Resolution Reforming Articles 1, 4, and 5 of the Standard for the Preparation of Technical Notes and Actuarial Studies

Resolution No. CD-SIBOIF-958-3-SEP6-2016 Dated September 6, 2016

NORM REFORMING ARTICLES 1, 4, AND 5 OF THE STANDARD FOR THE PREPARATION OF TECHNICAL NOTES AND ACTUARIAL STUDIES

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

CONSIDERING

I

That on March 18, 2016, the Standard for the Preparation of Technical Notes and Actuarial Studies was issued, contained in Resolution No. CD-SIBOIF-934-2-MAR18-2016, published in La Gaceta, Official Gazette No. 83, on May 5, 2016, which aims to establish the requirements that insurance companies must comply with for the preparation of technical notes and actuarial studies, so that these companies can support the formulation of their tariff premiums and other technical support documents in their operations.

II

That it is necessary to reform Articles 1, 4, and 5 of the aforementioned standard in order to clarify the definition of "technical note" and to unify the procedure to be followed by insurance companies to request authorization for both insurance policies and their technical notes.

III

That in accordance with the considerations set forth 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 No. 733, "General Law of Insurance, Reinsurance, and Surety Bonds," published in La Gaceta, Official Gazette Nos. 162, 163, and 164, on August 25, 26, and 27, 2010; and Article 3, item 13) of Law No. 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-958-3-SEP6-2016 NORM REFORMING ARTICLES 1, 4, AND 5 OF THE STANDARD FOR THE PREPARATION OF TECHNICAL NOTES AND ACTUARIAL STUDIES

FIRST: Articles 1, 4, and 5 of the Standard for the Preparation of Technical Notes and Actuarial Studies, contained in Resolution No. CD-SIBOIF-934-2-MAR18-2016, published in La Gaceta, Official Gazette No. 83, on May 5, 2016, are hereby amended, which shall read as follows:

"Article 1. Concepts.- For the purposes of applying the provisions contained in this standard, the terms indicated in this article, whether in uppercase or lowercase, singular or plural, shall have the following meanings:

a) Actuary: A person registered in the Register of Insurance Auxiliaries of the Superintendence, graduated in the field of actuarial science, professionally trained to resolve financial, technical, mathematical, and statistical aspects related to insurance operations, through the application of actuarial sciences. For the purposes of this standard, the actuary shall be responsible for preparing, evaluating, certifying, and signing technical actuarial studies, actuarial balances, technical notes, product design, and the reserves of insurance companies, in accordance with what is established in Article 37 of the General Insurance Law.

b) Actuarial Calculation: The method by which the value of sufficient tariff premiums for an insurance product is determined, considering that this method incorporates the contingent characteristics of the occurrence of the insured risk.

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

d) Administrative Expenses: Those incurred for the underwriting, issuance, collection, administration, control, and any other function necessary for the operational management of the product.

e) Acquisition Expenses: Those generated by the commercial activity of the insurer, such as: commissions, override commissions, advertising, campaigns and promotions, training, and policy reinstatements, among others.

f) Reinsurance Cost: Expenses for the acquisition of reinsurance.

g) General Insurance Law: Law No. 733, General Law of Insurance, Reinsurance, and Surety Bonds, published in Official Gazette Nos. 162, 163, and 164, on August 25, 26, and 27, 2010.

h) Law No. 316: Law of the Superintendence of Banks and Other Financial Institutions, published in La Gaceta, Official Gazette No. 196, on October 14, 1999, and its amendments.

i) Safety Margin: That intended to cover unfavorable random deviations from the expected loss ratio and shall be calculated on the pure premium, if applicable.

j) Profit Margin: The marginal contribution to the overall gross profit defined for the specific line or type of insurance in question, in accordance with the policies established by the company.

k) Technical Note: The document that describes the actuarial calculations that, for each insurance plan or modality, give rise to the determination of the premiums and surcharges that an insurance entity will apply, as well as the justification of its management and administrative expenses and calculation systems for technical provisions.

l) Tariff Premiums: The value of the fee or payment that the policyholder or insured must satisfy to an insurance company, as consideration for the coverage of the risk specified in the insurance, reinsurance, or surety bond contract, which is composed of the pure or risk premium and surcharges for administrative and acquisition expenses, reinsurance cost, safety margin, and profit margin.

m) Pure or Risk Premium: The amount necessary and sufficient to cover the risk exclusively.

n) Ratio, Reason, or Combined Indicator: An indicator that measures the technical profitability of life insurance. It is the sum of the loss ratio and the operational expense ratio calculated on net premiums.

o) Register: Register of Insurance Auxiliaries of the Superintendence.

p) Insurance Company or Company: An entity that operates in insurance, reinsurance, and surety bonds, national or foreign, privately owned, state-owned, or mixed, in accordance with what is established in the General Insurance Law.

q) Superintendence: Superintendence of Banks and Other Financial Institutions.

r) Superintendent: Superintendent of Banks and Other Financial Institutions."

"Article 4. Application.- In accordance with what is established in Articles 73 and 75 of the General Insurance Law, both tariff premiums and technical notes and their modifications will require prior authorization from the Superintendent for their use, and must be presented at the time an insurance company requests authorization for new products or modifications to existing ones.

Tariff premiums and technical notes must be prepared and certified by an actuary registered in the Register of the Superintendence, for which the guidelines established in this Standard must be met, at a minimum."

"Article 5. Authorization.- For the authorization of technical notes and their future modifications, the procedure shall be in accordance with the regulations governing the matter for the authorization of insurance policies."

SECOND: This standard shall enter into force upon its notification, without prejudice to its subsequent publication in La Gaceta, Official Gazette. (signed) S. Rosales C. (signed) V. Urcuyo V. (signed) Gabriel Pasos Lacayo (signed) Fausto Reyes B. (signed) illegible (Silvio Moisés Casco Marenco) (signed) illegible (Freddy José Blandón Argeñal) (signed) U. Cerna B. Secretary.

URIEL CERNA BARQUERO Secretary of the Board of Directors SIBOIF