Resolution No. 10839-2011: Approves rules for the control of accounts receivable from and payable to reinsurers and coinsurers

Los Laureles Nº 214 - Lima 27 - Perú Telf.: (511) 6309000 Fax: (511) 6309239

Lima, October 21, 2011

S.B.S. Resolution
No. 10839-2011

The Superintendent of Banking, Insurance and
Private Administrators of Pension Funds

WHEREAS:

That, by SBS Resolution No. 288-2002 of March 26, 2002, the rules for the control of accounts receivable from and payable to reinsurers and coinsurers were approved;

That, based on the experience gained in the application of the aforementioned rules, it is considered necessary to establish clarifications in order to promote the adequate valuation and administration of the current accounts corresponding to reinsurers and coinsurers of insurance companies;

That, likewise, it is necessary to update the information on current accounts with reinsurers and coinsurers for their adequate identification and monitoring;

That, in order to gather the opinions of the general public regarding the proposed amendments to the regulations, the pre-publication of this resolution was ordered, under the provisions of Supreme Decree No. 001-2009-JUS;

Having the opinion of the Deputy Superintendencies of Insurance, Economic Studies and Legal Advice; and,

In use of the powers conferred by numerals 9 and 13 of article 349 of the General Law of the Financial System and the Insurance System and Organic Law of the Superintendency of Banking and Insurance, Law No. 26702 and its amendments, hereinafter the General Law,

RESOLVES:

Article One.- To approve the Rules for the control of accounts receivable from and payable to reinsurers and coinsurers, which shall be applicable to the insurance companies indicated in literal D of article 16 of the General Law, hereinafter companies, with the text indicated below:

Los Laureles Nº 214 - Lima 27 - Perú Telf.: (511) 6309000 Fax: (511) 6309239

“RULES FOR THE CONTROL OF ACCOUNTS RECEIVABLE FROM AND PAYABLE TO REINSURERS AND COINSURERS

Article 1. Purpose of the regulation
The purpose of this rule is to establish uniform criteria for the preparation of statements of account for reinsurance and coinsurance operations, aimed at improving the valuation of accounts receivable from and payable to reinsurers and coinsurers. These criteria will allow greater transparency of operations, as well as improve the support of the balances recorded in the financial statements of the companies to prove the quality of said assets and liabilities.

Article 2. Technical accounts with Reinsurers and/or Coinsurers
Technical accounts correspond to the statements of account, by type of contract, prepared by the reinsurance area of the companies, or whoever acts in its place, that support the balances of the current accounts with reinsurers and/or coinsurers.

The technical accounts must be prepared for each reinsurer and/or coinsurer, based on the following models, which are attached to this rule:
a) Model No. 1 “Facultative Contracts – Local and foreign Reinsurer” b) Model No. 2 “Automatic Contracts - Local and foreign Reinsurer”

The referred models correspond to the information on the detail of the movements had by type of contract and by each reinsurer.

In the case of coinsurance operations, the companies must use model 2, for the respective detail of the operations for each coinsurer.

For the preparation of the technical accounts, the companies must observe the corresponding instructions, which are inserted in each of the models.

Article 3. Current Accounts with Reinsurers and/or Coinsurers
Current accounts with reinsurers and/or coinsurers comprise the accounts receivable and payable, resulting from the compilation and summary of the technical accounts indicated in the previous article.

This information must be prepared by type of contract and by reinsurer or coinsurer and constitutes the support of items 14 “Accounts receivable from reinsurers and coinsurers” and 24 “Accounts payable to reinsurers and coinsurers” of the Trial Balance of Balances that is monthly reported to the Superintendency.

For its preparation, Annex ES-2A 1 “Current accounts with reinsurers and/or coinsurers – detail of balances reported in the trial balance” shall be used, taking into account the instructions for the corresponding filling, which are attached to the Annex.

1 Annex numbering modified by SBS Resolution No. 2842-2012 of 05-11-2012.

Los Laureles Nº 214 - Lima 27 - Perú Telf.: (511) 6309000 Fax: (511) 6309239

Article 4. Reinsurance Discount
The discount on ceded premiums is the compensation recognized by the reinsurer for the acquisition and administration expenses incurred by the company with respect to the insured risk, which is deducted from the gross reinsurance premium in proportional contracts. The amount of the discounts is recorded accounting-wise in accordance with the provisions of the reinsurance contracts.

When there are contracts that do not indicate the amounts of discounts agreed with the reinsurers, the companies must support the corresponding record with the pertinent documentation. The difference between insurance premiums and ceded premiums that is not a reinsurance discount, according to the provisions, constitutes part of the technical result.

