Resolution Amending Articles 5, 6, 7, 8, 9, 10, 11, 16, 19, 27, 29, 36, 38, 43, 47 and 54, and Adding Annex to the Reinsurance, Fronting and Co-insurance Standard

1 Resolution No. CD-SIBOIF-913-1-OCT27-2015 Dated October 27, 2015 STANDARD AMENDING ARTICLES 5, 6, 7, 8, 9, 10, 11, 16, 19, 27, 29, 36, 38, 43, 47 AND 54, AND ADDING AN ANNEX TO THE STANDARD ON REINSURANCE, FRONTING AND CO-INSURANCE

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

CONSIDERING

I That on July 7, 2015, the Standard on Reinsurance, Fronting and Co-insurance was issued, contained in Resolution No. CD-SIBOIF-897-2-JUL7-2015, published in La Gaceta, Official Journal 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 it is necessary to amend Articles 5, 6, 7, 8, 9, 10, 11, 16, 19, 27, 29, 36, 38, 43, 47 and 54 and add an annex to the aforementioned standard, with the following objectives: 1) to specify the information requirements that reinsurers and reinsurance brokers must meet to be registered in the Registry maintained by the Superintendence for such purposes, as well as the deadlines to update such information; 2) to clarify the procedure to be followed by the insurance company in the event of suspension or revocation of the registration of a reinsurer; 3) to establish new criteria regarding the minimum conditions that surety bonds or civil liability policies required of reinsurance brokers must meet; 4) to establish new mechanisms for the submission of information related to facultative reinsurance contracts and fronting policies; 5) to specify the minimum documentation that insurance company files must contain regarding their fronting operations; and 6) to clarify the definition of "leading company" regarding co-insurance operations.

III That in accordance with the foregoing and based on the powers provided for in Articles 4, 5, items 1) and 3); 6, items 9) and 11); and 7 of the aforementioned Law 733; and Article 3, item 13) of Law 316; Law of the Superintendence of Banks and Other Financial Institutions, and its amendments.

In exercise of its powers,

HAS ISSUED

The following,

Resolution No. CD-SIBOIF-913-1-OCT27-2015 STANDARD AMENDING ARTICLES 5, 6, 7, 8, 9, 10, 11, 16, 19, 27, 29, 36, 38, 43, 47 AND 54, AND ADDING AN ANNEX TO THE STANDARD ON REINSURANCE, FRONTING AND CO-INSURANCE

FIRST: Articles 5, 6, 7, 8, 9, 10, 11, 16, 19, 27, 29, 36, 38, 43, 47 and 54 of the Standard on Reinsurance, Fronting and Co-insurance, contained in Resolution No. CD-SIBOIF-897-2-JUL7-2015, published in La Gaceta, Official Journal No. 148, of August 7, 2015, are hereby amended, 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 Registry of the Superintendence. In the case of foreign reinsurers, they may apply for registration in the Registry directly or through the proposal of a national insurance or reinsurance company, or 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 international 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 from the supervisory or regulatory authority of the country of origin, stating that the reinsurer is legally constituted in that country and has authorization to carry out reinsurance operations abroad, indicating the lines of insurance it can reinsure and that there are no legal impediments to the payment of indemnities in freely convertible currencies, derived from its contracts or reinsurance operations. c) Copy of the Financial Statements audited by independent audit firms, corresponding to the last three (3) economic 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. If 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 to manage the procedure; otherwise, the interested party will assume the costs of sending communications or resolutions issued in the processing of the application.

Article 6. Superintendent's resolution on registration applications. Once the requirements established in the preceding article are met, 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 in the Registry maintained by the Superintendence, which is non-transferable and for a period of three years, which will contain the name, trade name or corporate name, types of reinsurance, lines authorized to reinsure, date of issue and serial number of registration with which it will be identified. In case of denial of the application, the Superintendent must justify it 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 registration, 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 5 of this standard, with the exception of what is required in letter c), and must submit the last economic year.

