BRAZIL Law and Practice Contributed by: Thiago Junqueira and Daniel Barreto Gelbecke, Junqueira & Gelbecke Advogados
8. Interpreting an Insurance Contract 8.1 Interpretation of Insurance Contracts and Use of Extraneous Evidence Insurance contracts in Brazil are interpreted under general contract law, complemented by specific statu- tory rules applicable to insurance. Policies must be construed and performed in good faith. Ambiguities in documents prepared by the insur- er, including pre-contractual materials, are interpreted in favour of the insured or beneficiary, and exclusions or limitations of coverage are construed restrictively, with the burden of proof on the insurer. The approach varies according to the type of contract. Consumer insurance is interpreted more protective- ly, reflecting reduced contractual autonomy and the adhesive nature of the policy. In large-risk and com- mercial insurance, greater weight is given to negoti- ated terms and professional risk allocation. Extraneous evidence is permitted. Courts may con- sider pre-contractual communications, the circum- stances of placement and, in a limited manner, market usages and customs, particularly in technically com- plex insurance arrangements. 8.2 Warranties Brazilian insurance law does not recognise “warran- ties” as a distinct contractual category in the common law sense; the concept is foreign to civil law systems and is not used as a technical label in insurance con- tracts governed by Brazilian law. Clauses with a similar function are typically drafted as duties or obligations of the insured, risk-related con- ditions or loss-prevention requirements. Their legal effects depend on their substance, not on whether they are labelled as “warranties”. Such clauses are not treated as stricter or autono- mous terms. They are interpreted in accordance with statutory insurance rules and general contract princi- ples, particularly good faith and risk relevance. A breach does not automatically lead to loss of cover- age. Intentional non-compliance by the insured gen-
ance and distribution of the LRS are subject to capital markets regulation. From a regulatory perspective: • on the insurance side, the SSPE must be author- ised and is supervised by SUSEP (Andrina received authorisation in December 2024); • on the capital markets side, public offerings or distributions of LRS fall under CVM rules; and • Joint Resolution CNSP/CMN No 9/2024 governs the role of the fiduciary agent, including eligibility criteria, duties, conflicts of interest and disclosure obligations. The main challenges stem from the recent introduc- tion of the framework, the limited number of market precedents and the need for co-ordination between insurance supervision (SUSEP/CNSP) and capital markets regulation (CVM/B3) when structuring and placing these instruments. 7.2 Foreign ART Transactions Foreign ART transactions are still uncommon in Brazil and there is no specific regulatory framework address- ing them directly. As a result, Brazilian insurers and reinsurers have made limited practical use of offshore ILS, cat bonds or similar structures. Brazilian solvency regulation is largely principle-based and economically oriented, which allows the regulator to assess transactions based on their substance and risk-transfer effect, rather than solely on their legal form. In this context, a foreign ART transaction may potentially be considered as reinsurance for solvency purposes, provided it results in an effective and meas- urable transfer of insurance risk. However, in the absence of express rules or con- solidated supervisory practice, such treatment is not assured. In practice, foreign ART transactions tend to be evaluated on a case-by-case basis. Where the structure does not clearly fit within the reinsurance regulatory perimeter, it may be regarded primarily as a financial risk-financing arrangement, rather than as reinsurance for prudential purposes.
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