Amending Circular 11/19 of the Single Insurance and Surety Circular

DOF: 28/06/2019

Amending Circular 11/19 of the Single Insurance and Surety Circular

At the margin, a seal with the National Coat of Arms, which says: United Mexican States.- SHCP.- Ministry of Finance and Public Credit.- National Insurance and Sureties Commission.

AMENDING CIRCULAR 11/19 OF THE SINGLE INSURANCE AND SURETY CIRCULAR

(Annexes 6.3.3., 6.3.7., 6.3.8. and 6.3.9.)

The National Insurance and Sureties Commission, based on the provisions of articles 366, fraction II, 372, fractions V, VI and XLII, 373 and 381 of the Law of Insurance and Surety Institutions, and

CONSIDERING

That in terms of what is established in articles 232, 233, 234 and 236 of the Law of Insurance and Surety Institutions, Insurance Institutions must calculate monthly a solvency capital requirement in accordance with the general formula determined for this purpose by the National Insurance and Sureties Commission.

That article 235, fractions IV and VI of the aforementioned Law, establishes that the solvency capital requirement of institutions, among others, must consider the underwriting risks of life insurance, accident and illness insurance, and damage insurance, as well as market risk, asset-liability mismatch risk, and credit risk.

That with the aim of improving the measurement of market risk, as well as incentivizing adequate management thereof, it is considered convenient to adjust the model for determining the loss variables of assets subject to market risk, provided for in Provisions 6.3.2 to 6.3.6, 6.5.2, 6.5.18, 6.6.2 and 6.6.9 of the Single Insurance and Surety Circular, and whose calculation methodology is specified in Annex 6.3.3. This through a simplification of the model and the technical bases that allow for direct incorporation of market information, generating greater adherence to market valuations, as well as a more efficient use of its parameters for risk measurement.

That the calculation of the loss variables for life insurance, accident and illness insurance, and damage insurance, provided for in Chapters 6.2 and 6.3 of the Single Insurance and Surety Circular and whose calculation methodology is specified in Annexes 6.3.7, 6.3.8 and 6.3.9, must be consistent with the market risk modeling considered for the assets.

For the aforementioned reasons, the National Insurance and Sureties Commission has resolved to issue the following modification to the Single Insurance and Surety Circular in the following terms:

AMENDING CIRCULAR 11/19 OF THE SINGLE INSURANCE AND SURETY CIRCULAR

(Annexes 6.3.3., 6.3.7., 6.3.8. and 6.3.9.)

SINGLE. - Annexes 6.3.3., 6.3.7., 6.3.8. and 6.3.9. of the Single Insurance and Surety Circular are modified.

TRANSITORY

SINGLE. - This Amending Circular shall enter into force the day following its publication in the Official Gazette of the Federation.

This is made known to you, based on articles 366, fraction II, 372, fractions V, VI and XLII, 373 and 381 of the Law of Insurance and Surety Institutions.

Respectfully,

Mexico City, May 31, 2019.- The President of the National Insurance and Sureties Commission, Ricardo Ernesto Ochoa Rodríguez.- Signature.

The results obtained are derived from modeling a series of underlying instruments, which are specified in the list presented below. The indices used in this section, for each of the described instruments, refer to said list.

II.1. Reference Instruments.

The following primary instruments are available from which financial risk is modeled.

They are divided into three large groups: interest rates, exchange rates, and financial indices.

a)
Interest Rate Curves.

1)
Bonds-M;

2)
UMS;

3)
UDIBONOS; and

4)
T-Bills.

b)
Exchange Rates.

1)
Dollar, and

2)
UDI.

c)
Financial Indices.

1)
National Capital Market:

i)
Basic Consumer Goods and Services;

ii)
Materials;

iii)
Industrial;

iv)
Financial Services;

v)
Telecommunications Services;

vi)
Non-Frequent Consumer Goods and Services;

vii)
Price and Quotations Index;

viii)
FIBRAS;

ix)
Mexican Sovereign Bond Index, and

x)
Federal Mortgage Society Housing Index.

