Costa Rica's SUGESE - Regulatory Framework and Supervision

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SUGESE is the regulatory agency charged with supervising the insurance market in Costa Rica. They license companies that may operate here, and approve each policy the company offers. The company must show that it is an experienced insurer and that its Costa Rican operations will be professionally and prudently managed. The policies are analyzed to determine that they are viable and that the premiums are priced fairly. SUGESE does not monitor specific contracts related to the policy, so the consumer must ensure that the coverage is appropriate for their individual situation.

The superintendency sees itself as a promoter of competition and would like to see as many operators and policies as possible, in order to benefit consumers. They are watching the state-owned INS to make sure that incoming insurers have a level playing field. At the same time, they are watching newcomers, to be sure that they play fairly. Particularly in terms of offering policies that are fair to the consumer, and ensuring that the consumer is protected in terms of being able to make legitimate claims on the policies they hold. In a broader sense, this leads the superintendency to inspect very closely companies that want to operate here, in addition to seeking to determine that policies they offer are viable.

An interesting aspect particular to Costa Rica is that there is not an insurance culture. The INS has offered insurance in Costa Rica for over 80 years, but as a public entity (and monopoly), it has not pursued new clients as aggressively as private enterprise would. Frequently its policies are seen as expensive or outdated, and there is the impression that there is a lot of red tape to take out policies and to make claims on them. In addition, the INS has not promoted having insurance to point where Cost Ricans believe it to be a necessity. Consequently, upper and middle income Ticos do not carry a level insurance coverage anywhere near there counterparts in Europe or the US. They are even underinsured as compared to other progressive Latin American countries, like Chile or Panama for instance.

In the long run, companies that operate here will be expected to operate transparently, and will need to provide detailed information about their operations to SUGESE. There is already a weaning out process, as about 30 companies have make initial inquiries to the SUGESE directly about the Costa Rican market and operating here, and the majority of these have failed to follow up with an application. However, of those that have initiated the application process, none have desisted and are either already approved or in the process of submitting the required documentation.

SUGESE adheres to standards recognized by the International Association of Insurance Supervisors (IAIS). According to the website, http://www.iaisweb.org/ , the association was established in 1994, and it represents insurance regulators and supervisors of some 190 jurisdictions in nearly 140 countries, constituting 97% of the world's insurance premiums. It also has more than 120 observers. Its objectives are to:

• Cooperate to contribute to improved supervision of the insurance industry on a domestic as well as on an international level in order to maintain efficient, fair, safe and stable insurance markets for the benefit and protection of policyholders
• Promote the development of well-regulated insurance markets
• Contribute to global financial stability

These objectives have lead them to create standards for regulation of markets, and these standards are outlined in this document. Insurance Core Principals and Methodology. http://www.iaisweb.org/view/element_href.cfm?src=1/94.pdf The SUGESE also must take into account norms demanded or recommended by the the World Bank, the IMF, IAA (International Actuarial Association) and IOSCO (International Organization of Securities Commissions).

In October of 2010, Fijatevos.com attended a conference sponsored by the SUGESE over the status of the insurance market and its regulation. Read this article, SUGESE - IAIS Detail of Regulatory Framework, for the full breakdown.