Norm Reforming Articles 5, 6, 7, 11, 13, 19, 36, 37, 38, 39, 40, 41, 43 and 52; and Annex 3 of the Reinsurance, Fronting and Co-insurance Standard

Page 1 of 9 Resolution No. CD-SIBOIF-1049-1-MAR22-2018 Dated March 22, 2018

NORM REFORMING ARTICLES 5, 6, 7, 11, 13, 19, 36, 37, 38, 39, 40, 41, 43 AND 52; AND ANNEX 3 OF THE REINSURANCE, FRONTING AND CO-INSURANCE STANDARD

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

CONSIDERING

I

That on July 7, 2015, the Reinsurance, Fronting and Co-insurance Standard was issued, contained in Resolution No. CD-SIBOIF-897-2-JUL7-2015, published in La Gaceta, Official Gazette No. 148, of August 7, 2015, which aims to establish minimum guidelines to be complied with by insurance companies in their reinsurance, fronting and co-insurance operations, as well as to create the Registry of Reinsurance Companies and Reinsurance Brokers of the Superintendence, establishing the corresponding registration requirements.

II

That according to the above and based on the powers provided for in Articles 4, 5, items 1) and 3); 6, items 9) and 11); and 7 of Law 733; and Article 3, item 13) of Law 316; Law of the Superintendence of Banks and Other Financial Institutions, and its reforms.

In exercise of its powers,

HAS ISSUED

CD-SIBOIF-1049-1-MAR22-2018

The following,

NORM REFORMING ARTICLES 5, 6, 7, 11, 13, 19, 36, 37, 38, 39, 40, 41, 43 AND 52; AND ANNEX 3 OF THE REINSURANCE, FRONTING AND CO-INSURANCE STANDARD

FIRST: Articles 5, 6, 7, 11, 13, 19, 36, 37, 38, 39, 40, 41, 43 and 52 of the Reinsurance, Fronting and Co-insurance Standard, contained in Resolution No. CD-SIBOIF-897-2-JUL7-2015, published in La Gaceta, Official Gazette No. 148, of August 7, 2015, are hereby reformed, which shall read as follows:

“Article 5. Requirements for registration in the Registry.- Local insurance companies must use the services of national or foreign reinsurers that are registered in the Superintendence’s Registry. In the case of foreign reinsurers, they may apply for registration directly or through a proposal by a national insurance or reinsurance company, or by a national or foreign reinsurance broker registered in the Registry. The application for registration shall be made in writing in a communication addressed to the Superintendent indicating the lines of business in which it wishes to operate, attaching the following documents:

a) Risk rating issued by an internationally recognized rating agency. Such rating must not be older than one (1) year counted from the date of the registration application, and must comply with the guidelines established in Annex 1 of this standard, which is an integral part of it.

b) Certificate or statement from the supervisory or regulatory authority of the country of origin, evidencing that the reinsurer is legally constituted in that country and has authorization to conduct reinsurance operations abroad, indicating the lines of insurance it can reinsure.

c) Copy of the Financial Statements audited by independent audit firms, corresponding to the last three (3) fiscal years.

d) In the case where a reinsurer also acts as a Lloyd’s Representation Agency (Coverholder), in addition to complying with the requirements described in the aforementioned letters, it must present a copy of the contract (Binding Authority) signed with Lloyd’s.

e) Contact data, such as: address, telephone number, address of its offices in the country of origin, email address and website.

In the event that the application is made directly by the reinsurer, or through a foreign reinsurance broker registered in the Registry, they must designate a duly accredited representative with a physical address in the country for the purpose of managing the procedure; otherwise, the interested party will bear the costs of sending communications or resolutions issued in the processing of the application.

Article 6. Superintendent’s resolution on registration applications.- Upon meeting the requirements established in the preceding article, the Superintendent shall resolve on the registration application, authorizing or denying it, within a period not exceeding twenty (20) business days, counted from the presentation of the complete information required, to the satisfaction of the Superintendence. In case of approval, the Superintendent will notify the interested party of the registration resolution carried out by the Superintendence, which is non-transferable and for a period of three years, which will contain the name, trade name or corporate name, lines authorized for reinsurance, date of issuance and serial number of the registry by which it will be identified. In case of denial of the application, the Superintendent must provide reasons and make it known to the applicant.