2)
Foreign Capital Market:

i)
S&P Global 1200.

II.2.
Debt Instruments Issued or Backed by the Federal Government.

Below are enumerated the results used to calculate the loss distribution of the instruments referred to in subsection a) and the debt instruments referred to in subsection l) of the List of Financial Instruments of Section I.

For notational simplicity, the IF subscripts of the total instruments are omitted (in cases where this does not generate confusion).

In all results, the same vector formed by independent standard normal random variables is considered.

1.
Zero-coupon bonds expressed in their original currency. The price of a zero-coupon bond referring to curve l expressed in its currency at time t, with maturity date T is calculated as

ANNEX 6.3.7.

MODEL AND TECHNICAL BASES FOR THE DETERMINATION OF THE LOSS VARIABLE OF

SHORT-TERM LIFE INSURANCE ( L P,VCP ), FOR THE PURPOSES OF

THE CALCULATION OF THE SCR ACCORDING TO

THE GENERAL FORMULA.

For the purposes of what is established in Chapters 6.2 and 6.3 of these Provisions, in particular, with respect to what is referred to in Provisions 6.3.2 and 6.3.7, insurance institutions must calculate the loss random variable of the technical liabilities corresponding to short-term life insurance, L P,VCP . The L P,VCP constitutes one of the elements for the calculation of the Technical and Financial Risk Capital Requirement for Insurance, RC TyFS of the General Formula referred to in article 236 of the Law of Insurance and Surety Institutions for the calculation of the SCR. The loss variable, L P,VCP will be calculated in accordance with the methodology and information detailed in this annex.

I.
Introduction.

This document will describe the methodology required to calculate the distribution of the loss random variable L P,VCP , related to short-term life insurance, which is required for the calculation of the SCR. Short-term insurance will be considered as all those whose contract validity is less than one year. The loss random variable for short-term life insurance, L P,VCP , will be calculated as

where CVCP corresponds to the classification catalog for short-term life insurance detailed in the " Data Manual for the Calculation of the SCR of Short-Term Life Insurance ", the " Data Manual for the Calculation of the SCR of Taken Reinsurance Operations " and the " Data Manual for the Calculation of the SCR of Reinsurance Schemes ", which will be made known through the Commission's Website, which consider as a minimum, the following classification criteria.

Table 1: Classification Criteria Table.

Classification Criterion

Age

Currency or unit of account

Type of insurance

Contracted benefits

Range of contracted benefits

Basic benefit coverage

Organic loss coverage

Accidental death coverage

Collective death coverage

Disability or invalidity coverage

Other coverage

Survival coverage

Each group g=g(e,s,m,ts,b,r,c 1 ,c 2 ) is formed by those claims that paid coverage c1 and c2 in the simulation period (the case where c1=c2 corresponds to claims that paid a single coverage) originating from insured/certificates that coincide in age, sex, currency, type of insurance, contracted benefits, and range of benefits. The variable L P,VCP will be calculated according to the following formula:

ANNEX 6.3.8.

MODEL AND TECHNICAL BASES FOR THE DETERMINATION OF THE LOSS VARIABLE OF

LONG-TERM LIFE INSURANCE ( L P,VLP ) , FOR THE PURPOSES OF

THE CALCULATION OF THE SCR

IN ACCORDANCE WITH THE GENERAL FORMULA.

For the purposes of what is established in Chapters 6.2 and 6.3, of these Provisions, in particular, with respect to what is referred to in Provisions 6.3.2 and 6.3.8, insurance institutions must calculate the loss random variable of the technical liabilities corresponding to long-term life insurance, L P,VLP . The aforementioned loss variable constitutes one of the elements for the calculation of the Technical and Financial Risk Capital Requirement for Insurance, RC TyFS , of the General Formula referred to in article 236 of the Law of Insurance and Surety Institutions for the calculation of the SCR. The loss variable L P,VLP will be calculated in accordance with the methodology and information detailed in this annex.

