JPRF-S-2025-0146 — Replaces Chapter VII “Rule on Maximum Segments and Percentages of Mandatory Investment”

Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Government Financial Management Platform. Red Block, 8th floor
| Postal Code: 170507 | Quito - Ecuador |
Resolution No. JPRF-S-2025-0146
THE FINANCIAL POLICY AND REGULATION BOARD
WHEREAS:
That, Article 82 of the Constitution of the Republic of Ecuador stipulates that legal certainty is based on respect for the Constitution and the existence of prior, clear, public legal norms applied by competent authorities; That, Article 226 of the Magna Carta stipulates that State institutions, their agencies, dependencies, public servants, and persons acting under state authority shall only exercise the competencies and powers attributed to them in the Constitution and the law; having the duty to coordinate necessary actions for the effective fulfillment of rights recognized in the Constitution; That, Article 13 of the Organic Code of Monetary and Financial Affairs, Book I, reformed by the Organic Reform Law to the Organic Code of Monetary and Financial Affairs for the Defense of Dollarization, published in Official Register Supplement No. 443 on May 3, 2021, created the Financial Policy and Regulation Board, part of the Executive Branch, as a public law legal entity with administrative, financial, and operational autonomy, responsible for formulating credit, financial, securities, insurance, and prepaid comprehensive health care service policy and regulation; That, the unnumbered article added after Article 6, ibidem, refers to international best practices and mandates that bodies with regulatory, normative, or supervisory capacity shall seek to adopt international technical standards related to their area of competence as a reference framework for issuing regulations and exercising their functions; That, Article 14 of the aforementioned code, referring to the scope of the Financial Policy and Regulation Board, determines in numbers 1, 2, and 3 that this collegiate body is responsible for formulating insurance policies; issuing regulations to maintain the integrity, solidity, sustainability, and stability of the insurance system; and, additionally, issuing micro-prudential regulations for the insurance sector; That, the third-to-last paragraph of Article 14 of the Organic Code of Monetary and Financial Affairs, Book I, states that, to fulfill its functions, the Financial Policy and Regulation Board shall issue norms in matters within its competence, without altering legal provisions; That, Article 14.1 of the aforementioned organic code, in numbers 1, 7, 17, 25, and 27, establishes that the Financial Policy and Regulation Board is responsible for fulfilling the duty and exercising the power to: regulate the creation, constitution, organization, activities, operation, and liquidation of insurance entities; issue the prudential regulatory framework to which insurance entities must adhere, which must be coherent and not give rise to regulatory arbitrage; dictate norms regulating insurance and reinsurance; apply the provisions of the Organic Code of Monetary and Financial Affairs; and, exercise other functions, duties, and powers assigned to it by the Organic Code of Monetary and Financial Affairs and the law, respectively; That, the last
paragraph of Article 14.1 of the Organic Code of Monetary and Financial Affairs, Book I, mandates that all norms and policies issued by the Financial Policy and Regulation Board in the exercise of its functions, duties, and powers must be backed by duly substantiated and argued technical reports;

