Amending Circular 4/24 of the Single Insurance and Surety Circular

DOF: 07/08/2024

Amending Circular 4/24 of the Single Insurance and Surety Circular

A seal with the National Coat of Arms appears at the margin, which reads: United Mexican States.- TREASURY.- Ministry of Finance and Public Credit.- National Insurance and Surety Commission.

AMENDING CIRCULAR 4/24 OF THE SINGLE INSURANCE AND SURETY CIRCULAR

(Chapter 17.2.)

The National Insurance and Surety Commission, based on the provisions of articles 26, 27, fraction XIII, 258, 260, 366, fraction II, 369, fraction I, 372, fractions V, VI, XLI and XLII, 373 and 381 of the Law of Insurance and Surety Institutions, and:

CONSIDERING

That in accordance with what is provided in article 260 of the Law of Insurance and Surety Institutions, as well as in Chapter 9.1 of the Single Insurance and Surety Circular, Institutions shall establish and approve, during the third quarter of each year, the maximum retention limits that they will apply for the immediate subsequent exercise with respect to each operation or line of business they operate.

That in home credit insurance, the current maximum retention limit (LMR) of each insured credit is equivalent to 2% of Admissible Own Funds (FOPAS), without said amount exceeding, in any case, 30% of said credit.

That for the purposes of concentration by geographic zone, Authorized Insurance Institutions to operate home credit insurance, referred to in fraction XIII of article 27 of the Law of Insurance and Surety Institutions (LISF), may not maintain risks in excess of 10% of FOPAS when the involved properties are located on the same land plot, or on contiguous plots.

That in recent years, the mortgage sector has evolved in accordance with the changing needs of the Mexican population, as well as modifications in the regulation of other entities in the financial system, a situation that requires updating the regulation regarding maximum retention limits (LMR) in home credit insurance, thereby contributing to making the mortgage sector more efficient and integral, allowing Authorized Insurance Institutions for the aforementioned line of business to perform a technical estimation based on the risks assumed.

That with the update of Chapter 17.2, the 30% cap on the credit amount for the LMR will no longer be considered, so that, based on their experience and appetite for home credit risk, these institutions may adopt a higher limit.

For the aforementioned reasons, this Commission issues the following modification to the Single Insurance and Surety Circular in the following terms:

AMENDING CIRCULAR 4/24 OF THE SINGLE INSURANCE AND SURETY CIRCULAR

(Chapter 17.2.)

FIRST. - Chapter 17.2 is modified to read as follows:

CHAPTER 17.2.

ON REINSURANCE OPERATIONS IN HOME CREDIT INSURANCE

For the purposes of articles 26, 27, fraction XIII, 258, 259 and 260 of the LISF:

17.2.1.

For the determination of the maximum retention limit (LMR) for the damage operation in the home credit line of business, the provisions established in Chapter 9.1. Of the maximum retention limits of insurance institutions, of these Regulations, shall be observed. In particular, due to the characteristics of the line of business, for the determination of said limit, what is established in fraction IX of article 260 of the LISF, which refers to the accumulation of risks by policyholder or groups of policyholders of insurance, shall be considered. The aforementioned maximum retention limit in no case may exceed the equivalent to 2% of the Admissible Own Funds that cover its RCS. In the event that the maximum retention limit calculated in accordance with the provisions of the preceding paragraph results in being greater than 1% of the Admissible Own Funds that cover the RCS, the information indicated in Provision 9.1.8 of this Circular shall be submitted.

17.2.2.

Insurance Institutions may not maintain risks for home credits insured in excess of 10% of the Admissible Own Funds that cover their RCS when the Properties subject to said insured home credits are located on the same land plot or on contiguous plots. For these purposes, contiguous plots shall be understood as those located at a maximum distance of one kilometer around.

17.2.3.

The excesses over the maximum retention limit of the damage operation in the home credit line of business, obtained in accordance with Provision 17.2.1., shall be transferred to Insurance Institutions in terms of article 118 of the LISF or Foreign Reinsurers, none of which may take more than 50% of the excess.

The transfer of said excesses must be carried out through proportional or non-proportional reinsurance contracts whose coverage is risk by risk.

TRANSITORY

FIRST. -

Publish in the Official Gazette of the Federation.

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

Respectfully,

Mexico City, July 30, 2024. - The President of the National Insurance and Surety Commission, Ricardo Ernesto Ochoa Rodríguez. - Signature.

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