The Newly Opened Costa Rican Insurance And Reinsurance Market: A Mini-Brazil?

In August 2008, Costa Rican President Dr. Oscar Arias Sanchez signed into law Costa Rica's new Ley Reguladora del Mercado de Seguros, thereby ending the Instituto Nacional de Seguros' (INS) more than eighty-year-old monopoly over the country's insurance industry. The new law and subsequently-issued regulations permit domestic and foreign companies (with local branches) to operate insurance and reinsurance business in Costa Rica, subject to minimum capital (US$ 3 million for personal lines insurers and US$ 10 million for reinsurers) and other financial and technical requirements.

Despite the new laws and regulations, concern has persisted that foreign companies would continue certain grey market practices rather than comply with the new regulatory scheme. Halfway through 2009, Eduardo Recinos, Insurance Director for Fitch Centroamerica, reportedly commented that the true volume of insurance sales in Costa Rica is obscured by illegal sale of foreign insurance, and that he does not expect either the opening of the Costa Rican insurance market to private competition or the creation of an insurance regulator to eradicate the problem. Mr. Recinos further reportedly commented that the lack of competition in the market due to the long-standing government monopoly, together with the relative wealth and sophistication of the country's population, has created a grey market in foreign insurance that may be difficult to eliminate. Nonetheless, the market has moved forward toward a more competitive atmosphere, while the developing regulatory authorities have warned of increased vigilance concerning grey market practices now clearly prohibited by Costa Rican law.

At the end of 2009, Costa Rica's financial services supervisor, the Consejo Nacional de Supervision del Sistema Financiero (Conassif) unanimously selected Javier Cascante as the head of country's new insurance superintendency, the Superintendencia General de Seguros (Sugese). Mr. Cascante previously served as the superintendent of the nation's pensions superintendency (Supen), which has been responsible for overseeing the development of the nation's insurance market pending the creation of the insurance superintendency. Mr. Cascante will take his place at the head of Sugese on January 1, 2010. He can be expected to drive forward the implementation of the remaining necessary regulations governing the market, as well as step up enforcement activities against non-conforming insurance and reinsurance...