Resolution No. JPRF-S-2025-0146

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Government Financial Management Platform. Red Block, 8th floor
| Postal Code: 170507 | Quito - Ecuador |
That, number 1 of Article 25.1 ibidem prescribes as one of the functions of the Technical Secretariat of this Board, the preparation of technical and legal reports supporting the regulatory proposals to be issued by the Financial Policy and Regulation Board; That, Article 22 of the Organic Code of Monetary and Financial Affairs, Book III “General Insurance Law” establishes that:
“Art. 22.- Insurance and reinsurance companies must maintain at all times the general or by-line solvency requirements regulated by the Financial Policy and Regulation Board, considering the following:
a) Technical reserves regime; b) Risk management system; c) Technical equity; and, d) Mandatory investments.
Solvency requirements will be reviewed by the Financial Policy and Regulation Board. The Board will issue the necessary regulations to apply the solvency regime provided for in this article; it may determine the deadlines, conditions, measures, and actions necessary for its application; with the aim of avoiding or attenuating the risk exposure of insurance and reinsurance companies for the benefit of policyholders. Insurance and reinsurance companies must establish technical reserves for risks in force, mathematical reserves, catastrophic reserves, reserves for pending obligations, and reserves for loss deviation; defined by the regulations issued by the Board, which will determine their methodology. Technical reserves must cover the entirety of risks assumed by insurance and reinsurance companies. The Board may create other types of technical reserves and/or modify existing ones and their calculation formula based on the dynamics of insurance business development. The technical equity regime comprises the determination of the minimum required technical equity, which is established based on an adequate capital level intended to protect insurance and reinsurance companies against effects generated by deviation in the frequency and severity of underwriting risk, as well as any other risk and especially credit risk derived from reinsurance operations. The technical equity regime requirements established in this chapter must be fulfilled in addition to provisions regarding minimum capitals established by law, and other regulations issued by the Financial Policy and Regulation Board on the matter. Every insurance and reinsurance company must establish efficient and effective schemes for the administration and control of technical, market, liquidity, credit, and operational risks.”; That, Article 23 ibidem mandates the following:
“Art. 23.- Insurance and reinsurance companies must invest their technical reserves, at least sixty percent (60%) of paid-in capital and the legal reserve, in securities, investment funds, financial instruments, and real estate, in the segments and percentages defined by the Financial Policy and Regulation Board, through general norms, seeking an adequate combination of risk, liquidity, safety, and profitability. Insurance and reinsurance companies are prohibited from trading shares or convertible bonds with institutions of the Financial System. In no case shall investments in financial instruments issued by financial system institutions exceed 10% of the total investment instruments; the Board will define the maximum percentages for other investments.”; That, General Provision Twenty-Ninth of the Organic Code of Monetary and Financial Affairs, Book I, added by the Organic Reform Law to the Organic Code of Monetary and Financial Affairs for the Defense of Dollarization, provides that in existing legislation mentioning the “Financial Policy and Regulation Monetary Board” it shall be replaced by “Financial Policy and Regulation Board”; That, Transitory Provision Fifty-Fourth of the aforementioned organic code, prescribes that “resolutions contained in the Codification of Monetary, Financial, Securities and Insurance Resolutions of the Financial Policy and Regulation Monetary Board and norms issued by control bodies shall remain in effect until the Financial Policy and Regulation Monetary Board and the Financial Policy and Regulation Board resolve what corresponds, within their competencies.”; That, Article 15 of the Organic Administrative Code, referring to the principle of responsibility, provides that the State shall be liable for damages resulting from the lack or deficiency in the provision of public services or the actions or omissions of its public servants or subjects of private rights acting in the exercise of a public power delegated by the State and its dependents, controlled entities, or contractors, with the State holding the public servant liable for willful or negligent acts or omissions, stating that no public servant is exempt from responsibility; That, the Technical Secretary of the Financial Policy and Regulation Board, through Memorandum No. JPRF-ST-2025-0021-M of April 4, 2025, submits to the Board President the Technical Report No. JPRF-CTVS-2025-001 of April 4, 2025, issued by the Technical Coordination of Policy and Regulation of the Securities and Insurance System of this Board, and the Legal Report No. JPRF-CJF-2025-011 of April 4, 2025, issued by the Legal Coordination of Financial Policy and Norms of this Board, as well as the respective draft resolution; That, the Financial Policy and Regulation Board, in an ordinary session held via technological means, convened on April 4, 2025, and carried out via video conference on April 9, 2025, reviewed the Memorandum No. JPRF-ST-2025-0021-M of April 4, 2025, issued by the
Technical Secretary of the Board; as well as the aforementioned Technical Report No. JPRF-CTVS-2025-001 and Legal Report No. JPRF-CJF-2025-011, in addition to the corresponding draft resolution; That, the Financial Policy and Regulation Board, in an ordinary session held via technological means, convened on April 4, 2025, and carried out via video conference on April 9, 2025, reviewed and approved the following Resolution; and, In exercise of its functions,