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 Registry of the Superintendence. The underwriting syndicates of London Lloyd's do not require individual registration. When reinsurance is carried out through an Underwriting Agency (coverholder), authorized by

4 Lloyd's, it shall be considered that the reinsurer will be the Syndicate that sponsors (sponsor) such underwriting agency, as stipulated in the contract signed (Binding Authority) with Lloyd's. In any case, the Underwriting 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. Reinsurers registered in the Registry must update the following information annually with the Superintendence:

a) Risk rating referred to in Article 5 of this standard, which must be presented 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; b) Audited Financial Statements by independent audit firms, corresponding to the last economic year, which may be submitted before the close of the following period; c) Proof of renewal of the contract signed (Binding Authority) as an Underwriting Agency (Coverholder) of Lloyd's, when applicable, which must be submitted no later than within sixty days following the renewal; and d) 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 submitted to the Superintendence after each annual closing of the reinsuring institutions, and they must include in reinsurance contracts a clause obligating them to submit such information to the Superintendence annually.

Likewise, in the event of changes in the corporate name of the reinsurer, whether by merger, conversion or spin-off, it must be reported to the Superintendent within the month following the date on which the change originated. In the case where 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 subordinate.

Article 8. Grounds for suspension. The Superintendent will temporarily suspend the reinsurer from the Registry if it incurs in any of the following grounds:

5 a) In case of failure to comply with the obligation to periodically submit the information referred to in the preceding article, within the indicated deadlines, for two consecutive years. b) When its risk rating is lower than the minimum established in Annex 1 of this standard. c) When, in the opinion of the supervisory body of the country of origin of the reinsurer, there are indications of lack of technical and/or financial capacity.

The suspension of the Registry will remain in effect until the circumstances that caused it are remedied, or for a maximum period of three (3) months, counted from the date of notification of the final suspension resolution, in which case proceedings will follow what is established in the following article.

While the causes that originated the suspension persist, reinsurance contracts will maintain their validity for the coverage of the risks underwritten until the expiration of the three (3) months referred to in the previous paragraph.

The Superintendence will inform these circumstances to the other insurance companies authorized to operate in the country so that they abstain from signing contracts or carrying out reinsurance operations with the reinsurer whose registration was suspended.

Article 9. Grounds for revocation. The Superintendent will revoke the registration in the Registry of a reinsurer in any of the following cases: a) When the circumstances that motivated the suspension of the registration are not remedied or corrected once the period of three (3) months referred to in the preceding article has expired. b) When a ceding insurance company, reinsurer or reinsurance broker files a substantiated complaint against the reinsurer, for having incurred in delay exceeding three (3) months in the payment of its obligations. c) When any situation arises that, according to reviews carried out by the Superintendence, indicates that the reinsurer might fail to comply or delay the fulfillment of its obligations.

6 d) When the reinsurer is in any of the following situations: notice of cessation or suspension of payments, declaration of bankruptcy, judicial or administrative intervention, creditor agreement, insolvency, concursal process of any nature or equivalent figures, in accordance with the legislation of its country of origin.

After the period of one (1) year counted from the date on which the resolution revoking the registration became final, the reinsurer may request its registration in the Registry again. For this purpose, in addition to complying with the requirements required for an initial application, it must demonstrate that it remedied the circumstances that motivated its revocation.

In the event of revocation of the registration in the Registry of the reinsurer, the Superintendent will order the ceding insurance company that from the date of such revocation, it replaces the participation or percentage of participation of this reinsurer, as well as its portfolio of ceded risks, either with the other reinsurers participating in the contract or with a new one, provided that it complies with the requirements established in this standard.

The Superintendence will inform these circumstances to the other insurance companies authorized to operate in the country so that they abstain from signing contracts or reinsurance operations with the reinsurer whose registration was revoked.

Article 10. Grounds for cancellation. The Superintendent will cancel the registration of a reinsurer when it so requests in writing, in any of the following cases: a) By decision of the highest administrative body of the company, attaching the certification of the respective meeting minutes. b) By dissolution of the company; and c) By merger of two or more reinsurers, in which case, the registration of the merged company(ies) will be cancelled, as appropriate.

