Modifying Circular 1/19 of the Single Document on Insurance and Sureties — SHCP — MX

DOF: 31/05/2019

CIRCULAR Modifying 1/19 of the Single Document on Insurance and Sureties

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

MODIFYING CIRCULAR 1/19 OF THE SINGLE DOCUMENT ON INSURANCE AND SURETIES

(Provisions 6.5.5., 6.5.6., 6.5.7., 6.5.8., 6.5.9., 6.5.10., 6.5.11., 6.5.12., 6.5.13., 6.5.14., 6.5.15., 6.5.16., 6.5.17., 6.5.18., 6.5.19., 6.5.20., 6.5.21., 6.5.22. and 6.5.23.; Annexes 6.5.12-a, 6.5.12-b and 6.5.13)

The National Insurance and Sureties Commission, based on what is established in articles 366, fraction II, 369, fraction I, 372, fractions V, VI and XLII, 373 and 381 of the Law on Insurance and Surety Institutions, and

CONSIDERING

That in terms of what is established in articles 232, 233 and 234 of the Law on Insurance and Surety Institutions, Institutions must calculate monthly a solvency capital requirement, and in particular, for the insurance referred to in fraction II of article 27 of the aforementioned Law, the calculation of said requirement will only be carried out in accordance with the general formula determined for this purpose by the National Insurance and Sureties Commission.

That article 235, fraction VI, subsection b), of the Law on Insurance and Surety Institutions establishes that the solvency capital requirement will cover the risk of mismatch between assets and liabilities, which will reflect the potential loss derived from the structural lack of correspondence between assets and liabilities, due to the fact that a position cannot be covered by establishing an equivalent opposite position, and will consider, at least, duration, currency, interest rate, exchange rates, price indices, among others.

That the asset-liability mismatch capital requirement applicable to Pension Insurance Institutions is determined as the present value of the positive differences between liabilities (technical reserves) and assets (instruments affecting the investment base), both projected during the number of years for which there is some asset available in the market that offers a guaranteed return equal to or greater than inflation, in correspondence to the nature of the obligations assumed in the corresponding insurance policies.

That in view of the above, it is necessary to modify the content of various Provisions of the current Single Insurance Circular, in order to adjust the current model for the calculation of the asset-liability mismatch capital requirement, in order to incentivize adequate management of said risk, in terms of asset and liability cash flows, through a more precise method for measuring reinvestment risk.

That in order to comply with Article Fifth of the "Agreement that establishes the guidelines that must be observed by the dependencies and decentralized organisms of the Federal Public Administration, regarding the issuance of general administrative acts to which article 69-H of the Federal Administrative Procedure Law applies", published in the Official Journal of the Federation on March 8, 2017, the National Insurance and Sureties Commission will administratively simplify the procedure CNSF-16-002 named "Detailed report of the Medical Controller on any irregular situation observed", substituting its physical delivery in the offices of said Commission, by a remote submission in digital format; likewise, it will administratively facilitate the procedure CNSF-16-004 named "Notification of the appointment or dismissal of the Medical Controller", to similarly substitute its physical delivery before the National Insurance and Sureties Commission, by a remote submission in digital format, which will be provided for in the Single Insurance and Sureties Circular, particularly through the modifications made to Provisions 15.3.2. and 15.3.7., respectively; the foregoing, within a period of six months counted from the publication of this Modifying Circular in the Official Journal of the Federation.

For the above stated, the National Insurance and Sureties Commission has resolved to issue the following modification to the Modifying Circular to the Single Document on Insurance and Sureties, in the terms indicated below:

MODIFYING CIRCULAR 1/19 OF THE SINGLE DOCUMENT ON INSURANCE AND SURETIES

(Provisions 6.5.5., 6.5.6., 6.5.7., 6.5.8., 6.5.9., 6.5.10., 6.5.11., 6.5.12., 6.5. 13., 6.5.14., 6.5.15., 6.5.16., 6.5.17., 6.5.18., 6.5.19., 6.5.20., 6.5.21., 6.5.22. and 6.5.23.; Annexes 6.5.12-a, 6.5.12-b and 6.5.13)

FIRST.-

Provisions 6.5.5., 6.5.6., 6.5.7., 6.5.8., 6.5.9., 6.5.10., 6.5.11., 6.5.12., 6.5.13., 6.5.14., 6.5.15., 6.5.16., 6.5.17., 6.5.18. and 6.5.19 of the Single Document on Insurance and Sureties are modified, to read as follows:

6.5.5.

