Lima, 30 April 2019

S.B.S. Resolution No. 1825-2019

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

CONSIDERING:

That, in accordance with the provisions of articles 345 and 347 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 amending norms, hereinafter the General Law, it corresponds to the Superintendency of Banking, Insurance and Private Administrators of Pension Funds to protect and defend the interests of the public in the field of the financial and insurance systems, safeguarding the economic and financial soundness of the natural and legal persons that make up said systems;

That, in accordance with articles 9 and 326 of the General Law and article 27 of the Insurance Contract Law (Law No. 29946), insurance companies freely determine the conditions of the policies and their rates, without prejudice to the fact that, in matters of personal, compulsory and mass insurance, the contracts must be subject to the minimum conditions and/or clauses approved by the Superintendency, which must be incorporated into the corresponding insurance contracts;

That, by means of SBS Resolution No. 7044-2013, the Regulation for the Registration of Insurance Policy Models and Technical Notes was approved, which establishes the information that the technical notes must contain for their review and registration, the latter being a requirement for the review and registration of insurance policy models, prior to their commercialization;

That, by means of SBS Resolution No. 3863-2016, the Actuarial Management Regulation for Insurance Companies was approved, which defines the “methodological document for the calculation of technical reserves” as the document in which the methodology (models, parameters, assumptions and other relevant considerations) that the company applies for the calculation of technical reserves is established; likewise, it establishes that one of the activities carried out by the actuarial function is the pronouncement on the general pricing policy;

That, as a result of the supervision experience obtained and the regulations that subsequently emerged, as well as of the provisions of international standards, the need has been identified to update and simplify the information requirements regarding the content of the technical note, focusing them on the aspects of pricing but not on those of technical reserves, and that said document be made available to this Superintendency;

That, in order to gather the opinions of the general public regarding the aforementioned proposed modifications, the pre-publication of the draft resolution on the matter was ordered on the electronic portal of the Superintendency, under the protection of

the provisions of the Thirty-Second Final and Complementary Provision of the General Law and in Supreme Decree No. 001-2009-JUS; Counting on the approval of the Deputy Superintendencies of Insurance and Legal Advisory; and, In use of the powers conferred by numerals 7 and 9 of article 349° of the General Law;

RESOLVES:

Article One.- To modify the Regulation for the Registration of Insurance Policy Models and Technical Notes, approved by SBS Resolution No. 7044-2013 and its amending norms, in accordance with the following:

1. Modify the name of the Regulation to “Regulation for the Registration of Policy Models and Minimum Requirements for Technical Notes”. Likewise, replace or eliminate any expression referring to the registration or submission of technical notes, as indicated below:

• Replace any expression that refers to the “registration of technical notes” with the expression “technical notes” or “review of technical notes”, as the case may be.

• Eliminate any expression that refers to the submission or sending of the technical note as a requirement for the registration of insurance policy models.

2. In article 2° Definitions, modify literals e), f), h), j), k) and l) and incorporate literals p), q), r), s), t), u), v), x) and y) as indicated below:

“Article 2.- Definitions

For purposes of this regulation, the following definitions shall be considered:

(…)

e) Administration costs or expenses: These are the expected expenses related to the underwriting, evaluation, collection, production, redistribution (coinsurance and reinsurance), risk control and any other function necessary for the operational management of the product of an insurance portfolio, without considering the expenses corresponding to the settlement and payment of claims.

f) Acquisition costs or expenses: They comprise all expected expenses related to generating a sale and maintaining it, such as commissions of brokers, promoters and/or insurance marketers, commissions for sales through banks, commissions for direct sales and other channels exclusively related to the sale of insurance or the maintenance of policies. Direct costs associated with the sale of insurance are included, which would not have been incurred had the insurance contracts not been issued, such as inspection of the insured matter, issuance costs, premiums and recognition bonuses for sales, campaigns and any other disbursement whose purpose is to finalize the sale of an insurance or keep the policy in force.

(…)

h) Profit margin: It is the commercial profit or the marginal contribution to general gross profit, which has been defined for the type of insurance to which the product corresponds, in accordance with the policies established by the company that assumes the risk.

(…)

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j) Technical note: Document that describes the methodology and bases applied for the actuarial calculation of the pure or risk premium and the commercial premium.

k) Pure or risk premium: Theoretical cost of insurance estimated on actuarial bases or principles, whose objective is to cover the benefits and indemnities offered by the insurance. It is the premium associated with the expected value of the claims of the risk in question, as well as other contractual obligations, considering, where applicable, guaranteed values, the effect of deductibles, coinsurance, salvage and recoveries, as well as the margin for deviations, if applicable.

l) Registry: Registry of Insurance Policy Models.