Resolution No. JPRF-S-2025-0146

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Government Financial Management Platform. Red Block, 8th floor
| Postal Code: 170507 | Quito - Ecuador |
RESOLVES:
ARTICLE ONE.- Replace Chapter VII “Rule on Maximum Segments and Percentages of Mandatory Investment”, Title III “On the Surveillance, Control and Information of the Private Insurance System”, Book III “Private Insurance System” of the Codification of Monetary, Financial, Securities and Insurance Resolutions, with the following:
“CHAPTER VII: RULE ON MAXIMUM SEGMENTS AND PERCENTAGES OF MANDATORY INVESTMENT Art. 1.- Definitions: For the purposes of this rule, the following shall be understood:
Admitted Investment: the sum of investments by insurance companies and reinsurance companies that form part of mandatory investment and comply with the guidelines established in this rule.
Multilateral Organization: a financial institution established through treaties between sovereign states with the primary objective of promoting economic cooperation, financial intermediation, providing financing for development, monetary stability, or multilateral financial assistance.
Supranational Organization: an entity established through international treaties, endowed with express competence over sovereign financial considerations, to which member States have delegated the authority to adopt decisions and issue regulations with binding force in economic or financial matters, which prevail over national regulations in their areas of competence. Art. 2.- Mandatory Investments: Insurance companies and reinsurance companies must invest their technical reserves and at least sixty percent (60%) of paid-in capital and the legal reserve, in financial instruments, securities market instruments, and other investments, within the limits and conditions set forth in the following articles. In investments, safety, liquidity, and profitability must be prioritized in that order. Art. 3.- Guidelines for the Administration of Mandatory Investment Portfolios:
Insurance companies and reinsurance companies must administer their portfolios, adhering at least to the following:
a) Technical Reserve Matching: make investments ensuring a match between technical reserves and the assets backing them. Cash flows from these investments must be structured to align in term, amount, and liquidity with estimated future obligations arising from issued policies; technical matching must be evaluated on a monthly basis. b) Portfolio Concentration: control portfolio concentration levels of admitted investments through the development and implementation of a methodology backed by studies demonstrating its validity and applicability. This methodology must have sufficient statistical and mathematical foundations to support the reliability of obtained results and must be duly approved by the Comprehensive Risk Management Committee.

In no case shall the participation per issuer in the portfolio of insurance companies and reinsurance companies, of the aggregate of fixed or variable income securities, exceed fifteen percent (15%) of the portfolio.
Art. 4.- Investments in Securities or Financial Instruments: Insurance companies and reinsurance companies must carry out their mandatory investments in the following securities or financial instruments, complying at all times with the guidelines for the administration of mandatory investment portfolios defined in this rule:

