Norm for the Marketing of Mass Insurance

Page 1 of 15 Resolution No. CD-SIBOIF-1025-1-NOV7-2017 Dated November 7, 2017

NORM FOR THE MARKETING OF MASS INSURANCE

The Board of Directors of the Superintendent of Banks and Other Financial Institutions.

CONSIDERING

I

That Article 124 of Law No. 733, General Law of Insurance, Reinsurance, and Suretyship, published in La Gaceta, Official Gazette No. 162, 163, and 164, on August 25, 26, and 27, 2010, in its relevant parts, establishes that any insurance company wishing to include a product within the category of mass insurance must request approval from the Superintendent of Banks and Other Financial Institutions (Superintendent) to do so; it being incumbent upon this official to qualify a product as mass insurance.

II

That Article 125 of the aforementioned Law No. 733 establishes that legal entities wishing to market insurance policies of mass insurance issued by insurance companies must obtain the approval of the Superintendent and register in the registry of mass insurance marketers, in accordance with a general norm to that effect issued by the Board of Directors of the Superintendent of Banks and Other Financial Institutions.

III

That in accordance with the foregoing and based on the powers provided for in Articles 4, 5, numeral 1); 6, numerals 9) and 11); and 115 and 116 of the aforementioned Law 733; and Article 3, numeral 13) of Law 316; Law of the Superintendent of Banks and Other Financial Institutions, and its reforms.

In exercise of its powers,

RESOLVES

To issue the following Norm:

Resolution No. CD-SIBOIF-1025-1-NOV7-2017 NORM FOR THE MARKETING OF MASS INSURANCE

CHAPTER I CONCEPTS, OBJECT, AND SCOPE

Article 1. Concepts.- For the purposes of this Norm, the concepts indicated in this article, both in uppercase and lowercase, singular or plural, shall have the following meanings:

a) Mass Insurance Marketers or Marketers of Mass Insurance: Legal entities authorized by the Superintendent and registered with the Superintendent to place mass insurance as an added service to their main functions. These entities are not authorized to underwrite insurance, but only to distribute coverages underwritten by insurance companies. They are characterized by being sales channels different from the traditional ones, through distribution networks that facilitate the mass sale of insurance.

b) Board of Directors: Board of Directors of the Superintendent of Banks and Other Financial Institutions.

c) Days: Business days.

d) General Law of Insurance: Law No. 733, General Law of Insurance, Reinsurance, and Suretyship, published in La Gaceta, Official Gazette No. 162, 163, and 164, on August 25, 26, and 27, 2010.

e) Law of the Superintendent: Law No. 316, Law of the Superintendent of Banks and Other Financial Institutions and its reforms.

f) Premium: The value of the installment or payment that the policyholder or insured must satisfy to an insurance company, as consideration for the coverage of the risk specified in the insurance contract.

g) Registry: Registry of Mass Insurance and Marketers of the Superintendent.

h) Recidivism: Second offense regarding a fact of the same nature already sanctioned within a period of twelve months.

i) Mass Insurance: Insurance qualified as such by the Superintendent and registered with the Superintendent, characterized by being standardized products, with a simplified marketing and distribution form, easy for the client to understand, and at more accessible costs to the public. Mass insurance is not an individual line of business, but a particular way of organizing and distributing insurance.

j) Insurance Companies: Entities authorized by the Superintendent, operating in insurance, reinsurance, suretyship, and reinsurer, national or foreign, private, state, or mixed ownership, except for the exceptions expressly contemplated in the General Law of Insurance.

k) Superintendent: Superintendent of Banks and Other Financial Institutions.

l) Superintendent: Superintendent of Banks and Other Financial Institutions.

m) Fine Unit: As established in Article 158 of the General Law of Insurance, the value of each fine unit shall be equivalent in national currency to one United States Dollar, according to the official exchange rate established by the Central Bank of Nicaragua, in effect on the date the sanction is imposed.

Article 2. Object.- This Norm aims to establish the general guidelines to be followed by insurance companies to place mass insurance policies, as well as, among other aspects, to establish the requirements for the contracting and registration of legal entities interested in marketing this type of insurance, the reports required by the Superintendent, the disciplinary regime, and the supervisory aspects applicable.

Article 3. Scope.- These provisions are applicable to insurance companies and to legal entities interested in marketing mass insurance policies.

