Recopilación de Normas de Seguros y Reaseguros – Normative Modifications Regarding Pending Claim Reserves When Lawsuits Are Filed Against the Insurer

1 Montevideo, July 19, 2024 Ref: INSURANCE AND REINSURANCE NORMS COMPILATION – Normative Modifications Regarding Pending Claim Reserves in Case a Lawsuit Has Been Filed Against the Insurer. The market is informed that the Superintendence of Financial Services adopted, on July 10, 2024, the following resolution: SUBSTITUTE in Chapter I – Property Damage Insurance and Non-Pension Insurance, of Title II – Technical Reserves, of Book II – Stability and Solvency, of the Insurance and Reinsurance Norms Compilation, Article 29 with the following: ARTICLE 29 (RESERVES FOR PENDING CLAIMS - CALCULATION). To calculate reserves for pending claims, companies must adhere to the following: A. For occurred and reported claims: The amount to be included as a reserve will be determined, claim by claim. The establishment of the reserve must be adequately justified, even in cases where a null amount is estimated, and must be based on the best estimate of the claim cost. To this end, the greatest possible amount of judgment elements must be gathered to allow determining the amount of the claim covered by the insurance at all times. For the motor vehicles and trailers branch, the reserve related to damages must be established independently from that related to civil liability. Diagonal Fabini 777 - C.P. 11100 - Tel.: (598 2) 1967 - Montevideo, Uruguay - www.bcu.gub.uy CIRCULAR N°2462

2 In the event that a lawsuit has been filed, the following considerations must be taken into account: a) All lawsuits filed against the company, as well as those in which it has been cited as guarantor, will be included. b) If a settlement is reached, the agreed amount must be taken, provided it is duly documented. c) If a judgment has been issued, the updated amount of the last one must be taken, adding the fees and expenses associated with the process that correspond to the insurance company. d) If a judgment has not yet been issued, the best estimate may be based on historical claim information of the product or branch, the particular evaluation of the circumstances of the claim, and the evolution of the judicial process. A detailed report must be prepared justifying the estimate made, in which all judgment elements considered to determine the value of the established reserve will be explicitly stated. This report must be kept updated and be based on reports from legal advisors detailing the status of the cases, with a frequency not exceeding one year. Alternatively, insurance companies may reserve exclusively a percentage of the updated claimed amount based on the own claim experience of each branch or sub-branch. The percentage to be applied cannot be less than 20% (twenty percent). If the insurance company has had to establish a Reserve for Insufficiency of Calculation for a certain branch or sub-branch detailed in articles 1 and 2 in the last two closed fiscal years or errors have been detected in its calculation, it must, from the subsequent economic year, begin to count as a reserve, for all claims in portfolio that are undergoing a judicial process without judgment and correspond to the branch/sub-branch in question, a 20% (twenty percent), as a minimum, of their updated claimed amount. This method of determining the reserve must be maintained for a period of no less than 3 (three) years. Claims for which a judgment has been issued are exempted, to which the provisions of letter c) will apply. The criteria and parameters used to establish the reserves for each branch or sub-branch must be explicitly stated in notes to the financial statements, detailing the reserved amounts in each case. e) Once the reserve amount is determined, it will be compared with the total liability of the company, taking the lower amount. f) The estimate made by the insurance company must be updated in accordance with the current legal regulations on the adjustment of obligations, plus the corresponding legal interest. Separately from the estimation of the reserve for occurred and reported claims, the reinsurer's participation will be calculated considering the reinsurance contracts corresponding to the policy in which the claim is registered, provided they permanently meet the conditions established in Title VI. This amount will be shown in a regularizing account of the established reserve. Non-proportional reinsurance contracts will be counted as long as the amount can be established precisely and its determination is adequately justified and available to the Superintendence of Financial Services. B. For occurred and unreported claims (which includes occurred and insufficiently reported claims), a reserve must be determined at least quarterly, with the level of disaggregation established in articles 1 and 2. For the motor vehicles and trailers branch, the reserve related to damages must be established independently from that related to civil liability. For the calculation of this reserve, one of the following methods must be applied:

