Resolution Reforming Article 7 and Annex B of the Regulation on Investment Limits for Insurance, Reinsurance, and Surety Companies

Page 1 of 4 Resolution No. CD-SIBOIF-1042-1-FEB20-2018 Dated February 20, 2018

REGULATION REFORMING ARTICLE 7 AND ANNEX B OF THE REGULATION ON INVESTMENT LIMITS FOR INSURANCE, REINSURANCE, AND SURETY COMPANIES

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

CONSIDERING

I

That on September 22, 2015, the Regulation on Investment Limits for Insurance, Reinsurance, and Surety Companies was approved, contained in Resolution No. CD-SIBOIF-908-1-SEPT22-2015, published in La Gaceta, Official Journal No. 208, of November 3, 2015.

II

That it is necessary to reform Article 7 of the aforementioned regulation in order to expand the investment alternatives for insurance companies, allowing them to invest in real estate funds that meet the safety, liquidity, and profitability characteristics established in the General Insurance Law; likewise, to modify the "Annex B" of the same regulation to adjust it to the reform of Article 7 mentioned above.

III

That according to the considerations stated above and based on the powers provided for in Articles 4; 5, numeral 1); and 40 of the aforementioned Law No. 733; and Article 3, numeral 13) and Article 10, numeral 1) of Law No. 316, Law of the Superintendence of Banks and Other Financial Institutions, and its reforms.

In exercise of its powers,

HAS ISSUED,

The following:

Resolution No. CD-SIBOIF-1042-1-FEB20-2018 REGULATION REFORMING ARTICLE 7 AND ANNEX B OF THE REGULATION ON INVESTMENT LIMITS FOR INSURANCE, REINSURANCE, AND SURETY COMPANIES

FIRST: Article 7 of the Regulation on Investment Limits for Insurance, Reinsurance, and Surety Companies, contained in Resolution No. CD-SIBOIF-908-1-SEPT22-2015, dated September 22, 2017, published in La Gaceta, Official Journal No. 208, of November 3, 2015, is hereby reformed, which shall read as follows:

"Article 7. Limits by type of investment in the country.- The following shall be considered as investments backing the Investment Sufficiency Calculation Base: a) No limit on securities issued or guaranteed by the Central Government of Nicaragua in accordance with the law on the matter and accounted for in accordance with current accounting standards. b) No limit on securities issued or guaranteed by the Central Bank of Nicaragua in accordance with the law on the matter and accounted for in accordance with current accounting standards.

Page 2 of 4 c) No limit on securities repurchase operations of securities issued by the Central Bank and the Central Government of Nicaragua agreed upon for terms not greater than twelve (12) months, carried out with supervised national financial institutions or first-class qualified foreign financial institutions in accordance with Article 21 of this regulation. d) According to their operational needs in cash availability, deposited in availability accounts that accrue interest in banks or financial institutions authorized and supervised by the Superintendence. e) 60% of the Investment Sufficiency Calculation Base in time deposits or fixed-income securities issued by banks or financial institutions authorized and supervised by the Superintendence of Banks. Demand deposits in financial institutions in the country do not form part of the investments. f) 20% of the Investment Sufficiency Calculation Base in bills of exchange guaranteed or issued by banks or financial institutions authorized and supervised by the Superintendence of Banks. g) 25% of the Investment Sufficiency Calculation Base in fixed-income securities of public offering, registered in the registry kept for such purposes by the Superintendence, issued by Nicaraguan companies, and which are accounted for at market price or acquisition cost, whichever is lower. Within the same percentage, they may also invest in shares of financial investment funds constituted in the country, in which at least 60% of their portfolio is invested in fixed-income securities; as well as in shares of real estate investment funds and real estate development funds registered in the registry kept for such purposes by the Superintendence. h) 10% of the Investment Sufficiency Calculation Base in shares of first-class Nicaraguan anonymous societies that are qualified as first-class issuers in accordance with what is established in Article 21 of this regulation, that are registered in the registry kept for such purposes by the Superintendence, that are negotiable through the country's stock exchanges, and that are accounted for at market price or acquisition cost, whichever is lower. i) 20% of the Investment Sufficiency Calculation Base in land and buildings owned for the use of the company. j) 20% of the Investment Sufficiency Calculation Base in mortgage loans to natural or legal persons. The regulations governing credit risk management apply to these loans. k) 10% of the Investment Sufficiency Calculation Base in personal loans for the acquisition of vehicles with pledge guarantee of the same. The regulations governing credit risk management apply to these loans. l. The maximum amount to be considered as an investment for unpaid credits from premiums receivable shall be 40% of the same; understood as such, those that are less than 60 days past due."