The Superintendence must make public the name or corporate name of the reinsurers registered in the Registry and authorized to sign reinsurance contracts with national insurers.

To update the registry, a request letter suffices, with the Superintendent proceeding as indicated in the first paragraph of this article, provided that the reinsurer has timely and properly submitted the information required by Article 7 of this standard.

Insurance companies may cede their risks through reinsurance operations with the London Lloyd’s market, using for such purposes the services of reinsurance brokers that are registered in the Superintendence’s Registry. The underwriting syndicates of London Lloyd’s will not require individual registration.

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When reinsurance is carried out through a Subscription Agency (coverholder) authorized by Lloyd’s, it will be considered that the reinsurer is the Syndicate that sponsors (sponsor) such subscription agency, as stipulated in the contract signed (Binding Authority) with Lloyd’s.

In any case, the Subscription Agency must be registered in the Registry either as a Reinsurance Broker or Reinsurer depending on the company in question.

Article 7. Update of information.- One year after being registered in the registry, reinsurers must annually update the following information with the Superintendence:

a) Certificate or statement from the supervisory authority of the country of origin, evidencing that the reinsurer is operating;

b) Risk rating referred to in Article 5 of this standard, which must be submitted no later than January 31 of each year. If during the validity of the contract, the risk rating assigned to a reinsurer turns out to be lower than the minimum established in Annex 1 of this standard, the insurance company must immediately inform the Superintendent;

c) Audited Financial Statements by independent audit firms, corresponding to the last fiscal year, which may be submitted before the close of the following period;

d) Proof of renewal of the contract signed (Binding Authority) as a Subscription Agency (Coverholder) of Lloyd’s, when applicable, which must be submitted no later than within sixty days following the renewal; and

e) Address, telephone number, address of its offices in the country of origin, email address and website, no later than January 31 of each year.

The aforementioned information must be sent to the Superintendence after each annual closing of the reinsuring institutions.

Likewise, in the event of changes in the corporate name of the reinsurer, whether by merger, conversion or spin-off, it must inform the Superintendent within the month following the date on which the change originated. In the event that the absorbing company is not registered with the Superintendence, it must comply with the requirements established in this standard for its registration in the Registry. The change of corporate name must be accredited by a certificate issued by the supervisory body to which the reinsurer is affiliated.

Article 11. Requirements for registration in the Registry.- Insurance and reinsurance companies may only use the services of reinsurance brokers, authorized national legal entities, or foreign entities that are registered in the Superintendence’s Registry.

Interested parties wishing to act as national reinsurance brokers must present the corresponding authorization application, complying with the requirements of item a) of this article. In the case of foreign reinsurance brokers, they must present a registration application, either directly, or through a proposal by an insurance or reinsurance company registered in the Superintendence’s Registry, complying with the requirements of item b) of this article.

a) For national reinsurance brokers: Interested parties must present an authorization application to the Superintendent indicating the lines of reinsurance they wish to intermediate, attaching the following documentation:

1. Draft deed of incorporation of the company, which must be constituted as a joint-stock company and have as its sole corporate object the intermediation of reinsurance;

2. Copy of the Unique Taxpayer Registry certificate;

3. Three letters of support issued by reinsurers registered in the Superintendence’s Registry, stating their intention to conduct reinsurance business through the proposed broker;

4. Curriculum Vitae of the person who will act as legal representative, accompanied by academic credentials, training certificates accrediting knowledge in the lines of reinsurance they intend to intermediate and for which authorization is requested, as well as documents evidencing work experience in the matter; not being subject to any of the impediments in Article 17 of this standard; and any other requirement the Superintendent deems necessary to assess the competence, honorability and suitability of the proposed legal representative.