CHAPTER II MASS INSURANCE

Article 4. Qualification of Mass Insurance.- In accordance with what is established in Article 124 of the General Law of Insurance, any insurance company wishing to include a product within the category of mass insurance must submit an application for approval and registration to the Superintendent, attaching the respective policy models. The Superintendent will qualify the presented policy models as mass insurance if it meets the following characteristics:

a) That the policy conditions are the same for all persons, for each class of risk protected; therefore, the exclusions established, if any, must be general and not related to the individualized risk, and in general, the policies must not contain special conditions or differentiated treatments among the insured; and

b) That the policy conditions are drafted precisely, without greater technical complexity, easy for the insured to understand, in clearly visible characters, in aspects such as: amount of the sum insured, amount of the premium, exclusions, risks covered, procedures for claims and for renewal or cancellation of the policy; likewise, that they provide simplified mechanisms for the payment of the premium, highlighting the definitions, exclusions, and limitations of the rights of the insured, in differentiated characters.

This qualification may be revoked when, in the reasonable judgment of the Superintendent, the product ceases to meet the characteristics of mass insurance established in this norm.

Article 5. Creation of the Registry.- For the purposes of this Norm, the Registry of Mass Insurance and Marketers of the Superintendent is created, hereinafter referred to as the Registry.

CHAPTER III CONTRACTING OF MARKETERS

Article 6. Requirements.- Insurance companies may only contract marketers who meet the following requirements:

a) That they are legally constituted and registered in the corresponding registry of the country;

b) That they have been exercising their commercial activity habitually for at least one (1) year;

c) That they have infrastructure that allows the mass sale of insurance policies, in accordance with the policies established by the insurance company; and

d) That they are in a stable financial situation, such that the reputation or solvency of the contracting insurance company cannot be affected.

Article 7. Documents for Contracting.- For the contracting of those interested in acting as marketers, insurance companies must obtain from them the following documents:

a) Notarially certified copy of the testimony of the public deed of constitution, bylaws, and of their modifications, if any, with the corresponding reasons for registration;

b) Notarially certified copy of the Single Taxpayer Registry Number (RUC);

c) Certification of the minutes of the board of directors or highest administrative body of the potential marketer, in which the decision to act as such is recorded; and

d) Notarially certified copy of the document accrediting the legal representative of the proposed marketer.

If those interested in marketing mass insurance are banks and financial institutions, it will not be necessary to present the documents mentioned in this article; it will suffice for the insurance company to obtain and present a letter signed by the legal representative of the financial institution expressing its decision to act as a marketer for said insurer and to sign the contract referred to in Article 8 of this norm.

In the case of microfinance institutions regulated and supervised by the National Microfinance Commission (CONAMI) interested in acting as marketers, the insurance company must obtain the non-objection of CONAMI so that the respective Microfinance can operate as a marketer of mass insurance, present a letter signed by the legal representative of the microfinance expressing its decision to act as a marketer and sign the contract referred to in Article 8 of this norm.

Article 8. Minimum Content of the Service Contract.- The service contracts that insurance companies sign with their marketers must contain, at a minimum, the following aspects:

a) The description of the mass insurance policies to be marketed;

b) The points of sale for the marketing of mass insurance;

c) The rights of the parties;

d) The following obligations for the marketer:

1. Inform the policyholders and insured that the responsibility for the contracted insurance corresponds directly to the insurance company;

2. Contract the surety bond or insurance policy referred to in Article 122 of the General Law of Insurance. This requirement will not be applicable to banks and financial institutions authorized, supervised, and audited by the Superintendent and to microfinance institutions regulated and supervised by CONAMI;

3. Inform the insurance company at least fifteen (15) days in advance of the incorporation of new points of sale for the marketing of mass insurance;

4. Attend to the claims of the insured and channel them to the corresponding insurance company;

5. Provide the general public with the information that the insurance company provides regarding the mass insurance it markets; and

6. Send to the insurance company within the timeframe indicated by it, the necessary information for the preparation of the reports required by the Superintendent as established in Article 19 of this norm.