Article 11. Requirements for registration in the Registry. Insurance and reinsurance companies may only use the services of reinsurance brokers, legal entities, national or foreign, that are registered in the Registry of the Superintendence. For these purposes, interested parties may apply for registration, either directly or through the proposal of an insurance or reinsurance company duly registered in the Registry maintained by the Superintendence for such purposes. The application for registration shall be made in writing, in a communication addressed to the Superintendent indicating

7 the lines in which it operates, attaching the following documents:

a) For national reinsurance brokers:

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 contracts and operations;
2. Copy of the Unique Taxpayer Registry certificate;
3. Three letters of support issued by reinsurers with international rating as provided in this standard, stating the intention to conduct reinsurance business through the proposed broker;
4. Opening Balance Sheet certified by a National Authorized Public Accountant and signed by the person who will act as the legal representative of the company;
5. Documented Curriculum Vitae of the person who will act as the legal representative of the company, evidencing knowledge and/or experience in the subject matter;
6. Judicial and police background certificates of the partners and the proposed legal representative, valid on the date of submission of the application, issued by the corresponding national instances;
7. List of partners or shareholders, indicating their percentage of 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;
9. Address of the place 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;

8 11) In the case of Lloyd's Underwriting Agencies, they must present a copy of the contract signed with the corresponding Syndicate; 12) Original of the surety 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:

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 operate in reinsurance brokerage abroad, indicating the authorized lines;
3. In the case of foreign reinsurance brokers with more than three years of operation, audited financial statements of the last three economic years. In the case of reinsurance brokers with less than three years of operation, present the financial statements corresponding to the years of operation; and in the case of reinsurance brokers starting operations, submit the projected financial statements presented to the supervisory body of the country of origin.
4. List of reinsurers with which it regularly operates, if applicable;
5. Notarized and reasoned copy of the General Power of Administration granted to the legal representative;
6. In the case of Lloyd's Underwriting Agencies, they must present a copy of the contract signed with the corresponding Syndicate;
7. Original of the surety bond or insurance policy referred to in Article 19 of this standard;
8. 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

9 it; and 9) Address, telephone number, address of its offices in the country of origin, email address and website, if any. c) For the establishment of branches, the head office must comply with all the requirements established in letter 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.

Article 16. Grounds for cancellation. The Superintendent will cancel the registration in the Registry of a reinsurance broker in any of the following cases: a) By written request of the reinsurance broker in which it expressly renounces continuing to exercise the activities for which it was authorized, attaching the resolution of the highest administrative body of the company. b) By dissolution of the reinsurance brokerage company; and c) By merger of two or more reinsurance brokerage companies, in which case, the registration of the merged company(ies) will be cancelled, as appropriate.

The cancellation request submitted by the reinsurance broker must be accompanied by the respective letter of solvency of the obligations signed with insurance companies.

Article 19. Surety bond or civil liability insurance policy. Reinsurance brokers must have a professional civil liability surety bond or policy that guarantees the fulfillment of the responsibilities assumed in the exercise of intermediation activities they carry out, and respond for the damages that might be caused as a consequence of errors, omissions, incompetence or negligence in the execution of their activities. Such surety 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 surety bond or policy must meet the following minimum conditions:

10 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 imputable facts that might have occurred during the original validity, or until judicial actions filed against the reinsurance broker by the alleged victims for such facts and within the aforementioned period are resolved by a final judgment; and c) It must be automatically renewable and must cover all lines specified in Article 66 of the General Insurance Law.

Once the surety 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.

Such surety bond or policy must be presented in original to the Superintendence, which will safeguard it and return it to the reinsurance broker upon request, once the time established in item c) of this article has been fulfilled.

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

Article 27. Submission of contracts. Insurance companies must submit to the Superintendent a copy of their reinsurance and retrocession contracts, as well as renewals, additions or modifications to said contracts, no later than ninety (90) days after they are made, in which the broker participating in the intermediated reinsurance contracts must appear. Similarly, they must inform no later than within the first fifteen (15) days of each year, the expiration dates of said contracts.

In the case of signing facultative reinsurance contracts, insurance companies will have a period of up to thirty (30) days counted from the signing of the contract to submit to the Superintendent the information required in Annex 4 of this standard, which is an integral part of it. Insurance companies must keep a file of the facultative reinsurance contracts they sign, as well as all documentation supporting them.

11 Article 29. Reconciliations and account statements. Insurance companies must, at a minimum, reconcile and issue account statements no later than sixty days after the close of each quarter, complying with the following guidelines: a) Reconciliations of balances and/or reinsurance balance: These reconciliations must be prepared for all reinsurance accounts of assets and liabilities such as: current account, premium reserve account and pending claims account charged to reinsurers, which must contain, at a minimum, the following:

1. Name of the reinsurer;
2. Type of contra