5. Opening Balance Sheet certified by a National Authorized Public Accountant and signed by the person who will act as legal representative of the company;

6. Certificates of judicial and police records of the partners and the proposed legal representative, valid on the date of submission of the application, issued by the corresponding national instances, or by those of their country of origin in the case of foreigners;

7. List of partners or shareholders, indicating their percentage participation in the company’s capital; as well as the composition of its board of directors;

8. Letter in which the proposed partners, directors and legal representative authorize the Superintendent to verify the report of their obligations with financial system institutions, issued by the Risk Central of the Superintendence; in the case of foreigners, they must present a report of their obligations issued by risk centers of their countries of origin;

9. Address of the location where their offices will be located, indicating the telephone number and email address;

10. Notarized declaration by the proposed legal representative of not being subject to the impediments established in Article 17 of this Standard;

11. In the case of Lloyd’s Subscription Agencies, they must present a copy of the

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contract signed with the corresponding Syndicate;

12. Original of the bond or insurance policy referred to in Article 19 of this standard; and

13. Copy of the Official Cash Receipt issued by the Superintendence demonstrating payment of the registration fee established in Annex 3 of this standard, which is an integral part of it.

b) For foreign reinsurance brokers: Interested parties must present a registration application to the Superintendent indicating that they are authorized to operate by the supervisory authority of their country of origin, attaching the following documentation:

1. Notarized and reasoned copy of the corporate deed and bylaws of the company with its registration data;

2. Notarized and reasoned copy of the current document issued by the supervisory authority of the country of origin stating that the interested company is authorized to intermediate reinsurance from foreign cedents;

3. Three certificates issued by reinsurers with international rating as provided for in this standard, stating that they maintain a business relationship with the reinsurance broker;

4. Notarized and reasoned copy of the General Power of Administration granted to the legal representative;

5. In the case of Lloyd’s Subscription Agencies, they must present a copy of the contract signed with the corresponding Syndicate;

6. Original of the bond or insurance policy referred to in Article 19 of this standard;

7. Copy of the Official Cash Receipt issued by the Superintendence demonstrating payment of the registration fee established in Annex 3 of this standard, which is an integral part of it; and

8. Address, telephone number, address of its offices in the country of origin, email address and website, if applicable.

c) For the establishment of branches, the head office must comply with all the requirements established in item b) of this article, and additionally must present the following:

1. Personal data identifying the legal representative designated by the head office;

2. Exact address in Nicaragua to receive notifications from the Superintendence; and

3. Copy of the Unique Taxpayer Registry certificate.

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Article 13. Update of information.- Reinsurance brokers must communicate in writing to the Superintendent any modification that occurs to the information that served as the basis for their registration in the Registry, no later than within thirty (30) days following the date on which such modification occurred. Likewise, they must annually submit to the Superintendent the renewal of the policy referred to in Article 19 of this standard.

Article 19. Bond or civil liability insurance policy.- Reinsurance brokers must have a professional civil liability bond or insurance policy that guarantees the fulfillment of the responsibilities assumed in the exercise of the intermediation activities they carry out, and respond for the damages that might occur as a consequence of errors, omissions, incompetence or negligence in the execution of their activities.

Such bond or policy must be contracted for an insured or guaranteed sum not less than the equivalent in cordobas to two million five hundred thousand United States Dollars (US$2,500,000.00).

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

a) That the deductible is 2% of the guaranteed or insured sum, which cannot exceed the equivalent in cordobas to one hundred thousand United States Dollars (US$100,000.00);

b) The 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 attributable facts that might have occurred during the original validity period, or until judicial actions brought against the reinsurance broker by the alleged victims regarding such facts within the aforementioned period are resolved by final judgment; and

c) That the coverage is of worldwide territoriality, in which case it must not exclude Nicaragua.

Once the bond or policy referred to in this article is presented to the Superintendence, it will be reviewed by the Superintendent, who may instruct modifications to it when deemed necessary, and will safeguard it if everything is in order.

Reinsurance brokers must renew the bond or policy thirty (30) days in advance of its expiration to present it to the Superintendence. While the bond is not renewed, the intermediary cannot exercise its functions; in which case, the Superintendent will communicate to national insurance and reinsurance companies authorized to operate in the country of such situation, instructing them to abstain from conducting business through reinsurance brokers who fail to comply.

Article 36. Companies that can perform operations as a fronting company.- The insurance or guarantee operation may be performed by national insurance companies (fronting company), having received instruction directly from a foreign insurer or foreign reinsurer (instructors), or through a national or foreign reinsurance broker, on behalf of the instructor.

Except for microinsurance, mandatory insurance and automobile, fronting operations may be carried out in all other lines of insurance or guarantees established in Article 66 of the General Insurance Law. Fronting operations may only be carried out on goods located or services provided within the national territory, provided that these are owned by foreign persons, natural or legal, with domicile abroad.