(…)

p) Investment management costs or expenses: They comprise all expected expenses related to the management of investments backing the obligations of the insurance company, including expenses involving personnel or third parties related to the investment management process.

q) Claims management costs or expenses: They comprise all expenses expected by the company for the settlement and payment of claims, such as expenses for expert appraisal, and those associated with personnel or third parties that perform the management of payment and settlement of claims, without considering administrative expenses.

r) Reliable information.- Information is only considered reliable when the company justifies its credibility, taking into account the consistency, objectivity and veracity of the source, its form of generation and process being transparent and verifiable, or when it is generated by a nationally or internationally recognized institution.

s) Homogeneous information.- It refers to the fact that the statistical data used for the actuarial calculation of the commercial premium must correspond to units (persons or goods) exposed, under equal or similar conditions, to risks of the same type.

t) Sufficient information.- It is that whose volume of data allows the application of statistical methods or credibility models and that covers all aspects related to the valuation of the risk in question.

u) Chart of accounts: Chart of Accounts for Companies of the Insurance System approved by SBS Resolution No. 348-95 and its amending norms.

v) Commercial or tariff premium: It is the pure or risk premium increased by administration expenses, investment management expenses, acquisition expenses, claims management expenses and required profit margin, which does not consider taxes.

x) Actuarial principles: theories and fundamental concepts of common use and application in actuarial practice, which are generally accepted and which are explained and supported in actuarial literature. Such theories and concepts must be adequate, applicable and pertinent to the calculations and to the actuarial models used.

y) Actuarial Management Regulation: Actuarial Management Regulation for Insurance Companies, approved by SBS Resolution No. 3863-2016.”

3. Amend article 3 “Registry of Insurance Policy Models and Technical Notes”, as indicated below:

“Article 3.- Registry of Insurance Policy Models

It is the system designed by the Superintendence for the registration of insurance policy models before their use and application in the national market. It gathers the models of policies, summaries, insurance certificates, insurance applications and application-certificates that are marketed in the national market.

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Companies may only offer or market, in the national market, insurance policies whose models are incorporated in the Registry and that have the code referred to in the following chapter of this Regulation.

The information in this Registry is freely accessible to the public through the Superintendence's website. Likewise, through said website, it is informed whether the marketing of a product is suspended or if the product code has been revoked, referring in the latter case to the reasons supporting the revocation of the code, without prejudice to the obligation of companies to inform the contracting parties, through the means established in article 15, about said situation.”

4. Eliminate article 4 “Registry of insurance policy models”, article 5 “Registry of technical notes, literal i) of article 8 “Documentation required for the registration of policy models”, literal e) of article 17 “Documentation required for the modification of policy models”.

5. Incorporate a paragraph at the end of article 20 “Policy models that have been discontinued”, in accordance with the following text:

“The responsible representative indicated in numeral 5 of Circular S-662-2016 is in charge of submitting the information contained in the communication referred to in this article. Likewise, it is responsible that said information is consistent with the information of the Annexes indicated in article 26 of this Regulation”.

6. Amend the title of Chapter III “Registry of Technical Notes” to “Minimum requirements of Technical Notes”.

7. Amend articles 21, 23 and 24, in accordance with the following text:

“Article 21.- Technical note

The technical note is the document that expressly contains all the concepts, hypotheses, parameters and procedures used for the actuarial calculation of the risk premium and the commercial premium. This document must include the clear and precise definition of the risk and of the contractual obligations covered, the characteristics of the product, the statistics and respective sources of information, as well as any other element necessary to actuarially substantiate the resulting premium.

The technical note must comply with the provisions of this Regulation and be available to this Superintendency, which may require its submission when it deems pertinent, in order to evaluate the actuarial principles and regulatory compliance. Likewise, companies must keep said document updated in order to reflect any modification made in practice, keeping a control of the changes made therein and an inventory of its previous versions.

The technical notes must contain, before the signature of the professional in charge of their preparation, the following paragraph:

"I hereby declare that the methodology applied for the determination of the premium and other technical elements considered in this technical note comply with the current provisions; likewise, I declare that I have verified that the obligations assumed in the policy model of the product named (product name) are duly backed by actuarial calculations described in this technical note."

Article 23.- Content of the technical notes

The technical notes must contain the following information:

23.1 Product characteristics

The following concepts must be included: product name, SBS registration code if such information is available, and the risk to which the product corresponds according to the classification contained in chapter II of the Chart of Accounts for insurance system companies. Likewise, a description of the product must be made, including its characteristics, such as contracting modalities, renewal, temporality, among others. It must also be specified whether the product is a microinsurance, if applicable.

23.2 Coverages

The basic coverage must be described, as well as the additional, special and optional coverages that can be contracted through additional clauses, indicating the risks covered, benefits, terms and other technical aspects that characterize said coverages. In the case of microinsurances, it is sufficient to indicate the coverages, and it is not necessary to describe them.

The additional services to the policy coverages must be indicated, such as: medical, legal, automotive, travel or home assistance, stating whether the additional services will be provided by the company or by third parties.