I.
Introduction.

This document will describe the methodology required to calculate the distribution of the loss random variable L P,VLP , related to long-term life insurance, which is required for the calculation of the SCR. Long-term insurance will be considered as all those whose contract validity is greater than one year. The loss random variable L P,VLP will contemplate technical and financial risks for the following types of plans:

a)
Term;

b)
Whole Life;

c)
Endowment;

d)
Private annuity or pension, and

e)
Flexible or investment, that is, those long-term life insurance policies in which there is the constitution of a fund formed by the insured's savings, and the payment of the premium can be made from said fund.

The loss random variable L P,VLP will be calculated as

a)
For the plans corresponding to subsections a), b) and c) listed in this section, the criteria are:

1)
Age;

2)
Sex;

3)
Seniority;

4)
Remaining validity;

5)
Currency or unit of account;

6)
Basic benefit insured sum;

7)
Organic loss insured sum;

8)
Accidental death insured sum;

9)
Collective accidental death insured sum;

10)
Disability or invalidity insured sum;

11)
Other insured sum;

12)
Survival insured sum;

13)
Surrender values;

14)
Annual tariff premium;

15)
Acquisition expenses;

16)
Administration expenses;

17)
Lapse type;

b)
For the plans corresponding to subsection d) of this section, in addition to the criteria in point a), the following will be considered:

1)
Accumulation period for private annuities or pensions;

2)
Annuity modality, and

3)
Annualized benefit of annuity payments, and

c)
For the plans corresponding to subsection e) of this section, in addition to the criteria in point a), the following will be considered:

1)
Fund in administration, and

2)
Guaranteed rate.

In the event that reinsurance contracts cover the total claims of group g , the results from section II.3 will be used.

The present value is calculated in accordance with what is established in Annex 6.3.3.

II.
Main Results.

This section summarizes the main results for the calculation of the loss random variable of technical liabilities, L P,VLP .

II.1.
Calculation of the loss variable.

Generally, a policy/certificate with age x, seniority a , lapse type c, currency m and remaining validity r is considered. We consider the policy age e=e(x,a,c) , which we will use as general notation to index the probabilities of each of the decrements. The following results contain all the cases described in section I except for the flexible or investment insurance indicated in subsection e) of said section.

ANNEX 6.3.9.

MODEL AND TECHNICAL BASES FOR THE DETERMINATION OF THE LOSS VARIABLE OF

DAMAGE INSURANCE IN THE LINES OF CIVIL LIABILITY AND PROFESSIONAL RISKS,

MARITIME AND TRANSPORT, FIRE, AUTOMOBILES, CREDIT,

SURETYSHIP AND VARIOUS , AND OF

ACCIDENT AND ILLNESS INSURANCE,

FOR THE PURPOSES OF THE CALCULATION OF THE SCR

IN ACCORDANCE WITH THE GENERAL FORMULA.

For the purposes of what is established in Chapters 6.2 and 6.3 of these Provisions, in particular, with respect to what is referred to in Provisions 6.3.2 to 6.3.16, insurance institutions must calculate the loss random variables of the technical liabilities corresponding to Damage and Accident and Illness Insurance, (hereinafter, " Non-Life Insurance "), L P,D,Rm and L P,AyE,Rm (hereinafter, L P,NV,Rm ).

The L P,NV,Rm constitutes one of the elements for the calculation of the Technical and Financial Risk Capital Requirement for Insurance, RC TyFS of the general formula referred to in article 236 of the Law of Insurance and Surety Institutions for the calculation of the SCR. The loss variable L P,NV,Rm will be calculated in accordance with the methodology and information detailed in this annex.

I.
Introduction.

The loss random variable of Non-Life Insurance L P,NV,Rm for each of the insurance lines will be calculated as:

where:

• P NV,Rm (0) is the value of the technical liability at retention at time 0 for line Rm detailed in the " Data Manual for the Calculation of the SCR of Technical Reserves ";

• G NV,Rm (0,1) is the total value at retention of claims paid during the period (0,1).

