Consults Foreign Reinsurance for Life Annuities
Summary
Chile's Financial Market Commission (CMF) has published for public consultation a regulatory proposal on reinsurance operations for life annuities through foreign entities. The proposal draws on best practices from the United Kingdom, United States, Bermuda, and the Netherlands, and aims to strengthen the sustainability and resilience of the Chilean life annuity market. The CMF is accepting feedback for an eight-week period.
“The reserve deductions for the purposes of General Rule No. 323 may not exceed 20 percent of technical reserves as calculated on the date of the contract.”
Chilean life annuity writers that currently retain or concentrate long-term pension obligations should evaluate whether foreign reinsurance could provide capital optimization and risk diversification. Before entering any reinsurance arrangement under this framework, insurers must confirm the foreign reinsurer's rating, verify the supervisory information-sharing arrangement with the CMF, and ensure the segregated fund structure complies with portfolio composition limits. Contract structures will require mandatory early termination clauses.
What changed
The CMF proposes to allow Chilean life annuity insurers to deduct reinsurance transfers from technical reserve calculations under General Rule No. 323, subject to a 20 percent cap on reserve deductions, a minimum 'A' international risk rating for reinsurers, and a memorandum of understanding between the reinsurer's foreign supervisor and the CMF. Assets backing transferred obligations must be held in a segregated fund managed by a CMF-supervised entity, with portfolio composition limits of 30 percent in foreign securities and 5 percent in other investments. Reinsurance contracts must include early termination or recapture clauses, and companies must submit detailed quarterly information on reinsurance transactions.
Chilean life annuity writers that currently concentrate long-term pension risk locally should assess how participation in foreign reinsurance markets could optimize their capital usage and diversify their risk portfolios. Insurers considering foreign reinsurers must verify the reinsurer holds a minimum 'A' rating, the foreign supervisor has a formal information-sharing arrangement with the CMF, and that assets backing transferred obligations are held in a CMF-supervised segregated fund. Reinsurance contract structures will need to include early termination clauses.
Scheduled event
- Date
- 2026-04-20
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Apr 21, 2026GovPing captured this document from the original source. If the source has since changed or been removed, this is the text as it existed at that time.
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CMF publishes for consultation regulation on reinsurance operations for life annuities through foreign entities
The proposal moves the Chilean insurance market forward by allowing a more efficient, diversified management of risks related to long-term pension obligations under an adequate prudential framework.
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April 20, 2026 - The Financial Market Commission (CMF) published for consultation for the next eight weeks a regulatory proposal with instructions regarding the deduction of life annuity reinsurance through foreign reinsurance entities.
The proposal - which considers the best practices of jurisdictions like the United Kingdom, the United States, Bermuda, and the Netherlands - aims to establish minimum dispositions and requirements for reinsurance transfers of annuity insurance to be deducted from the calculation of technical reserves pursuant to General Rule No. 323.
This regulatory proposal intends to strengthen the sustainability and resilience of the life annuity market by facilitating a more efficient, diversified management of risks related to long-term pension obligations. Its main elements are as follows:
- The reserve deductions for the purposes of General Rule No. 323 may not exceed 20 percent of technical reserves as calculated on the date of the contract.
- Requires reinsurers to have a minimum international risk rating equivalent to category "A".
- The reinsurer's foreign supervisor must have a memorandum of understanding with the CMF or equivalent measures for exchanging information.
- Assets backing these transferred obligations must be held in a segregated fund managed by an entity supervised by the CMF.
- Sets quantitative limits on the fund's portfolio composition, such as a maximum of 30 percent in foreign securities and 5 percent in "other investments."
- Reinsurance contracts must include early termination (recapture) clauses.
- Requires detailed quarterly information on reinsurance transactions carried out by companies. The participation of international reinsurers, which operate with broader and more diversified portfolios, can contribute to better risk distribution and reduce local risk concentration, as well as optimize the use of capital by insurance companies. Furthermore, the regulation is expected to create direct incentives for developing and expanding the annuity reinsurance market.
Interested parties can access the Regulations Under Consultation section of the CMF website to review the regulatory proposal in detail, with an eight-week timeframe to submit feedback. The Commission also makes available the corresponding Regulatory Report with its key elements.
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