1. Up to one hundred percent (100%) in securities issued and guaranteed by institutions or entities of the public sector, including decentralized autonomous governments and public companies, as well as securities resulting from securitization processes whose originator or beneficiary belongs to the public sector, that are registered in the Public Registry of the Securities Market and on the stock exchange, and carry an “AA+” or higher risk rating. Securities issued by the Ministry of Finance or the Central Bank of Ecuador are exempt from the risk rating requirement;
2. Up to ten percent (10%) in time deposits and long-term obligations or other generic securities issued by entities of the national financial system, provided they are registered in the Public Registry of the Securities Market and on the stock exchange; and carry an "AA+" or higher risk rating, of the security or the issuer, as applicable;
3. Up to one hundred percent (100%) in long-term obligations, commercial paper issued by commercial companies subject to the control of the Superintendence of Companies, Securities and Insurance; and, securities resulting from credit-content securitization processes issued by commercial trusts, subject to the control of the Superintendence of Companies, Securities and Insurance, that are registered in the Public Registry of the Securities Market or in the Special Stock Registry (REB), that are originated by legal entities and entities of the private financial sector, and that carry an "AA+" or higher risk rating, of the security or the issuer, as applicable. Insurance companies that are part of the private insurance national system, and entities of the popular and solidary financial sector, are exempt;
4. Up to one hundred percent (100%) in shares of anonymous companies subject to the control of the Superintendence of Companies, Securities and Insurance, with the exception of those that are part of the private insurance national system, securities houses, and fund and trust management companies, and always provided they meet the following conditions:
   a. Their equity, at the close of the economic year preceding the investment date, must exceed an amount representing twenty thousand (20,000) unified basic remunerations in effect at the time of the investment; b. They must be registered in the Public Registry of the Securities Market; and, on the stock exchange; and,
   c. They must carry an "AA+" or higher risk rating.
   Investment per issuer may not exceed 10% of the paid-in capital of said issuer.
5. Up to one hundred percent (100%) in investment fund shares with a minimum AA+ rating registered in the Public Registry of the Securities Market; or, investment fund participation units that carry a minimum AA+ rating and are aligned with the investment policies of insurance companies or reinsurance companies in terms of safety, liquidity, and profitability, in that order.
   Investment in each fund may not exceed a participation of fifteen percent (15%) of the total of its shares or participation units;
6. Up to one hundred percent (100%) in participation securities from securitization processes other than credit-content ones registered in the Public Registry of the Securities Market, and that carry an "AA+" or higher risk rating, investment that may not exceed fifteen percent (15%) of the total of each process; and,
7. Up to one hundred percent (100%) in the following issuers: Sovereign governments, Central Banks, Multilateral Organizations, and Supranational Organizations.
   When referring to sovereign governments and central banks, the countries must carry a country rating of “AA”, granted by international risk agencies Standard & Poor's, Fitch Ratings, or Moody's Investors Service.
   In the event that one of the countries holds two or more sovereign risk ratings from international risk agencies, the most conservative rating shall be considered.
   Supranational and multilateral organizations are exempt from the risk rating requirement.
   The insurance company or reinsurance company must maintain documented evidence that these securities are custodied by primary broker-dealers of the Federal Reserve or the European Commission, and that these investments belong to the insurance company or reinsurance company.
   Investments shall be made exclusively in instruments denominated in United States dollars.
   Art. 5.- Advance Premium Payment: As provided in the eleventh clause of number 1 "Risks in force reserves-unearned premiums", article 5 of Subsection II “Calculation Methodology”, Section I "Rules on the Technical Reserves Regime", Chapter V "On Technical Financial Prudence Rules, Technical Reserves", of Title II "On Constitution, Organization, Activities and Operation", of this book, in the case of premiums paid in advance by the insured, this premium must be invested in its entirety, following the guidelines of this chapter. Art. 6.- For the calculation of technical reserves subject to mandatory investment, seventy-five percent (75%) of non-matured loans granted to life insurance policyholders, backed by the amount of their surrender value, shall be deducted from life insurance reserves-subaccount other reserves-savings, provided that the contracts of said policies explicitly state that the credit may be deducted from the indemnification amount to be paid. Art. 7.- Absence of Encumbrances: All investments must be free of encumbrances or limitations on ownership, with the exception of pre-existing and legal passive easements, in the case of real estate.

Resolution No. JPRF-S-2025-0146

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Government Financial Management Platform. Red Block, 8th floor
| Postal Code: 170507 | Quito - Ecuador |
Art. 8.- Registered Securities: The securities in which insurance companies and reinsurance companies make their investments shall be dematerialized, with the exception of securities issued by public sector entities that have the authorization of the Financial Policy and Regulation Board to be physical, and of generic securities issued by financial entities that maintain physical representation and must be issued in registered form. Art. 9.- Risk Management: Insurance companies and reinsurance companies shall incorporate into their risk management and administration policies and processes:

1. Criteria applicable to identify, monitor, and control the risk level of investments;
2. Adequate limits to prevent concentration in their investments by issuer, by type of financial instrument, and other criteria defined for this purpose by the control body;
3. Parameters for the selection of investments and periodic evaluation of the risk level; in accordance with the provisions established in this rule;
4. Actions that must be considered in portfolio administration to mitigate or control risk levels, when they exceed thresholds defined as acceptable by the entity; and,
5. Monthly validation mechanisms for compliance with the guidelines for the Administration of Mandatory Investment Portfolios established in this rule.
   Art. 10.- Investments in Real Estate: Insurance companies and reinsurance companies may invest in real estate, adhering at least to the following:
   a) Periodic Valuation: real estate must be periodically appraised by qualified appraisers accredited by the Superintendence of Banks. Valuation must be carried out at least every two (2) years to continuously maintain its fair value updated. b) Investment Limit: the