The RC b

will be equal to the positive difference between the risk reserve in force of Basic Pension Benefits to retention ( RMS p ), plus the risk reserve in force of Additional Benefits to retention ( RRCS p ) for each policy p , both obtained with the technical interest rate and the actuarial bases indicated in Provision 14.2.6, and the sum of the risk reserve in force of Basic Pension Benefits to retention ( RM p ) and the corresponding to risk reserve in force of Additional Benefits to retention ( RRC p ):

For the purposes of this Provision, the balance of the risk reserve in force of Basic Pension Benefits and of risk reserve in force of Additional Benefits must include the obligations derived from legal and administrative provisions related to the institutes or social security entities.

6.5.6.

The [Symbol] will be determined as the sum of the present value of the asset-liability mismatch requirement corresponding to each measurement interval k

( ), considering said sum up to the interval corresponding to the number of years for which there is some asset available in the market that offers a guaranteed return equal to or greater than inflation,

through which Insurance Institutions can match their liabilities:

where:

is the annual measurement interval,

is the present value of the asset-liability mismatch requirement

corresponding to measurement interval k ,

corresponds to the number of years for which there is some asset available in the

market that offers a guaranteed return equal to or greater than inflation,

is the technical interest rate defined in accordance with Provision 6.5.8,

is the asset-liability mismatch requirement corresponding to measurement interval

k , determined in accordance with Provision 6.5.9, and

is the total number of annual measurement intervals during which the

Insurance Institution continues to maintain obligations with its portfolio, in accordance with the

projection of liabilities.

6.5.7.

For the purposes of what is stated in Provision 6.5.6, the measurement interval up to which

there is an asset available in the market that offers a guaranteed return equal to or

greater than inflation, through which the Insurance Institution can match its liabilities, will be the

indicated in Annex 6.5.7.

6.5.8.

Insurance Institutions must use the discount rate indicated in Annex 6.5.8

for the determination of the present value of the asset-liability mismatch requirement

corresponding to each measurement interval k ( ).

6.5.9.

The asset-liability mismatch requirement of the annual measurement interval k ( ) to

which Provision 6.5.6 refers, will be obtained through the following procedure:

where:

is the technical interest rate defined in accordance with Provision 6.5.8, and

is the loss by asset-liability mismatch at the end of each measurement interval

k , determined in accordance with Provision 6.5.10.

6.5.10.

Insurance Institutions will calculate the loss by asset-liability mismatch at the end

of each measurement interval k ( R k ) , as the difference between their liabilities ( P k ) and net assets

of claims ( ).

If the difference between the value of liabilities and assets is positive, it will be understood that there is

loss by mismatch. Otherwise, it will be taken as zero:

6.5.11.

The liabilities to be projected will be composed of the following technical reserves,

corresponding to obligations derived from legal and administrative provisions

related to the institutes or social security entities:

Risk reserve in force of Basic Pension Benefits;

Risk reserve in force of Additional Benefits;

Special mathematical reserve;

Contingency reserve;

Reserve for investment fluctuation, and

Reserve for obligations pending fulfillment.

The projection of the liabilities of Insurance Institutions ( P k ) must be determined for the

total of annual measurement intervals during which the Insurance Institution continues to have

obligations on its portfolio. The value of the liability corresponding to the beginning of the first annual measurement

interval will be equivalent to the balance at the close of the month in question.

For the determination of the projection of the technical reserves referred to in this

Provision, the actuarial bases and the technical interest rate with which the risk reserve in force of Basic Pension Benefits and the risk reserve

in force of Additional Benefits respectively are valued must be applied.