Article 37. Companies that can perform operations as an instructor company.- Since they cannot conduct insurance operations in Nicaragua, reinsurers or foreign insurance companies may act as instructors, provided that in both cases they comply with the requirements established in Articles 5 and 43 respectively of this standard.

In the case of national insurance companies, they may act as instructor companies for insurance companies domiciled abroad (fronting companies) complying with what is provided in Article 43 of this standard.

By the nature of fronting being a reinsurance operation, in the event that the instructor company does not directly negotiate with the national insurance company (fronting company), this may only be carried out through a national or foreign reinsurance broker, registered in the Registry kept for this purpose by the Superintendence.

The reinsurance broker must back the intermediated account with coverage notes backed 100% by the instructor company.

Article 38. Information requirements.- In accordance with what is established in Article 104 of the General Insurance Law, insurance companies acting as fronting companies must send to the Superintendent within thirty (30) days following the issuance of the policy or guarantee, the information required in Annex 4 of this standard.

Article 39. Fronting policies.- National insurance companies acting as fronting companies, at the time of signing a contract, must have their own policy approved by the Superintendence, covering the risks described in the coverage note or fronting operation contract.

When insurance companies do not have an authorized policy for the operations they intend to sign, they may perform fronting for a single term. If the fronting operation is extended to consecutive terms, they must submit a policy corresponding to the risks they have been covering for approval by the Superintendence.

Article 40. Minimum content of the coverage note in operations as a fronting company or as an instructor company.- The fronting company must sign a coverage note with the instructor company, which must be part of the policy file and must contain the following minimum aspects:

a) Nature of the risks.

b) Name of the instructor company and fronting company.

c) Fronting policy number.

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d) Period of validity.

e) Place and date of signature.

f) Insured sum of the instructor company’s liability.

g) Type of currency in which the operation is carried out.

h) Value of the premium of the policy and/or guarantee contract and the percentage of commission to be received by the fronting company.

i) Clause establishing that the fronting company will be responsible for any claim covered by the fronting policies it issues, without prejudice to what is indicated in item k) of this article, as agreed in the respective contract.

j) Method of cancellation or method of payment of claims, in the event they occur.

k) Guarantee clause for payment by the instructor company to the fronting company.

l) Clause indicating that the seat and procedure for resolving conflicts will be Nicaragua, in accordance with its national legislation.

m) Signature and seal of the contracting parties.

When the instructor is an insurer, the coverage note of the reinsurer(s) will also be part of the policy file.

Article 41. Repealed.

Article 43. File of fronting operations carried out with foreign insurance companies.- The local company, whether operating as fronting or as instructor, must keep a file for each foreign insurance company with which it carries out one of these operations, which must contain the following minimum documentation:

a) Certification or statement issued by the supervisory or regulatory authority of the country of origin evidencing that the instructor or fronting company is legally constituted in its country, indicating the lines it can insure and the list of reinsurers backing its operations;

b) Copy of the report of the last three (3) years when the foreign company is the instructor, and containing the Financial Statements audited by independent audit firms; and

c) Local risk rating.

Article 52. Contribution to the maintenance of the Superintendence.- In accordance with what is established in Article 29 of Law No. 316, national reinsurance brokers authorized by the Superintendence will contribute resources to cover its annual budget. Such

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contribution will be half a percent (0.5%) of their total annual income from commissions, calculated on December 31 of the immediately preceding year.”

SECOND: Annex 3 of the aforementioned Reinsurance, Fronting and Co-insurance Standard is hereby reformed, which shall read as follows:

ANNEX 3

TABLE OF REGISTRATION FEES FOR THE REGISTRY OF REINSURANCE BROKERS

*This fee includes the costs of local commissions for bank transfers

THIRD: This standard will enter into force upon its notification, without prejudice to its subsequent publication in La Gaceta, Official Gazette. (f) S. Rosales C. (f) V. Urcuyo V. (f) Gabriel Pasos Lacayo (f) Fausto Reyes B. (f) illegible (Silvio Moisés Casco Marenco) (f) illegible (Freddy José Blandón Argeñal) (f) illegible (Edelberto Zelaya Castillo) Ad Hoc Secretary.

URIEL CERNA BARQUERO Secretary of the Board of Directors SIBOIF

CONCEPT FEE (equivalent in national currency according to the official exchange rate) Registration U$700.00* Registration Update U$700.00*