It is determined in accordance with equation (3);

• P NV,Rm (1) is the present value of the technical liability at retention at time 1. It is determined in accordance with equation (2), and

• NV and Rm are defined in accordance with Table 1.

Table 1: Subscripts by line or type of insurance.

Index NV, R m
Line or Type of Insurance
Provision
D, RC
Civil liability and professional risks.
6.3.9
D, MyT
Maritime and Transport.
6.3.10
D, I
Fire.
6.3.11
D, A
Automobiles.
6.3.12
D, C
Credit.
6.3.13
D, CA
Suretyship.
6.3.14
D, D
Various.
6.3.15
AyE, AP
Personal Accidents.
6.3.16
AyE, GM
Medical Expenses.
6.3.16
AyE, H
Health.
6.3.16

For each line NV,Rm , the loss variable will be disaggregated as follows

where CC Rm is the catalog formed by the different classification criteria (hereinafter " coverages ") detailed in the " Data Manual for the Calculation of the SCR of Damage Insurance ", the " Data Manual for the Calculation of the SCR of Accident and Illness Insurance ", the " Data Manual for the Calculation of the SCR of Taken Reinsurance Operations " and the " Data Manual for the Calculation of the SCR of Reinsurance Schemes ", which will be made known through the Commission's Website.

The loss L NV,Rm,r will then be calculated according to the following formula:

where:

P NV,Rm,r (0) is the value of the technical liability at retention at time 0 for coverage r ;

G NV,Rm,r (0,1) is the total value at retention of claims paid for coverage r during the period (0,1). It is determined in accordance with what is proposed in sections II.1 and II.2;

P NV,Rm (1) is the present value of the technical liability at retention at time 1 for coverage r . It is determined in accordance with what is proposed in sections II.1 and II.2.

It should be mentioned that the following relationships are met:

and

with f NV,Rm the line adjustment factor of NV,Rm defined in equation (7).

In the event that reinsurance contracts cover the total claims of coverage r , the results from section II.3 will be used.

The present value is calculated in accordance with what is established in Annex 6.3.3.

II.
Results for the calculation of L NV,Rm,r .

This section summarizes the main results for the calculation of the loss random variable L NV,Rm,r .

II.1.
Direct Insurance.

For direct insurance contracts, the following relationships are met for each group g.

1.
Expense in [0,1). It will be calculated using the following expression:

where:

• Z m ( d )

is a random variable representing the exchange rate of currency m to pesos at time d ;

• P l d (·) represents the price of a zero-coupon bond of the domestic market and P m (·)

represents the price of a zero-coupon bond in market m .

• d is the fraction of the year where claims incurred are paid, generally it will be considered that d = ½;

• K r, 0 is a mixed Poisson random variable with random parameter h r that represents the number of payments the institution will make for coverage r , in the period (0,1);

• h r is a random variable with mean r that represents the frequency of claims of coverage r ;

• pm r.m is the average premium of the institution for coverage r expressed in currency

m ;

• X r,n is a random variable representing the claim index of the n-th amount paid for coverage r in the period (0,1), and mixed Poisson with random parameter h r that represents the number of payments the institution will make for coverage r , in the period (0,1);

• pm r,m X r,n takes values in the set (0, SA r,m ], where SA r,m represents the sum insured or maximum liability limit of coverage r expressed in currency m .

2.
Liability at 1. It will be calculated through the following expression:

where:

• a r is the number of years that elapse for the obligation of coverage r to extinguish;

• h r is a random variable with mean r that represents the frequency of claims of coverage r ;

• r,k represents the decay rate of the payment frequency for coverage r that will be paid in year k , with k=1, ... ,a r ;

• pm r.m is the average premium of the institution for coverage r expressed in currency

m ;

• r is the mean value of the claim index of coverage r. It is considered that the mean claim index is a random variable;

• is the price of a zero-coupon bond in currency m, expressed in pesos,

brought to present value, valued at time 1 with maturity at time T , and

• d is the fraction of the year where claims incurred are paid, generally it will be considered that d = ½.