Article 5. Support of balances with Reinsurers and/or Coinsurers
Companies must support their balances with foreign and local reinsurers, as well as balances for coinsurance and assumed reinsurance operations, with communications confirming the balances obtained in their current accounts. Such communications must be part of the reinsurer's file and be available to the Superintendency.

Article 6. Reconciliation of balances with Coinsurers
Reconciliations with coinsuring companies will be required by the Superintendency to verify the counterparty's balances and the balances in books shown by the companies. Companies may not consider as reconciling items those that originate in itself. In the reconciliations, only pending items of accounting by the counterparty with an age that may not exceed sixty (60) days from the date corresponding to the current account statement shall be incorporated.

The Superintendency may order the accounting record of obligations not accounted for by the accepting company of the risk that are recorded by the ceding company, if in its judgment there is evidence that supports the aforementioned liabilities.

Article 7. Provision for doubtful collection
The items that make up the debtor balances of the current accounts of reinsurers and/or coinsurers, in case of being past due, will be subject to the provisions detailed below:
a) Accounts maintained without movement for periods equal to or greater than six (6) months must be provisioned at fifty percent (50%) of the amount of the individual debtor items or the net debtor balance, as applicable. b) Those maintained without movement for periods equal to or greater than twelve (12) months must be provisioned at one hundred percent (100%) of the amount of the individual debtor items or the net debtor balance, as applicable. c) The provision corresponding to automatic reinsurance and coinsurance contracts shall be made for the net debtor balance of the respective current account with each reinsurer and/or coinsurer. In the case of facultative reinsurance contracts, and other modalities, the provision shall be made for the amount of the individual items that are uncollectible. In both cases, the terms established in the previous literals shall apply.

When in the judgment of the Superintendency it is considered that, in addition to the above, there is no security of collection or compliance with obligations by the reinsurer, the provision that said Organism disposes must be made.

Los Laureles Nº 214 - Lima 27 - Perú Telf.: (511) 6309000 Fax: (511) 6309239

Companies must evaluate the situations described below, which could determine the confirmation of non-compliance with the obligation by reinsurers and/or coinsurers:
a) Express denial of the payment of the claim by the reinsurer and/or coinsurer with an age equal to or greater than six (6) months, counted from the date they become aware of the final adjustment of the claim. b) Litigation in judicial and arbitration processes with reinsurers and/or coinsurers for collection of rights arising from the reinsurance contract, when there is objective evidence of a negative result for the company. c) Balances receivable from inactive current accounts with reinsurers, with an age greater than twenty-four (24) months.

If the situations described above are confirmed, the company must directly affect the receivable item with a charge to results.

Article 8. Information for the Superintendency
Companies must present to this Superintendency the information indicated in the following annexes, which form an integral part of this Resolution:
Annex ES-2A 1 “Current accounts with reinsurers, ceding insurance companies and/or coinsurers - Detail of balances reported in the trial balance of balances” on a quarterly basis,
Annex ES-2B 1 “Current accounts with reinsurers and/or coinsurers - Analysis of debtor items by age of balances and determination of provisions”, on a quarterly basis.

Such information must be submitted within thirty (30) days following the end of each quarter, except for the information corresponding to the fourth quarter of the year, which must be presented within forty-five (45) days following the end of said quarter.

Article 9 Automated information system
Companies, for the purposes of supporting the technical accounts with reinsurers and/or coinsurers, must have a system that allows verifying the information sent to this Superintendency in the last six (06) months. In this sense, it will be required that said system provide, at a minimum, the information referred to in article 2, with the detail contained in the models indicated below:
Model No. 1 “Technical accounts of facultative reinsurance contracts”.
Model No. 2 “Technical accounts of automatic reinsurance contracts”.
In the case of information on coinsurance, Model No. 2 shall be used.
The information referred to in this numeral shall be presented at the request of this Superintendency at the requested date and must allow the conversion of the information to spreadsheet format.”

1 Annex numbering modified by SBS Resolution No. 2842-2012 of 05-11-2012.

Los Laureles Nº 214 - Lima 27 - Perú Telf.: (511) 6309000 Fax: (511) 6309239

Article Two.- To modify the Chart of Accounts of the Insurance System, approved by SBS Resolution No. 348-95, in the terms indicated in annex A that forms part of this Resolution, which will be published on the institutional Portal (www.sbs.gob.pe), in accordance with the provisions of Supreme Decree No. 001-2009-JUS.

