and financing of the proliferation of weapons of mass destruction.

2. Modification of the scope of the definition of insurance activity: The Reform, in comparison with the Repealed Law, establishes that "insurance activity" is any relationship or operation related to insurance, reinsurance, prepaid medicine and risk management contracts, intermediation, bonds, financing of premiums or quotas, managed funds, trust in the insurance market, risk inspection, appraisal and loss adjustment in insurance activities (Article 2 of the Reform). In this sense, the Reform includes microinsurance, inclusive insurance and mass insurance covering specific risks, aimed at excluded or underserved social sectors (Article 4 of the Reform). Therefore, it is foreseen that the offer will include health and funeral insurance, among others, which will be regulated in accordance with the rules issued by SUDEASEG for those purposes.

3. Use of new technologies: The Reform includes a definition of financial technology (fintech) establishing that they are technology-enabled financial solutions offered by financial services companies to serve as an auxiliary payment system or service provider within the insurance company or alternative channels. Insurance companies, prepaid medicine companies and alternative channels will be able to contract providers specialized in remote services and in the use of fintech. Additionally, the Reform establishes that SUDEASEG will regulate the use of these mechanisms through norms.

4. Prohibitions:

a. Companies may not (i) declare dividends or distribute profits provided for in their Articles of Incorporation/By-laws without SUDEASEG's prior approval of their financial statements; (ii) increase capital stock without having restored losses from previous years; (iii) perform fundraising operations other than those provided for in the systems known as "Resource Collection System," unless authorized by SUDEASEG with prior approval of the Ministry of Finance; or (iv) perform operations included in the tontine and chatelusian systems, their derivatives or similar, or enter into participation account agreements in connection with the insurance activity (Article 25 of the Reform).

b. The Reform eliminates the prohibition of insurance banking operations established in the Repealed Law. In this sense, the Reform includes the "alternative channels," defined as a legal entity with which the insurer enters into an agreement for the purpose of using its infrastructure, its technological assets and its relations with a large number of members or potential policyholders, with whom it has commercial or other types of connections, for the purpose of serving as a mechanism to facilitate the acquisition of an insurance product. Alternative channels involve financial institutions governed by the law regulating the banking sector, public or private companies, commercial and industrial establishments, guilds and associations.

c. The Reform extends the prohibition of operations with foreign companies to include prepaid medicine and reinsurance companies when they are not registered in the corresponding registry kept by SUDEASEG (Article 17 of the Reform).

5. Modification in the requirements for regulated subjects: The Reform modifies the requirements to obtain and maintain the authorization issued by SUDEASEG to operate as an insurance, prepaid medicine, reinsurance or risk management company (Article 13 of the Reform). In this sense, the Reform (i) modified the calculation method for fixing capital stock, indicating that it must be in VEB or in Venezuelan Government Securities indexed and expressed in VEB, according to the number of times of the official exchange rate is established depending on the type of entity (e.g., reinsurance, prepaid medicine); (ii) established that the minimum capitals will be adjusted every two years before 31 January of the corresponding year for insurance, prepaid medicine and risk management companies, and 31 July for reinsurance companies; and (iii) modified the estimation method of the guarantee to the nation, establishing that it will be equivalent to 10% of the minimum capital required, among others.

6. Special contributions: The Reform (i) increased the special contribution to an amount between 2.5% and 3.5% of the total items set forth in the Reform (Article 11); (ii) incorporated a different calculation method for the collection of service fees from regulated entities and other interested parties, establishing that they will be paid in VEB according to the number of times the official exchange rate established by the Venezuelan regulation (Article 12 of the Reform); and (iii) established a considerable increase in the fees to be paid for registration of procedures before SUDEASEG. 

7. Penalty regime: The Reform incorporated a different calculation for administrative penalties, establishing that it will be calculated according to the number of times the official exchange rate established by the Venezuelan regulation — the Repealed Law established the fixing of fines in Tax Units. Additionally, the Reform increased the time period for sanctioning administrative violations in Article 146, from five to six years as from the date on which the offense occurred, unless they are interrupted by actions of SUDEASEG or third parties whose rights are injured in the cases set forth in Article 146. 

8. Relevant transitory and final provisions: 

a. The Reform establishes that within 180 days following the effective date of the Reform (i.e., 29 March 2024), SUDEASEG will issue the regulations of the Reform and the applicable rules.

b. The registries established in Article 12 of the Reform must be renewed within 90 continuous days as of 29 March 2024. The article refers to the registration in the records kept by SUDEASEG of insurance auxiliaries, actuaries, foreign reinsurance companies, insurance brokerage companies and reinsurance brokerage companies, among others. 

c. Cooperative associations authorized by SUDEASEG as of 29 March 2024 may adapt and adopt the form of an insurance, prepaid medicine and risk management company, complying with the requirements set forth in the Reform. They must submit an adaptation plan, accompanied by a feasibility study within six months following the entry into force of the Reform.

d. As from the entry into force of the Reform, the registration of companies affiliated with SUDEASEG that are incorporated in jurisdictions classified as low tax jurisdictions by the National Integrated Customs and Tax Administration Service will be cancelled.
e. For purposes of the Reform, the applicable reference exchange rate will be as follows:

(i) Fees for services and incorporation of regulated entities, the last value of the day immediately prior to the date on which the request is made.
(ii) Adjustment of minimum capital, the value as of the date of the shareholders' meeting that resolves it.
(iii) Administrative penalties, the value as of the date on which noncompliance was committed
Fees for services, guarantees to the nation, minimum capital and administrative penalties expressed at the reference exchange rate, shall be payable in legal tender, in accordance with the provisions of this law.

f. The provisions established in the Reform for insurance, reinsurance and prepaid medicine companies are applicable to risk management companies, premium or quota financing companies, insurance brokerage companies and reinsurance brokerage companies.

Click here to read the Spanish version.

1 Reform Law of the Decree with Rank, Value and Force of Law of the Insurance Activity, published in Official Gazette No. 6,770 on 29 November 2023.

2 Decree with Rank, Value and Force of Law of the Insurance Activity, published in Official Gazette No. 6,220 on 15 March 2016.

3 Decree with Force of Law for the Strengthening of the Insurance Sector, published in Official Gazette No. 5,554 on 13 November 2001.

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