Resolution No. JPRF-S-2022-012 Approves the Resolution Fixing the Contribution to the Private Insurance Fund at 0.18%

Resolution No. JPRF-S-2022-012 THE FINANCIAL POLICY AND REGULATION BOARD CONSIDERING: That, Article 226 of the Constitution of the Republic orders that: "State institutions, their agencies, dependencies, public servants, and persons acting by virtue of a state power shall exercise only the competencies and faculties attributed to them in the Constitution and the law. They shall have the duty to coordinate actions for the fulfillment of their purposes and to make effective the enjoyment and exercise of the rights recognized in the Constitution."; That, Article 9 of the Organic Code of Monetary and Financial Law provides that: "Regulatory and control bodies and the Deposit Insurance Corporation, Liquidity Fund, and Private Insurance Fund shall have the duty to coordinate actions for the fulfillment of their purposes and to make effective the enjoyment and exercise of the rights recognized in the Constitution, for which effect they shall exchange data or reports related to entities subject to their regulation and control. Information subject to secrecy and confidentiality shall be treated in accordance with the provisions of this Code."; That, Article 13 of the Organic Code of Monetary and Financial Law, Book I, creates the Financial Policy and Regulation Board as part of the Executive Function. The Board is a legal entity of public law, with administrative, financial, and operational autonomy, responsible for the formulation of credit, financial, securities, insurance, and prepaid comprehensive health care services policy and regulation; That, numeral 13 of Article 14.1 of the Organic Code of Monetary and Financial Law, Book I, prescribes as a function of the Financial Policy and Regulation Board: "Issue secondary regulation related to Deposit Insurance, Liquidity Fund, and Private Insurance Fund"; That, Article 80 of the Organic Code of Monetary and Financial Law, Book I, provides that the Deposit Insurance Corporation, Liquidity Fund, and Private Insurance Fund has the following functions: (...) 3. Administer the Private Insurance Fund and the resources that constitute it; (...) 5. Pay private insurance premiums; (...) 10. Cover the risks of legally constituted private insurance companies in the country that enter forced liquidation;"; That, Article 349 of the Organic Code of Monetary and Financial Law, Book I provides that the Private Insurance Fund shall be constituted with the following resources which shall be considered public: "a) A basic contribution of up to 0.7% on the value of net premiums of direct insurance that all insurance companies will carry out, in the percentage fixed annually by the Monetary and Financial Policy Board; and, a variable contribution of up to 0.8% of the same value based on risk ratings, also fixed by the Board, whose maximum percentage shall not exceed, in any case, 120% of the basic contribution; b) The proportion of the contribution determined in Article 67 of Book III of this Code; c) The yield from investments and net profits of each annual exercise of the Private Insurance Fund; d) Donations received; and, e) Those from loans or contingent lines obtained for the financing of its activities.- The Fund's resources shall be invested observing the principles of security, liquidity, diversification, and profitability and shall be framed within the investment policies approved by the Board.- The Fund's resources shall not be destined to cover administrative expenses nor for payment of investments in fixed assets of the Corporation.- The resources of the Private Insurance Fund shall accumulate up to the amount determined by the Monetary and Financial Policy Board, based on the technical report to be elaborated and presented by the Corporation."; That, General Provision Twenty-Ninth of the Organic Code of Monetary and Financial Law provides that: "In existing legislation where mention is made of the 'Monetary and Financial Policy Board', replace with 'Financial Policy and Regulation Board';