The projection of the liability will be calculated using the policy-by-policy valuation method

according to the current Family Group Status, which must be prepared and signed by an

actuary who holds the certification in technical reserve valuation of Pension Insurance

granted by the professional college of the specialty, or who holds the respective

accreditation of knowledge before the Commission, in terms of what is stated in

Chapter 31.1.

6.5.12.

The assets to be projected will be the investments in securities with which the Insurance Institution

covers its Investment Base, attending to what is established in Title 8 of these Provisions.

For this effect, in the case of assets with a remaining duration greater than or equal to one year, only

investments in securities that by themselves offer a guaranteed return

equal to or greater than inflation or, in their case, investments in securities that offer

nominal returns, provided that the future monetary flows that compose said

instruments, are entirely covered through the acquisition of derivative products

on the National Consumer Price Index or on the UDI, in order to guarantee

a return equal to or greater than inflation .

In accordance with the above, Insurance Institutions must assign to the liability

corresponding to the beginning of the first annual measurement interval

( P 0 ), a portfolio composed of

n 0 assets, so that the sum of the values of the assets that are assigned at the

moment of valuation, is equal to the amount of the portion of the liability that is intended to be matched.

In the case where the amount of assets is less than the amount of the liability that is intended to

be matched, it will be considered that said mismatch loss will be covered by a virtual asset to

which the return rate

r f

indicated in Annex 6.5.12-a will correspond.

In the case where the amount of the liability is less than the amount of the n 0

assets, these must be

reduced proportionally in order for both amounts to be equivalent.

6.5.13.

For the purpose of the projection of assets, the following four

sub-portfolios will be considered:

Virtual asset sub-portfolio , which corresponds to the mismatch loss to

which the penultimate paragraph of Provision 6.5.12 refers, which will be projected with

the return rate r f , indicated in Annex 6.5.12-a, in accordance with the procedure

indicated in Provision 6.5.16.

II.

Liquid resources sub-portfolio , which is composed of the values that integrate

the sub-portfolio from its redemption date or from the maximum term for its

projection established in Provision 6.5.16, as well as the flows (interest payment,

capital amortizations and principal maturity) coming from the

values that integrate the sub-portfolio . The sub-portfolio will be projected with the

return rate r l , indicated in Annex 6.5.12-a, in accordance with the procedure

indicated in Provision 6.5.16.

III.

Sub-portfolio composed of Debt Securities that do not correspond to the

category to hold to maturity, which will be projected considering the

market return rates r m,j , referred to in Annex 6.5.12-a.

IV.

Sub-portfolio composed of Debt Securities that correspond to the

category to hold to maturity, which will be projected through

the

valuation based on the contracted return rates r v,j referred to in

Annex 6.5.12-a.

6.5.14.

In order to consider the effect of the payment of claims that are deducted from the asset, the

following concepts are defined:

is the amount reached by the sub-portfolio at the end of measurement interval k ,

prior to the effect of the payment of claims of said period,

is the amount reached by the sub-portfolio at the end of measurement interval k ,

once the claims of said period are discounted,

is the type of the sub-portfolio, where t in accordance with what is defined in the

Provision 6.5.13 above,

is the amount of projected actuarial claim payable during the interval

annual measurement k , where

for 1 k N

is the value of the projected actuarial claim payable during the interval

annual measurement k by policy p , calculated taking into account the different

combinations of the pension to be paid according to the current Family Group Status,

which will consider the probability of permanence of said status,

is the total number of policies in force at the close of the month in question,

is the discount rate indicated in Annex 6.5.8.

6.5.22.

The calculation of RC A to which Provision 6.5.2 refers, will be carried out using models that

take into account the following aspects:

They will be developed under methodologies based on the generation of scenarios

stochastic that reflect the variability of risks in extreme situations;

II.