Article Three.- To incorporate the following infractions in section I “Minor Infractions” of Annex 3 “Specific infractions of the Insurance System” of the Sanctions Regulation approved by SBS Resolution No. 816-2005, as indicated below:

• Maintaining pending items of accounting in the reconciliations with coinsuring companies, which have an age greater than 60 days from the date corresponding to the current account statement.
• Not having the automated information system of current accounts with reinsurers and/or coinsurers.

Article Four.- The annexes and models mentioned in articles 8 and 9 of the provisions approved by this resolution are published on the electronic Portal of this Superintendency (www.sbs.gob.pe), in accordance with the provisions of Supreme Decree No. 001-2009-JUS.

Article Five.- This resolution shall enter into force within thirty (30) days counted from its publication in the Official Gazette El Peruano, on which date SBS Resolution No. 288-2002 shall be without effect.

Register, communicate and publish.

DANIEL SCHYDLOWSKY ROSENBERG
Superintendent of Banking, Insurance and
Private Administrators of Pension Funds

Los Laureles Nº 214 - Lima 27 - Perú Telf.: (511) 6309000 Fax: (511) 6309239

MODEL No. 1 2
FACULTATIVE CONTRACTS - LOCAL AND FOREIGN REINSURER NAME OF THE REINSURER OR CEDING INSURANCE COMPANY (*)
AS OF ......
(Type of Currency) ()

DATE (1)	DETAIL (2)	RISK (3)	PREMIUMS PAYABLE (4)	PREMIUMS RECEIVABLE (5)	CLAIMS RECEIVABLE (6)	CLAIMS PAYABLE (7)	OTHER ACCOUNTS RECEIVABLE (8)	OTHER ACCOUNTS PAYABLE (9)	DISCOUNTS AND COMMISSIONS (10)	DEBTOR BALANCE (11)	CREDITOR BALANCE (12)
Balance as of December 31 of the previous year	- Detail of each operation with indication of the name of the insured, policy number, claim number, accounting document of origin and cash vouchers.
…….
Less (-) Payments received/ made
TOTALS

(*) Name of the reinsurer or name of the ceding insurance company, when it is assumed reinsurance.
() In the case of contracts in foreign currency, state in US Dollars.

Instructions:
a) The information contained corresponds to the detail of movements had for each contract signed with the reinsurer, which must be detailed by date. b) The "Premiums Payable Ceded Reinsurance" (Column 4) are presented before discounts. c) This format must include the information corresponding to “Contracts in other modalities”, according to the Chart of Accounts. d) Accounts receivable (columns 5, 6, 8 and 11) must be recorded without considering accumulated impairment (account 1409). e) In the case of facultative reinsurance contracts, record the sum of the debtor accounts and the sum of the creditor accounts, without offsetting the balances, in columns 11 and 12. f) Retained premiums receivable and payable must be considered in columns 8 and 9 respectively. They correspond to the premiums recorded in accounts 1404, 1405, 2404 and 2405.

2 Format modified by SBS Resolution No. 6724-2016, dated 12.28.2016.

Los Laureles Nº 214 - Lima 27 - Perú Telf.: (511) 6309000 Fax: (511) 6309239

MODEL No. 2 3
AUTOMATIC CONTRACTS - LOCAL AND FOREIGN REINSURER NAME OF THE REINSURER OR CEDING INSURANCE COMPANY OR COINSURER (*)
AS OF ......
(Type of Currency) ()

DATE (1)	DETAIL (2)	RISK (3)	PREMIUMS PAYABLE (4)	PREMIUMS RECEIVABLE (5)	CLAIMS RECEIVABLE (6)	CLAIMS PAYABLE (7)	OTHER ACCOUNTS RECEIVABLE (8)	OTHER ACCOUNTS PAYABLE (9)	DISCOUNTS AND COMMISSIONS (10)	DEBTOR BALANCE (11)	CREDITOR BALANCE (12)
Previous balance as of December 31	- Detail of each operation with indication of the No. of schedule and accounting document of origin and cash vouchers
…….
…….
……..
Less (-) Payments received/ made
TOTALS

(*) Name of the reinsurer or name of the ceding insurance company (when it is assumed reinsurance) or of the coinsurer.
() In the case of contracts in foreign currency, state in US Dollars.