Page 3 of 4 SECOND: Annex B of the "Regulation on Investment Limits for Insurance, Reinsurance, and Surety Companies," described in the first section of this resolution, is hereby reformed, which shall read as follows:

INVESTMENT LIMITS AS OF XX OF XX OF XX ANNEX B EXCHANGE RATE OF THE MONTH XXX

CONCEPT CALCULATION BASE % INVESTED/BASE LIMIT BY TYPE OF INVESTMENT RELATIVE VARIATION IN ACCORDANCE WITH NEW REGULATION TOTAL INVESTMENTS Total investment

BY TYPE OF INVESTMENTS IN THE COUNTRY a) Securities issued or guaranteed by the State NO LIMITS b) Securities issued or guaranteed by the Central Bank of Nicaragua (CENI'S AND LETTERS) NO LIMITS c) Repurchase operations of Titles Securities issued by BCN and Central Government NO LIMITS d) Availability (in accordance with what is provided in the d) clause of article 7 of this Regulation.) e) Time deposits or fixed-income securities issued by supervised financial institutions 60% f) Bills of exchange issued or guaranteed by supervised financial institutions - 20% g) Fixed-income securities and public offering registered in the registry of the Superintendence, issued by Nicaraguan companies and participation in financial investment funds constituted in Nicaragua; as well as, in participation in real estate investment funds and real estate development funds constituted in the country. 25% h) In shares of Nicaraguan anonymous societies of first class, qualified as first-class issuers and registered in the registry of the Superintendence.

• 10% i) In land and buildings owned for use of the company - 20% j) Mortgage loans - 20% k) Personal loans for vehicle acquisition, with pledge guarantee - 10% TOTAL INVESTMENTS IN THE COUNTRY

BY TYPE OF INVESTMENTS IN THE EXTERIOR a) Titles issued by multilateral credit organizations - b) Deposits or fixed-income securities issued by financial institutions with first-class risk qualification c) Deposits in Banks and Financial Institutions domiciled in the United States of America that do not have the minimum required qualification, provided that they do not exceed the amount of the guarantee granted by the Federal Deposit Insurance Corporation (FDIC)

d) Fixed-income securities issued or guaranteed by the Department of the Treasury or by institutions of the Federal Government of the United States of America, quoted on the Stock or regulated market of the United States of America, as well as in fixed-income securities issued or guaranteed by the Departments of the Treasury or its equivalent in the countries members of the European Union. Participation in financial investment funds constituted abroad, that invest exclusively in fixed-income securities, authorized for public offering, and that have investment-grade risk qualification. TOTAL INVESTMENTS IN THE EXTERIOR - 20.00%

REGULATION SUPERINTENDENCE OF BANKS AND OTHER FINANCIAL INSTITUTIONS INSURANCE SUPERINTENDENCE COMPANY: XXXX

Page 4 of 4 THIRD: This regulation shall enter into force upon its notification, without prejudice to its subsequent publication in La Gaceta, Official Journal. (f) Sr. 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) U. Cerna B. Secretary.

URIEL CERNA BARQUERO Secretary of the Board of Directors SIBOIF