3.
Auxiliary Liability at 0. It will be calculated through the following expression:

where:

• a r is the number of years that elapse for the obligation of coverage r to extinguish;

• r is the frequency of the number of payments made for coverage r in the period (0,1);

• r,k represents the decay rate of the payment frequency for coverage r that will be paid in year k , with k=1, ... ,a r ;

• pm r.m is the average premium of the institution for coverage r expressed in

currency

m ;

• is the expectation of the mean value of the claim index r ;

• P zm m (0,T) is the price of a zero-coupon bond in currency m, expressed in pesos,

valued at time 0 with maturity at time T , and

• d is the fraction of the year where claims incurred are paid, generally it will be considered that d = ½.

Once the above variables are calculated (including those described in section II.2 if necessary), the adjustment factor with respect to the initial value of the technical reserves is calculated according to the following relationship for each line NV,Rm.

In the event that there are negative components of P NV,Rm,r (0) , the associated risks will be excluded from the calculation of the adjustment factor, both in the numerator and denominator of expression (7).

II.2.
Taken Reinsurance.

In the case that the institution operates taken reinsurance contracts for line NV,Rm , the following variable is generated:

This variable is added to the loss variable defined in equation (1) as part of the catalog CC Rm . The following is satisfied.

1.
Expense in (0,1). The variable G NV,Rm,RT (0,1) is defined according to the following cases.

a)
With direct insurance. When there are direct insurance contracts for line Rm as:

where

¡
G NV,Rm,r (0,1) is defined as in equation (1) and represents the expense in (0,1) of

direct insurance;

¡
PND NV,Rm,RT represents the unearned premium of the taken reinsurance contracts of line Rm, and

¡
PND NV,Rm,Dir represents the unearned premium of the direct insurance contracts of line Rm.

b)
Without direct insurance. When there are no direct insurance contracts for line Rm and

it concerns institutions authorized to operate direct insurance, as:

where:

¡
PND NV,Rm,RT represents the unearned premium of the taken reinsurance contracts of line Rm ;

¡
I Rm

is a discrete uniform random variable over the set

and

¡ the set is formed by the claim indices (total amount between premium issued) corresponding to the zero delay year of the claim triangles of line Rm . The indices of each of the institutions operating line Rm are added to obtain market information.

2.
Liability at 1. The variable P NV,Rm,RT (1) is defined according to the following cases.

a)
With direct insurance. When there are direct insurance contracts for line Rm as:

where:

¡
PEA NV,Rm,RT represents the annualized issued premium of the taken reinsurance contracts of line Rm ;

¡
PPE r represents the proportion of issued premium of coverage r with respect to

the issued premium in line Rm for direct insurance given by

Where PE j , j CC Rm

represents the issued premium in direct insurance for coverage j .

The rest of the variables are defined in accordance with subsection 2 corresponding to direct insurance.

b)
Without direct insurance. When there are no direct insurance contracts for line Rm and

---

In the document you are viewing, there may be text, characters, or objects that do not display correctly due to conversion to HTML format, so we recommend always taking the digitized image of the DOF or the PDF file of the edition as a reference. The content, form, and scope of published documents are the strict responsibility of their issuer.

INQUIRY

BY DATE

Su
Mo
Tu
We
Th
Fr
Sa
INDICATORS

Exchange Rate and Rates as of 28/08/2026

DOLLAR
16.9712 UDIS
8.808812 TIIE 28 DAYS
6.7559% TIIE 91 DAYS
6.7931% TIIE 182 DAYS
6.8474% TIIE OVERNIGHT
6.50%

See more
SURVEYS

Did you like the new look of the Official Gazette of the Federation website?

No
Yes
Official Gazette of the Federation

Río Amazonas No. 62, Col. Cuauhtémoc, C.P. 06500, Mexico City Tel. (55) 5093-3200, where you can access our service menu

Electronic address: dof.gob.mx

LEGAL NOTICE | SOME RIGHTS RESERVED © 2026