7. Pay to the insurance companies, within a period not exceeding three (3) days, the sums received from clients in the concept of premiums, as established in Article 119, numeral 11) of the General Law of Insurance.

e) The internal procedures and controls for the marketing of mass insurance, which describe, at a minimum, the following:

1. Delivery of contracted policies to the insured;

2. Receipt of premiums;

3. Transfer of received premiums to the insurance company and deposit of commissions; and

4. Procedure to follow in case of claims by the insured.

f) The guidelines and controls required of the marketer to manage money laundering and terrorist financing risks;

g) The grounds for termination of the contract.

CHAPTER IV REGISTRY OF MARKETERS

Article 9. Authorization and Registration of Marketers.- Prior to contracting the potential marketer, the insurance company must submit to the Superintendent an application for approval and registration of the marketer, attaching a copy of the Superintendent's resolution approving the mass insurance to be marketed and a draft of the service contract to be signed with the proposed marketer.

Once the aforementioned documents are presented, the Superintendent will resolve on the application for approval in accordance with the results of the analysis thereof, notifying the insurance company of the approval or denial of the respective marketer within a period not exceeding fifteen (15) days, counted from the date on which the insurance company presented its application. In case of approval, the Superintendent will notify the insurance company of the corresponding approval resolution and order the inscription of the marketer in the Registry, prior to payment of the registry cost and the presentation of the surety bond or insurance policy and the respective contract, as provided in the following article.

The aforementioned resolution enables the marketer to market mass insurance on behalf of the contracting insurance company, with respect to the previously authorized policy model. The registered marketer in accordance with the preceding paragraphs may market mass insurance issued by other insurance companies, provided that the latter presents a copy of the Superintendent's resolution approving the mass insurance to be marketed, the draft of the service contract to be signed with the marketer, and the surety bond or insurance policy referred to in the following article.

Article 10. Payment of Registry Costs and Presentation of Surety Bond or Insurance Policy and Contract.- Once notified of the authorization resolution referred to in the preceding article, the insurance company must present the following documents so that the inscription of the marketer in the Registry proceeds:

a) Official cash receipt from the Superintendent proving payment of the inscription cost of the marketer, referred to in Article 116 of the General Law of Insurance, according to the amount detailed in the Table of Registry Costs contained in Annex 1 of this norm, which is an integral part of it;

b) Surety bond or insurance policy of the marketer, referred to in Article 122 of the General Law of Insurance, which complies with what is established in Articles 16 and 17 of this norm, except for the case of banks and financial institutions supervised by the Superintendent, and for microfinance institutions supervised and regulated by CONAMI; and

c) Service contract signed with the marketer.

When the aforementioned documents are not presented within the term of ten (10) days counted from the notification of the authorization resolution referred to in the preceding article, the Superintendent will proceed to invalidate the corresponding approval, except for a duly justified cause by the interested insurance company.

In case of withdrawal of the application by the interested insurance company, it may initiate a new approval process; however, it will not have the right to reimbursement or refund from the Superintendent of the registry cost paid, if applicable.

Article 11. Registry Information.- The mass insurance and marketers approved by the Superintendent will be inscribed in the Registry kept by the Superintendent for such effect. In said Registry, the number and date of the corresponding approval resolution, the name and contact data of the marketer, the mass insurance product, and the insurance company issuing said product will be noted, as well as any other information that the Superintendent considers pertinent.

Article 12. Grounds for Cancellation of Registry Inscription.- The Superintendent, ex officio or at the request of a party duly motivated and supported by documentation accrediting such petition, as the case may be, will make effective without further procedure the cancellation of the registration in the following cases:

a) By written request of the insurance company with which the insurance marketer has a service contract signed. This ground does not apply in cases where the marketer places mass insurance policies of other insurance companies, in which case it will continue to operate as such; and

b) By dissolution of the marketer informed by at least one of the insurance companies with which it signed a service contract.

CHAPTER V RESPONSIBILITIES AND CONTROLS OF INSURANCE COMPANIES

Article 13. Responsibilities.- Insurance companies will be directly responsible for the coverages of mass insurance products placed through marketers; consequently, the insurance policies delivered to the insured must contain the number of the authorization and registration resolution of the mass insurance being marketed issued by the Superintendent, as well as the following clarification:

"The insurance company is responsible for the insurance sold, on its behalf, through the marketer."

Mass insurance marketers will be responsible for the damages they may cause to the insured, beneficiaries, or policyholders and to the insurers in their marketing operations, for the non-compliance with the duties and obligations established in Article 119 of the General Law of Insurance, as applicable to them, and in this norm; for which they will respond with the errors and omissions surety bond or insurance policy referred to in Article 16 of this norm.