Instructions:
a) The information contained corresponds to the detail of movements had for each contract signed with the reinsurer, which must be detailed by date. b) The "Premiums Payable Ceded Reinsurance" (Column 4) are presented before discounts. c) Accounts receivable (columns 5, 6, 8 and 11) must be recorded without considering accumulated impairment (account 1409). d) In the case of automatic reinsurance contracts, record the sum of the debtor accounts and the sum of the creditor accounts, without offsetting the balances, in columns 11 and 12. e) This format must include ceded and assumed coinsurance operations without offsetting the balances. f) Retained premiums receivable and payable must be considered in columns 8 and 9 respectively. They correspond to the premiums recorded in accounts 1404, 1405, 2404 and 2405.

3 Format modified by SBS Resolution No. 6724-2016, dated 12.28.2016.

Los Laureles Nº 214 - Lima 27 - Perú Telf.: (511) 6309000 Fax: (511) 6309239

ANNEX ES-2A 4
CURRENT ACCOUNTS WITH REINSURERS, CEDING INSURANCE COMPANIES AND/OR COINSURERS DETAIL OF BALANCES REPORTED IN THE TRIAL BALANCE OF BALANCES
AS OF ......
(In Soles)

SBS CODES (1)	REINSURANCE AND/OR COINSURANCE COMPANIES (2)	COUNTRY OF ORIGIN (3)	RATING COMPANY (4)	RATING (5)	PREMIUMS PAYABLE (6)	PREMIUMS RECEIVABLE (7)	CLAIMS RECEIVABLE (8)	CLAIMS PAYABLE (9)	OTHER ACCOUNTS RECEIVABLE (10)	OTHER ACCOUNTS PAYABLE (11)	DISCOUNTS AND COMMISSIONS (12)	DEBTOR BALANCE (13)	CREDITOR BALANCE (14)
AUTOMATIC PROPORTIONAL CONTRACTS	Reinsurance Companies
FACULTATIVE PROPORTIONAL CONTRACTS	Reinsurance Companies
AUTOMATIC NON-PROPORTIONAL CONTRACTS	Reinsurance Companies
FACULTATIVE NON-PROPORTIONAL CONTRACTS	Reinsurance Companies
CONTRACTS IN OTHER MODALITIES	Reinsurance Companies
CEDED COINSURANCE CONTRACTS	Coinsurance Companies
ASSUMED COINSURANCE CONTRACTS	Coinsurance Companies
TOTALS

4 Annex numbering modified by SBS Resolution No. 2842-2012 of 05-11-2012. Format modified by SBS Resolution No. 6724-2016, dated 12.28.2016.

Los Laureles Nº 214 - Lima 27 - Perú Telf.: (511) 6309000 Fax: (511) 6309239

Instructions for filling out Annex ES-2A 5

1. The information contained corresponds to the compilation and summary of the technical accounts developed according to Models No. 1 and 2.
2. The information must be expressed in Soles, so the amounts of Models No. 1 and 2 that are worked in the currency of origin must be converted, according to the accounting exchange rate provided by the Superintendency for each information period.
3. The information must be prepared by type of contract and by reinsurer or coinsurer.
4. In columns 3, 4 and 5, the country of origin, rating company and the rating of the reinsurers, and of the ceding insurance companies if they have one, must be reported. Companies must consider the international risk classification of the reinsurers corresponding to the highest risk to present said format.
5. Accounts receivable (columns 7, 8, 10 and 13) must be recorded without considering accumulated impairment (account 1409).
6. "Premiums Payable" (column 6) are presented before the corresponding discounts, in accordance with the reinsurance contracts.
7. In the case of automatic and facultative contracts, the amounts in columns 6 to 14 are obtained from the total amounts considered in columns 4 to 12 of the Technical Accounts prepared according to Models No. 1 and 2, as applicable. The balances of the Annex cannot be offset.
8. In the case of assumed and ceded coinsurance contracts, the amounts in columns 6 to 14 are obtained from the total amounts of the information considered in columns 4 to 12 of the Technical Accounts prepared according to Model No. 2. These balances cannot be offset and constitute the support of the subaccounts corresponding to account 1403 “Accounts receivable from coinsurers” and 2403 “Accounts payable to coinsurers” as corresponds to debtor and creditor balance.
9. Retained premiums receivable and payable to reinsurers local and foreign market, recorded in accounts 1404, 1405, 2404 and 2405 respectively, must be reported in columns 10 and 11.
10. In the case of contracts in other modalities, the applicable indications above must be followed.
11. The total of column 13 must reconcile with item 14 “Accounts receivable from reinsurers and coinsurers” without considering account 1409.
12. The total of column 14 must reconcile with item 24 “Accounts payable to reinsurers and coinsurers”.

