Resolution SBS No. 1692-2016: Modification of Article 4 of the Regulation for the Constitution of Mathematical Reserves of Insurance Based on the Matching of Assets and Liabilities of Insurance Companies

Los Laureles Nº 214 - Lima 27 - Perú Telf. : (511)6309000 Fax: (511) 6309239 1 Lima, March 23, 2016 Resolution S.B.S.
No. 1692-2016

The Superintendent of Banking, Insurance and Private Pension Fund Administrators

CONSIDERING:

That, the General Law of the Financial System and the Insurance System and Organic Law of the Superintendence of Banking and Insurance, Law No. 26702 and its respective modifying laws, hereinafter General Law, establishes in its article 306 that insurance and/or reinsurance companies must monthly constitute reserves for claims, mathematical reserves, reserves for risks in course, catastrophic risk reserves, and medical insurance reserves;

That, article 308 of the aforementioned General Law states that the mathematical reserve for life insurance is constituted based on actuarial calculations, taking into account the total number of insurance policies, and empowers this Superintendence to determine the rules regarding the calculation thereof;

That, through Resolution SBS No. 562-2002, the Regulation for the Constitution of Mathematical Reserves of Insurance Based on the Matching of Assets and Liabilities of Insurance Companies was approved; hereinafter Regulation, where complementary provisions for the methodology of calculating the mathematical reserves of life annuity insurance associated with the Private Pension System are established;

That, considering the offer in the financial market of long-term debt instruments with fixed-price prepayment options, where the option for each instrument is activated in a period very close to its maturity, and where the reinvestment risk is limited, it is necessary to modify the aforementioned Regulation, in order to allow insurance companies to consider the total flows of said instruments, under particular considerations, and thus have greater investment alternatives for the coverage of life annuities;

That, in order to collect opinions from the general public, the draft resolution on the matter was pre-published on the electronic portal of the Superintendence, under the provisions of Supreme Decree No. 001-2009-JUS;

Having the approvals of the Adjunct Superintendencies of Insurance, Risks, Legal Advice and Economic Studies; and,

Los Laureles Nº 214 - Lima 27 - Perú Telf. : (511)6309000 Fax: (511) 6309239 2

In exercise of the powers conferred by numeral 9 of article 349 of the General Law of the Financial System and the Insurance System and Organic Law of the Superintendence of Banking and Insurance, Law No. 26702 and its modifying laws;

RESOLVES:

Article First.- Modify the fourth paragraph of article 4 of the Regulation for the Constitution of Mathematical Reserves of Insurance Based on the Matching of Assets and Liabilities of Insurance Companies, approved by Resolution SBS No. 562-2002 and its modifying norms, according to the following text:

"(...)

Likewise, in the case that the eligible assets for the matching described above have any prepayment option by the issuer, the following must also be taken into consideration:

a) Debt instruments with "make-whole" call option: The total flow generated by the amortization of principal and/or interest may be used for the matching.

b) Debt instruments with a remaining term at the time of acquisition equal to or greater than five (5) years, and with a "fixed-price" call option, whose call option is activated six (6) months from the maturity date or in a shorter period: The total flows considering the original emission schedule may be used for the matching.

c) Debt instruments with a remaining term at the time of acquisition less than five (5) years, and with a "fixed-price" call option, whose call option is activated one (1) month from the maturity date or in a shorter period: The total flows considering the original emission schedule may be used for the matching.

d) The rest of debt instruments with a "fixed-price" call option: Only the estimated flow generated by interest and/or principal amortization may be used for the matching, that is, that flow which is generated before and up to the date on which the call option is activated. The flow after said date, generated by interest and/or amortization or payment of principal, cannot be used for the matching.

(...)"

Article Second.- This regulation enters into force from the day following its publication in the Official Gazette El Peruano.

Register, communicate and publish,

JAVIER MARTÍN POGGI CAMPODÓNICO
Superintendent of Banking, Insurance and Private Pension Fund Administrators (e)