Norm Reforming Articles 4, 8, and 9 of the Standard on Investment Limits for Insurance, Reinsurance, and Surety Companies

Page 1 of 3 Resolution No. CD-SIBOIF-1380-1-MAY29-2023 Dated May 29, 2023

STANDARD REFORMING ARTICLES 4, 8, AND 9 OF THE STANDARD ON INVESTMENT LIMITS FOR INSURANCE, REINSURANCE, AND SURETY COMPANIES

The Board of Directors of the Superintendence of Banks and Other Financial Institutions,

CONSIDERING

I

That Article 39 of Law No. 733, "General Law of Insurance, Reinsurance, and Surety," published in La Gaceta, Official Gazette No. 162, 163, and 164, on August 25, 26, and 27, 2010, respectively (Law No. 733), contained in Law No. 974, "Law of the Nicaraguan Legal Digest on Banking and Finance Matters," published in La Gaceta, Official Gazette No. 164, on August 27, 2018, and its updates (Legal Digest), in its relevant parts, establishes that technical and mathematical reserves, share capital and capital reserves, and other funds of insurance companies must be backed by high-security, liquid, and profitable investments in accordance with the currency corresponding to the operation that generated them. The investment policy must establish that the investments of these companies meet these characteristics.

II

That Article 40 of the aforementioned Law No. 733 empowers the Board of Directors of the Superintendence of Banks and Other Financial Institutions, following the guidelines established in the aforementioned Article 39, to establish through general standards the instruments, maximum concentration percentages, markets, and minimum requirements that insurance companies must comply with in the investment of their assets, fully backing their technical and mathematical reserves, capital and share capital reserves, and other funds.

III

That it is necessary to reform the "Standard on Investment Limits for Insurance, Reinsurance, and Surety Companies," contained in Resolution No. CD-SIBOIF-908-1-SEPT22-2015, of September 22, 2015, published in La Gaceta, Official Gazette No. 208, on November 3, 2015, and its updates, in order to establish a global limit on investments in foreign instruments, in order to mitigate concentration risks in the portfolios of insurance and reinsurance institutions and diversify the placement of these resources, as well as to make other modifications derived from the aforementioned limit.

IV

That in accordance with the considerations set forth above and based on the powers provided for in Articles 4 and 5, numeral 1), of the aforementioned Law No. 733; and Article 3, numeral 13) and Article 10, numeral 1) of Law No. 316, "Law of the Superintendence of Banks and Other Financial Institutions," both contained in the Legal Digest.

In exercise of its powers,

HAS ISSUED,

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The following:

Resolution No. CD-SIBOIF-1380-1-MAY29-2023 STANDARD REFORMING ARTICLES 4, 8, AND 9 OF THE STANDARD ON INVESTMENT LIMITS FOR INSURANCE, REINSURANCE, AND SURETY COMPANIES

FIRST: Articles 4, 8, and 9 of the "Standard on Investment Limits for Insurance, Reinsurance, and Surety Companies," contained in Resolution CD-SIBOIF-908-1-SEPT22-2015, of September 22, 2015, published in La Gaceta, Official Gazette No. 208, on November 3, 2015, and its updates, are hereby amended, which shall read as follows:

"Article 4. Maximum Investment Amount of the Sufficiency of Investments Calculation Base in the country and abroad.- Insurance and reinsurance institutions may invest one hundred percent (100%) of their Sufficiency of Investments Calculation Base in the country and up to a maximum of 20% of the same abroad."

"Article 8. Limits by type of foreign investment.- The following shall be considered as foreign investments backing the Sufficiency of Investments Calculation Base, without exceeding twenty percent (20%) of the same in aggregate: a) Securities issued by Multilateral Credit Organizations of which the country is a member. b) Deposits and fixed-income securities issued by financial institutions with first-class risk rating in accordance with what is established in Article 21 of this standard. Likewise, they may invest in deposits in banks and financial institutions domiciled in the United States of America that do not have the minimum first-class rating required, provided that these do not exceed the amount of the guarantee granted by the Federal Deposit Insurance Corporation (FDIC). Insurance and reinsurance institutions may maintain checking or brokerage accounts in first-class financial institutions according to their operational needs, which, for the purposes of this standard, do not form part of the investments. c) Fixed-income securities issued or guaranteed by the Department of the Treasury or by institutions of the Federal Government of the United States of America, traded on the stock exchange or regulated market of the United States of America, as well as fixed-income securities issued or guaranteed by the Treasury Departments or their equivalent, of the member countries of the European Union. d) In participations in financial investment funds constituted abroad, which invest exclusively in fixed-income securities, authorized for public offering, and which have an investment-grade risk rating.

The investments established in this article must be traded on a stock exchange or regulated market and accounted for in accordance with what is established in the Accounting Framework. The limits established in Articles 7 and 8 of this standard must be reported to the Superintendence in Annex B - "Investment Limits," which becomes part of this standard."

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"Article 9. Investments of the excess of the Sufficiency of Investments Calculation Base.- The excess of the Sufficiency of Investments Calculation Base may be freely invested in the instruments referred to in Article 7 of this standard, excepting those established in letters h), i), j), and k) of said article. Likewise, they may invest the excess of the Sufficiency of Investments Calculation Base in any of the instruments referred to in Article 8 of this standard, without exceeding the global limit of up to 50% of the total investments in securities registered as investments at fair value with changes in earnings, investments at fair value with changes in other comprehensive income, and investments at amortized cost."

SECOND: Time deposits and securities, both foreign, valid on the date of notification of this resolution, that exceed the global limit established in Article 9 subject to this reform, must be cancelled no later than their respective maturity dates, in such a way that the exceeded amount decreases based on such maturities, until they comply with the global limit established in said article.

For the compliance with the foregoing, depositing and/or investing insurance and reinsurance institutions must submit to the Superintendent, no later than five (5) business days counted from the entry into force of this resolution, the detail of the investments that exceed the global limit established in Article 9 subject to this reform, in which the type of investment, issuer, value, currency, and maturity are indicated.

THIRD: This standard shall enter into force upon its notification, without prejudice to its subsequent publication in La Gaceta, Official Gazette.

(S) Legible Magaly María Sáenz Ulloa (S) Illegible (Luis Ángel Montenegro E) (S) Illegible Fausto Reyes (S) Illegible (Silvio Moisés Casco Marenco) (S) Illegible (Ervin Antonio Vargas Pérez).

SAÚL CASTELLÓN TÓRREZ Ad Hoc Secretary Board of Directors SIBOIF