Published and draft legislation - Puerto Rico

Microinsurance Bill

Senate Bill 1057

On 15 October the Puerto Rican Senate passed the Microinsurance Bill. The legislation amends the Insurance Code, Law 77, 16th June 1957, to make it easier for low-income groups to access private insurance, providing a financial protection product against specified risks.

The main points introduced into the existing Insurance Code are as follows:

Definition

The Bill defines microinsurance as a low-cost, low-cover insurance policy, where the amount of the indemnity is based on a pre-defined amount, set out in the terms of the policy. The key difference between microinsurance and traditional insurance lies in its simplicity: it is a product that is easy for clients to access and understand, with quick and efficient models for resolving claims.

Premiums

Management of premiums is expected to be more efficient and less costly, enabling the client to make frequent or partial payments depending on the insured party's economic conditions (low-income groups).

Default entails the automatic suspension of cover from the date the obligation falls due, such that insurers will not be liable for losses occurring during the period in which the policy is suspended. The consumer can reactivate the policy in the two days following the notification of the automatic suspension.

Parametric insurance policies

This is recognized as a sub-category of insurance that does not pay out pure loss, in other words, the insurer is obliged to pay a predetermined amount solely because a triggering event as defined in the policy can be demonstrated to have occurred; the insured party will not have to demonstrate a specific loss or the value of that loss. This type of insurance is used to cover financial losses sustained from catastrophic events.

Other points

The regulation forbids automatic policy renewal or having more than one microinsurance policy of the same category covering the same risk; it provides exhaustive regulations for how to obtain the authorization or license to broker microinsurance as well as the categories of microinsurance distributor, producer, representative, authorized parties and general agents.

This new regulation constitutes an additional tool to make it easier to access funds against specific risks affecting low-income sectors. If it comes into law, Puerto Rico will be the first jurisdiction in the United States to incorporate microinsurance into its local market.