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That, Transitory Provision Fiftieth-Fourth added to the Organic Code of Monetary and Financial Law by the Organic Reformatory Law to the Organic Code of Monetary and Financial Law for the Defense of Dollarization, prescribes: "Transitory Regime of Resolutions of the Codification of the Monetary and Financial Policy Board. The resolutions contained in the Codification of Monetary, Financial, Securities, and Insurance Resolutions of the Monetary and Financial Policy Board and the norms issued by control bodies shall remain in force until the Monetary and Financial Policy Board and the Financial Policy and Regulation Board resolve what corresponds, within the scope of their competencies."; That, the first paragraph of Article 99 of the Statute of the Legal-Administrative Regime of the Executive Function prescribes that: "Normative acts may be repealed or reformed by the competent body to do so when deemed convenient. A normative act shall be understood as tacitly reformed to the extent that one issued subsequently contains provisions contradictory or different from the previous one."; That, Article 11 of Section III "OF THE RESOURCES OF THE PRIVATE INSURANCE FUND", Chapter I "GENERAL NORMS OF THE PRIVATE INSURANCE FUND", Title V "OF THE PRIVATE INSURANCE FUND", Book III "PRIVATE INSURANCE SYSTEM" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, prescribes that: "Art. 11.- Insurance companies in the private insurance system shall make a basic contribution of up to 0.7% on the value of net premiums of direct insurance; and, a variable contribution of up to 0.8% of the same value based on risk ratings, whose maximum percentage shall not exceed, in any case, 120% of the basic contribution; as provided in the Organic Code of Monetary and Financial Law.- For the calculation of the aforementioned contribution, the total amount of net premiums issued for direct insurance of the immediate previous year shall be used. The resulting value shall be distributed in 12 equal monthly payments, which shall be made within the first 15 days of each month."; That, the General Manager and, in such capacity, legal representative, of the Deposit Insurance Corporation, Liquidity Fund, and Private Insurance Fund, through letter No. COSEDE-COSEDE-2021-0712-OFICIO of December 20, 2021, addressed to the President of the Financial Policy and Regulation Board, submitted technical and legal reports on: the basic and variable contributions that insurance companies of the Private Insurance System must make to the Private Insurance Fund; the review of the amount up to which the Private Insurance Fund must accumulate; and, the coverage amount of the Private Insurance Fund, respectively; That, on December 30, 2021, the Financial Policy and Regulation Board issued Resolution No. JPRF-S-2021-007 which in its Article 1 disposes to substitute Articles 1, 2, and 3 of Chapter II "Norm for Fixing the Contribution to the Private Insurance Fund", Title V "Of the Private Insurance Fund" of Book III "Private Insurance System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions; That, through letter No. COSEDE-COSEDE-2021-0730-OFICIO of December 30, 2021, the general management of the Deposit Insurance Corporation, Liquidity Fund, and Private Insurance Fund informs this collegiate body that Article 2 of Chapter II "Norm for Fixing the Contribution to the Private Insurance Fund", Title V "Of the Private Insurance Fund" of Book III "Private Insurance System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, reformed with Resolution No. JPRF-S-2021-007, requires an adjustment in order to maintain harmony with what is prescribed in Article 349 letter a) of the Organic Code of Monetary and Financial Law, Book I, for the risk category "BB+, less than BB+";

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That, the Technical Secretary of the Financial Policy and Regulation Board through memorandum No. JPRF-SETEC-2022-0002-M of January 5, 2022, sends to the President of the JPRF, the technical and legal analyses that support the pertinence of this resolution, contained in reports No. JPRF-CT-2022-006 and No. JPRF-CJ-2022-0001 of January 4, 2022, respectively; That, the Financial Policy and Regulation Board, in an extraordinary session held by technological means convened on January 5, 2022 and carried out through video conference on January 6, 2022, learned of the present draft resolution; and, In exercise of its functions, RESOLVES: ARTICLE 1.- Substitute in Article 2 of Chapter II "Norm for Fixing the Contribution to the Private Insurance Fund", Title V "Of the Private Insurance Fund" of Book III "Private Insurance System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, the CAR percentage (annual) corresponding to the risk rating of BB+, less than BB+ from "0.22%" to: "0.18%". FINAL PROVISION.- This resolution shall enter into force from the present date, without prejudice to its publication in the Official Register. NOTIFY.- Given in the Metropolitan District of Quito, on January 06, 2022. THE PRESIDENT, Mgs. María Paulina Vela Zambrano The resolution above was processed and signed by Master María Paulina Vela Zambrano, President of the Financial Policy and Regulation Board, in the Metropolitan District of Quito, on January 06, 2022.- I CERTIFY. TECHNICAL SECRETARY Dr. Nelly Arias Zavala