The RC A will reflect, for those assets that are not considered for the purpose of the

asset projection referred to in Provision 6.5.12, the variation in the value of

said assets in a time horizon of one year, from the date on which

the RCS calculation is performed, considering the risks stated in fractions II and

III of Provision 6.5.1 ;

III.

The RC A will reflect, for those assets that are considered for the purpose of the

asset projection referred to in Provision 6.5.12, the variation in the value of

said assets in a time horizon of one year, from the date on which

the RCS calculation is performed, considering only the risks stated in the

fractions II, subsection b), and III of Provision 6.5.1 ;

IV.

The total value of assets ( A ) will be determined as follows:

where:

is the time variable such that

t = 0 corresponds to the date of RCS calculation and

=1 corresponds to the projection date, one year after the date of RCS

calculation;

A ( t )

is the present value of the total value of assets expressed in pesos subject to

risk at time t ;

A c ( t )

is the present value of the value of assets, which are considered for the purpose of the

asset projection referred to in Provision 6.5.12, expressed in pesos

subject to risk at time t , and

A nc ( t )

is the present value of the market value of assets, which are not considered

for the purpose of the asset projection referred to in Provision 6.5.12,

expressed in pesos subject to risk at time t ;

The change or variation in the total value of assets ( A ) will be calculated as:

From

A , the loss in the value of assets will be denoted as

L A and will be defined as:

VI.

The

RC A

will be calculated as the maximum between zero and the value at risk at a level of

confidence of 99.5% (VaR99.5%) of the variable of loss in the total value of assets,

L A . That is:

VII.

The loss variable

L A

will be calculated as:

where:

VIII.

The variable L Ac

will be formed by the losses in the value of assets that are

considered for the purpose of the asset projection referred to in Provision

6.5.12, which are subject to credit and concentration risk.

The loss variable L Ac is given by:

where:

is the set of assets formed by the instruments stated in the

fraction

VIII of Provision 6.3.2;

IX.

The loss variables L AC,j

corresponding to investments in the instruments

to which fraction VIII of Provision 6.3.2 refers will be calculated according to the

following formula:

where:

refers to the type of instrument corresponding to the set of assets CA described

in fraction VIII of Provision 6.3.2;

refers to the total number of instruments for the type of instrument

j , and

L AC,j,i

is the loss variable of instrument i corresponding to investments in

instruments of type

j .

The loss L AC,j,i will be calculated according to the following formula:

where:

is the value at projection time, , of the i -th instrument brought to

present value for the type of instrument

j , considering credit risk, which

will be determined according to the model and technical bases stated in the

Annex 6.3.18, and

is the value of the i -th instrument at the time of RCS calculation, , for

the type of instrument

j ;

The variable

will be formed by the losses in the value of assets that are not

considered for the purpose of the asset projection referred to in Provision

6.5.12, which are subject to market risk, which includes: the risk of

interest rate, equity risk, spread risk, and exchange rate risk, as well as by losses in the value of assets subject to the risk of

concentration and credit.

The loss is given by:

where:

is the set of assets formed by the instruments stated in fraction

VIII of Provision 6.3.2, and

XI.

The loss variables corresponding to investments in the

instruments to which fraction VIII of Provision 6.3.2 refers, will be calculated

in accordance with what is established in Provisions 6.3.3, 6.3.4, 6.3.5 and 6.3.6.

6.5.23.

The calculation of [Symbol] to which fraction III of Provision 6.2.1 refers, corresponding to

Reinsurance taken, will be equal to:

THIRD.- Annexes 6.5.12-a, 6.5.12-b and 6.5.13 of the Single Document on Insurance

and

Sureties are modified.

FOURTH.- The "LIST OF ANNEXES OF THE SINGLE DOCUMENT ON INSURANCE AND

SURETIES" is modified to refer to the new denomination of Annexes 6.5.12-a, 6.5.12-b and 6.5.13 of the

Single Document on Insurance and Sureties, to read as follows:

"LIST OF ANNEXES OF THE SINGLE DOCUMENT ON INSURANCE AND SURETIES

"...

