New Regulation on D&O Insurance - Overview 

May, 2017 - Andrea Piccolo

This article discusses new regulation introducing some novelties which in essence incorporate many comments coming from the industry. Some modifications to the legal framework provided for the previous regulation address the following: D&O Insurance;

Side B. Coverage; Defense Costs; Individuals as Policyholders; Nominated Risks; Penalties; Environmental Risks.: and Side C.

The Official Gazette published a new regulation enacted by SUSEP governing D&O insurance. Circular No. 553/2017 replaces Circular No. 541, issued in October 2016 and which the very SUSEP suspended before coming into force, after attracting a big wave of criticism from the insurance market.

The new regulation introduced some novelties which in essence incorporate many comments coming from the industry. Some modifications to the legal framework provided for the previous regulation include the following:

  • No doubt that Side B Coverage is Back. Side B coverage provides that the insurer shall reimburse the company for payments of risks contemplated in the policy the latter advances to officers and directors (e.g., defense costs and/or awards) and indemnification obligations that the company may have to its officers and directors (such as those based on indemnity agreements, comfort letters, etc.). Side B coverage is clearly available under Circular 553 as an extension of coverage - that is, one must pay extra to have it;

  • Defense Costs - Can Stand Alone, but are not Mandatorily Covered. Reimbursement of defense costs has now become again a typical loss covered under a D&O policy. The other ones are (i) the indemnification payable by the insurer for court or arbitral awards issued against the directors and/or officers and (ii) payment obligations arising out of settlements made by the insured and plaintiffs with the consent of the insurer. In practice, it means that one can purchase a policy covering defense costs alone – i.e., separately from the other types of indemnifiable losses. Nevertheless, insurer are free to sell D&O policies with no coverage of defense costs; and

  • Individuals may contract. It is clear now that individuals may take up D&O insurance for their own benefit;

  • All Risks or Nominated Perils? Typically, D&O policies are traded in the international insurance market as all risks’ policies. Under an all risks policy, whatever risk not explicitly excluded from coverage is deemed to be covered. However, Circular 553 frames the definition of indemnifiable losses in a way that suggests that in Brazil the policy has become a nominated risks policy. Under a nominated risks policy, only such risks plainly indicated in the policy are covered, thus, any other risks are to be excluded.


Like in the previous regulation, penalties and fines imposed upon the insured are losses for which the policy may respond. Also, under the new D&O policy environmental risks continue to be excluded from coverage.

Although the language of the regulation does not make it crystal clear, we believe insurers will be able to sell D&O policies with Side C coverage.

Insurers must have policies adapted to the new regulation and approved by SUSEP within 180 days from yesterday. After such term, the commercialization of non-adapted policies will be prohibited.

Should you have any doubts or comments, feel free to contact us.

Felipe Bastos
[email protected]

Andrea Piccolo
[email protected]



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