1. Insurance companies that have their own historical claim information and sufficient critical mass must develop claims based on the "triangle method", projecting claims to reflect the last estimated loss. Additionally, they must have records that allow Diagonal Fabini 777 - C.P. 11100 - Tel.: (598 2) 1967 - Montevideo, Uruguay - www.bcu.gub.uy CIRCULAR N°2462

3 determining claim developments by occurrence period and development period. 2. Those companies that do not have their own historical claim information or sufficient critical mass must estimate occurred and unreported claims considering:

• The average number of daily reported claims
• The average delay period in filing claim reports
• The average cost of claims Additionally, they must consider an additional factor that captures occurred and insufficiently reported claims. In cases where there is less than 2 years of activity, alternative criteria may be applied. Regardless of the calculation method used, it must be considered that the reserve balance must be positive or null. Separately from the estimation of the reserve for occurred and unreported claims, the reinsurer's participation will be calculated, considering the corresponding reinsurance contracts, provided they permanently meet the conditions established in Title VI. This amount will be shown in a regularizing account of the established reserve. Non-proportional reinsurance contracts will be counted as long as the amount can be established precisely and its determination is adequately justified and available to the Superintendence of Financial Services. A note to the financial statements must be included explaining the methodology, establishment and derecognition criteria, and sources of information used, as well as any other aspect that may be necessary for its justification. C. Reserve for Insufficiency of Calculation: This reserve will be established at the close of each fiscal year with the level of disaggregation established in articles 1 and 2. For these purposes, the following methodology will be applied: Diagonal Fabini 777 - C.P. 11100 - Tel.: (598 2) 1967 - Montevideo, Uruguay - www.bcu.gub.uy CIRCULAR N°2462

4 a) The sum of paid and settled claims pending payment by direct insurance at the close of the fiscal year will be taken, updated monthly according to the variation experienced by the Consumer Price Index prepared by the National Institute of Statistics, net of reinsurance, plus the balances at the close of the fiscal year of claims pending settlement, net of reinsurance. b) To the amount determined in letter a., the amounts for claims occurred in the current year that have been considered within the paid (duly updated) and pending at the close, net of reinsurance, will be deducted. c) The resulting value will be divided by the amount of the sum of the balances, at the close of the previous fiscal year, of claims pending settlement (including the value of the reserve for occurred and reported claims, reserve for occurred and unreported claims, reserve for insufficiency of calculation, and other reserves for claims that are part of other reserves), net of reinsurance and updated according to the variation experienced by the Consumer Price Index prepared by the National Institute of Statistics. d) If the aforementioned quotient results in greater than 1.2, the excess percentage will be applied to the sum of the balances of the reserve for occurred and reported claims, the reserve for occurred and unreported claims, and other reserves for claims included in other reserves, net of reinsurance, resulting in such amount being the reserve to be established for insufficiency of calculation of pending claims. At the close of each fiscal year, the liability established for this concept at the close of the previous fiscal year will be derecognized, and the liability for the new amount will be established, if applicable. Regarding the motor vehicles and trailers branch, the reserve for insufficiency of calculation of damage claims and civil liability claims must be calculated independently. Diagonal Fabini 777 - C.P. 11100 - Tel.: (598 2) 1967 - Montevideo, Uruguay - www.bcu.gub.uy CIRCULAR N°2462

5 A note to the financial statements must be presented explaining the reasons that motivated the establishment of the reserve and, if applicable, a detail of the aspects to be taken into account in the reserves for claims to be established in future fiscal years. Validity: The established modifications will govern from October 1, 2024. JUAN PEDRO CANTERA Superintendent of Financial Services 2024-50-1-01167 Diagonal Fabini 777 - C.P. 11100 - Tel.: (598 2) 1967 - Montevideo, Uruguay - www.bcu.gub.uy CIRCULAR N°2462