" Annex 6.5.12-a

Interest rates or returns for the purpose of asset projection used in

the calculation of [Symbol]

" Annex 6.5.12-b

Considerations for asset projection used in the calculation of [Symbol]

" Annex 6.5.13

Terms and values for the factor applicable to the market rate of investments classified for trading and available for sale

"..."

TRANSITORY

FIRST.-

This Modifying Circular will enter into force on the day of its publication in the Official

Journal of the Federation.

SECOND.-

What is established in this Modifying Circular will be applicable from the delivery of

information of the Regulatory Report on Capital Requirements (RR-4),

corresponding to the second quarter of 2019.

THIRD.-

Institutions that, due to the entry into force of this Modifying Circular,

require adjustments to their actuarial methods for the projection of liabilities and

of expected claims, in order to comply with what is established in Provisions

6.5.11. and 6.5.14. of the Single Document on Insurance and Sureties, will have a period that may

not exceed June 1, 2019, to register the methodologies referred to in Provision 6.5.21. of the

cited Single Document.

The foregoing is made known to you, based on articles 366, fraction II, 369, fraction I,

372, fractions V, VI and XLII, 373 and 381 of the Law on Insurance and Surety Institutions.

Respectfully

Mexico City, May 7, 2019 .- The President of the National Insurance and Sureties Commission ,

Ricardo Ernesto Ochoa Rodríguez .- Rubric.

ANNEX 6.5.12-a.

INTEREST RATES OR RETURNS FOR THE PURPOSE OF ASSET PROJECTION USED

IN THE CALCULATION OF [Symbol]

The return rates r f and r l to which Provisions 6.5.12, penultimate

paragraph, 6.5.13 and 6.5.16 refer, will be the following expressed in real terms:

Return rate

real

Asset projection assumption in which it applies

=0.0%

In the case of the shortfall in the asset referred to in the penultimate paragraph of

Provision 6.5.12.

=0.0%

Applicable for the projection of the liquid resources sub-portfolio to which

Provisions 6.5.12, penultimate paragraph , 6.5.13

and 6.5.16 refer.

To determine the projected value of the investments with which the Insurance Institution

covers its Investment Base, the following instruments and rates will be taken into account:

The assets to be projected through the annual market return rate ( r m )

specific to the instrument, will be those whose classification does not correspond to the category

to be held to maturity. In this case, the rate r m will be the

provided by the price provider for each instrument, at the close of the month

in question.

II.

The assets to be valued through the contracted rate of return implicit in the

acquisition of the instrument r v and that will be held to maturity,

correspond to Debt Securities that are valued at their Amortized Cost in accordance with

Annex 22.1.2 of these Provisions.

The rates used for the projection of such assets will be real rates, or their equivalent in

terms of real.

ANNEX 6.5.12-b.

CONSIDERATIONS FOR ASSET PROJECTION USED IN THE CALCULATION OF [Symbol]

The methodology for the determination of the Dirty Price of investments in assets which are valued at

maturity as indicated in Provisions 6.5.15, 6.5.16 and 6.5.18, will be the following:

For the case of instruments that do not have committed early amortization of the

principal:

ANNEX 6.5.13.

TERMS AND VALUES FOR THE FACTOR APPLICABLE TO THE MARKET RATE OF THE

INVESTMENTS CLASSIFIED FOR TRADING AND AVAILABLE FOR SALE

Tramo k

Factor

With Trading Purposes

Available for Sale

k= 1

1.00

k= 2

0.00

0.75

k= 3

0.00

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, format, and scope of published documents are the strict responsibility of their issuer.

INQUIRY

BY DATE

INDICATORS

Exchange Rate and Rates as of 08/28/2026

DOLLAR

16.9712 UDIS

8.808812 TIIE 28 DAYS

6.7559% TIIE 91 DAYS

6.7931% TIIE 182 DAYS

6.8474% TIIE FOR FUNDING

6.50%

SURVEYS

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

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 menu of services

Electronic address: dof.gob.mx

113