Insurance companies will respond to their insured for accidents that occur from the date on which the insured has paid the corresponding premium in the agreed manner, for the issuance of the policy.

Article 14. Operational Controls.- Insurance companies must implement the following minimum controls:

a) Maintain a file for each marketer containing the contracts signed with them and the documents established in Article 7 of this norm, which must be updated when any change occurs.

b) Keep control of the validity of the surety bond or insurance policy of each marketer and periodically verify that the amount thereof is not lower than required in Articles 16 and 17 of this norm.

c) Verify that the marketer is complying with the obligations derived from the contract. In case of non-compliance with the agreed conditions, they may terminate the contract, without prejudice to taking the actions that proceed to deduce the responsibilities of the case, and inform in writing to the Superintendent of what occurred within three (3) business days following the decision.

d) Keep control of statistics on operations carried out through the marketers, for which it must prepare the report referred to in Article 19 of this norm for each marketer with which it operates.

CHAPTER VI PROHIBITIONS TO MARKETERS

Article 15. Prohibitions.- Marketers are prohibited from:

a) Conditioning the sale of mass insurance policies to the sale of another product or service that they offer;

b) Charging additional fees to the insured on the authorized premium;

c) Paying the premium of the mass insurance they market from their commissions;

d) Conducting advertising outside the provisions on this matter regulated by the General Law of Insurance and the corresponding regulations;

e) Marketing mass insurance products without authorization to include them in their portfolio;

f) Marketing mass insurance products not approved by the Superintendent or that are issued by insurance companies not authorized to operate in the country.

g) Appear as the policyholder in the policies they market, except for those contracted for their personnel.

CHAPTER VII GUARANTEES

Article 16. Surety Bond or Insurance Policy of Marketers.- In accordance with what is established in Article 122 of the General Law of Insurance, marketers must have a surety bond or insurance policy that guarantees the fulfillment of the responsibilities incurred by them with the policyholders, insured, their beneficiaries, and insurance companies, due to the mass insurance marketing activities they carry out. Likewise, said surety bond or policy will serve to respond for economic damages caused by negligent acts in claims and/or indemnifications, as the case may be; as well as for damages derived from the appropriation of premiums received from their clients.

The aforementioned surety bond or policy must meet the following minimum conditions:

a) It will have no deductible;

b) The beneficiaries must be the policyholders, insured, their beneficiaries, and insurance companies;

c) Its validity must be one year and must contain a special clause stipulating that it will respond for up to one year after its expiration for imputable facts that may have occurred during the original validity period, or until judicial actions filed against the marketer by the alleged victims for such facts and within the aforementioned period are resolved by final judgment;

d) If a policy is presented as backing for its operations, it must be of automatic renewal and with a sum insured equivalent to 0.05% of the sums insured intermediated on December 31 of the immediately preceding year, which can never be less than US$250,000.00 or its equivalent in Cordobas according to the official exchange rate; and

e) The surety bond or policy must cover all types of mass insurance it markets.

Such surety bond or insurance policy must be delivered in original to the Superintendent, who will keep it in custody and return it to the marketer upon request, once the time established in subsection c) of this article has been fulfilled.

Article 17. Amount of the Surety Bond.- The amount of the surety bond referred to in the preceding article will be calculated according to the premiums placed in the immediately preceding year, ending on December 31; however, such surety bond cannot be less than the amounts equivalent in national currency, according to the official exchange rate in effect at the time of its issuance, established in the "Table of Annual Premium Ranges" contained in Annex 2 of this norm, which is an integral part of it.

Article 18. Renewal and Increase of the Bonded Sum.- Marketers must renew the surety bond thirty (30) calendar days in advance of its expiration to present it to the Superintendent. Likewise, marketers are obligated to increase their surety bond at the moment when their premium volume exceeds the upper limit of the range under which the bonded sum was calculated according to the "Table of Annual Premium Ranges" contained in Annex 2 of this norm, which is an integral part of it.

In case the surety bond or insurance policy is expired or for an amount lower than required in this norm, the Superintendent may instruct the insurance company to refrain from conducting business with the marketer in such situation.

CHAPTER VIII REPORTS

Article 19. Reports of Insurance Companies to the Superintendent.- Insurance companies must submit to the Superintendent...