COVID-19 | Recommendations regarding adjustments to insurance contracts
Abreu Advogados Team shares a Paper incorporating a set of recommendations regarding adjustments to insurance contracts as a result of the impacts COVID-19 has in Portugal.
Circular no. 1/2020 [Portuguese] was published last May, 26, further to the publication of Decree-Law no. 20-F/2020, dated May 12, approving an exceptional and temporary regime for insurance contracts.
As such, “Autoridade de Supervisão de Seguros e de Fundos de Pensões”, Insurance and Pension Funds Supervisory Authority (herein after referred to as ASF), wishes to ensure the protection of the policyholders, underwriters, participants, beneficiaries and injured parties in the context of a presumed reduction in the insured risk in view of the reduction or suspension of the respective activities.
As a result, given the economic and social role advocated by the insurance contract, ASF also made a set of recommendations to operators in order to maintain the highest standards of conduct in crisis situations.
Effectively, regarding the recommendations announced, ASF suggests that contractual conditions be adjusted according to the variation in risk. However, this adjustment cannot unbalance the adequacy of the premiums charged under the contract modality.
In this sense, ASF recommends that insurers reflect in the technical balance of the contract the uncertainties that the current pandemic context has created.
Simultaneously, ASF recommends that the operators increase their duty to inform the market, already arising from the applicable contract and legislation. The information on these alterations must be clear and accurate, and will have to mention the objective elements used in calculating the changes in premiums.
Finally, as mentioned, this Circular was made following the publication of DL no. 20-F/2020, dated May 12, which approved an exceptional and temporary regime for insurance contracts, which our analysis can be consulted here.