5 Annex numbering modified by SBS Resolution No. 2842-2012 of 05-11-2012. Notes modified by SBS Resolution No. 6724-2016, dated 12.28.2016.

Los Laureles Nº 214 - Lima 27 - Perú Telf.: (511) 6309000 Fax: (511) 6309239

ANNEX ES-2B 6
CURRENT ACCOUNTS WITH REINSURERS AND/OR COINSURERS ANALYSIS OF DEBTOR ITEMS BY AGE OF BALANCES AND DETERMINATION OF PROVISIONS
AS OF ......
(In Soles)

SBS CODES (1)	NAME OF COMPANIES AND DETAIL OF CONTRACTS (2)	ACCOUNTS RECEIVABLE FROM REINSURERS AND COINSURERS (3)	6 OR MORE MONTHS OF AGE (4)	12 OR MORE MONTHS OF AGE (5)	TOTAL (6)
AUTOMATIC PROPORTIONAL CONTRACTS	Reinsurance Companies
FACULTATIVE PROPORTIONAL CONTRACTS	Reinsurance Companies
AUTOMATIC NON-PROPORTIONAL CONTRACTS	Reinsurance Companies
FACULTATIVE NON-PROPORTIONAL CONTRACTS	Reinsurance Companies
CONTRACTS IN OTHER MODALITIES	Reinsurance Companies
CEDED COINSURANCE CONTRACTS	Coinsurance Companies
ASSUMED COINSURANCE CONTRACTS	Coinsurance Companies
TOTALS

(3) Amount corresponding to item 14 without considering account 1409 Accumulated impairment of accounts receivable from reinsurers and coinsurers (amount equal to column 13 of Annex ES-2A) (6) Sum of columns 4 and 5.

6 Annex numbering modified by SBS Resolution No. 2842-2012 of 05-11-2012. Format modified by SBS Resolution No. 6724-2016, dated 12.28.2016.

Los Laureles No. 214 - Lima 27 - Peru Tel.: (511) 6309000 Fax: (511) 6309239

ANNEX A

AMENDMENTS TO THE CHART OF ACCOUNTS FOR COMPANIES IN THE INSURANCE SYSTEM

I. Chapter III "Accounting Table and Chart of Accounts" is amended as indicated below:

1. The name of account 4405 is amended and the subaccounts indicated below are created:

4405 Provisions for bad debts and impairment of reinsurers and/or co-insurers
4405.00 (Risk)
4405.00.01 Provisions for bad debts
4405.00.02 Impairment of accounts receivable

2. The names of the analytical accounts of item 53 "Commissions on premiums ceded" are amended as indicated below:

5301.00.01 Automatic Proportional Contracts
5301.00.02 Facultative Proportional Contracts
5302.00.01 Automatic Proportional Contracts
5302.00.02 Facultative Proportional Contracts
5308.00.01 Automatic Proportional Contracts
5308.00.02 Facultative Proportional Contracts

II. The amendments to Chapter IV "Description and Dynamics" indicated below are made:

1. The description of account 2605 is amended, as well as the corresponding dynamics, as indicated below:

DESCRIPTION: This account records the proportion of the estimate of the total cost of reported claims, borne by reinsurers, calculated in accordance with reinsurance contracts, provided that the claims reported by the insured, corresponding to said estimate, form part of accounts 2601 and 2603.

DYNAMICS

CREDITS: - For the adjustment of the reserve originating from excess of the individual estimate of claims reported in the accounting period.

• For the payment of claims by reinsurers charged to the corresponding accounts of item 14.

Los Laureles No. 214 - Lima 27 - Peru Tel.: (511) 6309000 Fax: (511) 6309239

2. The description of accounts 4404 "Provisions for bad debts premiums" and 4405 "Provisions for bad debts and impairment of reinsurers and/or co-insurers" is amended, as well as the corresponding dynamics, as indicated below:

DESCRIPTION: These accounts record the provisions and impairments of uncollectible accounts of premiums receivable from insureds and accounts receivable from reinsurers and/or co-insurers, in accordance with the provisions of the Superintendency of Banking, Insurance and AFP.

DYNAMICS

DEBITS: - For the provisions made on premiums receivable and accounts receivable from reinsurers and/or co-insurers and the impairments recognized on them.

CREDITS: - For the reversals of provisions originating from payments by insureds, reinsurers and co-insurers in the accounting period.

3. The description of item 53 "Commissions on premiums ceded" is amended, according to the text indicated below:

DESCRIPTION: Comprises the remunerations paid by reinsurers to the insurer, in accordance with reinsurance contracts.