23.3 Technical hypotheses

In the case of life insurance, the demographic hypotheses used for the calculation of the pure or risk premium must be indicated and supported, qualitatively or quantitatively, such as: mortality, morbidity, disability or other tables, the respective adjustment factor, as well as the lapse and surrender rates, if applicable. Likewise, it must be indicated whether tables at monthly ages or another periodicity other than annual are used.

In the case of accident and health insurance, the technical hypotheses must be indicated, such as: frequency tables, average amounts, severity, morbidity, mortality, claims ratio, among others, used for the calculation of the pure or risk premium.

In the case of property insurance, the assumptions of frequency, severity, claims ratio, among others, used for the calculation of the pure or risk premium must be indicated.

The cases in which the premium is based on information provided by the reinsurer or reinsurer rates are adopted must be indicated.

23.4 Statistical information

Information on the statistical data used must be included, indicating the sample size, the sources and the period to which it refers. The information used to calculate

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the premium must be sufficient, homogeneous and reliable; in cases where such information is not available, experimental rating schemes may be proposed, and such cases must be indicated.

23.5 Economic hypotheses

The technical interest rate or rate curve used, if applicable, for the calculation of premiums must be indicated and supported. Such rates must consider the return on their investment portfolios and associated risks.

The assumptions of inflation, salary increase or any other economic assumption intended to be used must be indicated.

23.6 Procedures for calculating the pure or risk premium

The formulas, parameters, as well as the risk-based loadings and discounts used in the calculation of the pure or risk premium must be indicated, in addition to the deductibles, franchises, coinsurance and copayments that apply.

The pure or risk premium must be determined on the basis of actuarial principles and the application of technical and statistical procedures generally accepted in the actuarial field, so as to guarantee the technical and financial equilibrium of the benefit system and compliance with obligations to the insured.

A practical example must be included that contains the calculation of the pure or risk premium considering all coverages and the variables defined in its methodology. In the case of microinsurances, it is not mandatory to include the practical example.

23.7 Procedures for calculating the commercial premium

The formulas, administration, acquisition, investment management and claims management costs or expenses, the profit margin, the loadings and discounts, as well as any other value considered as part of the commercial premium must be indicated.

The commercial premium must be determined on the basis of actuarial principles and the application of technical and statistical procedures generally accepted in the actuarial field, and must guarantee sufficiency and solvency. The commercial premium must recognize the individual or particular characteristics of the units exposed to risk and the accumulated experience in groups of units subject to homogeneous or similar risks. It may also take into account the particular experience of specific groups or collectives, based on sufficient, homogeneous and reliable statistical information that supports the risk behavior.

A practical example must be included that contains the calculation of the commercial premium, consistent with the conditions, rates and variables considered. In the case of microinsurance, it is not mandatory to include the practical example.

23.8 Other relevant considerations

a) The application of other relevant variables must be indicated, such as financial guarantees, contractual options and other contractual obligations. For example, guaranteed values (cash surrender value, extended insurance, paid-up insurance), dividends or profits in favor of the insured must be included.

b) All parameters, symbols and concepts used in the technical note must be fully defined. Those corresponding to values that must be estimated must be defined and expressed in algebraic terms, regardless of whether a conceptual explanation of these is included.

c) The actuarial calculation of a commercial premium may incorporate other elements related to claims experience, underwriting policies or market or environmental variables, among others, referring to the risk or associated costs, provided that their effect can be objectively estimated.

d) The commercial premium must not consider taxes.

e) The calculation method for the actuarial age of the insured must be defined.

f) The consideration of variables in the premium calculation must be consistent with the calculation of the premium reserve.

The content indicated in this numeral also applies to microinsurance.

Article 24.- Review of technical notes

The Superintendency may request the company to submit technical notes, as part of its on-site or off-site supervision process, in order to evaluate their content, technical support and consistency with the policy model to which they correspond.

Failure to remedy the observations to the satisfaction of the Superintendency within the established term will be sanctioned in accordance with the Sanctions Regulation, without prejudice to the Superintendency being able to order modifications to the content of the policy or the technical note or other measures, such as the suspension of marketing of the product, depending on the relevance or criticality of the observation made. If the Superintendency orders the modification of the content of the policy, the company must follow the provisions of subchapter IV of this Regulation.”

8. Repeal article 22 “Officer responsible for coordination with the Superintendency”.

9. Eliminate article 25 “Modification of technical notes”.

10. Incorporate the Fifth and Sixth transitional provisions in accordance with the following text:

“Fifth.- The technical notes in force at the entry into force of Resolution SBS N° 1825-2019 are exempt from being adapted to the new requirements established by the aforementioned Resolution as long as the policy or the rating criteria are not modified.

Sixth.- Companies that have established their own methodology for calculating technical reserves and that have not prepared the methodological document for calculating technical reserves, as defined in article 2 of the Actuarial Management Regulation, must prepare the corresponding methodological document for calculating technical reserves within ninety (90) days from the entry into force of Resolution SBS N° 1825-2019. This document must be available to the Superintendency.”

Article Second.- Any reference to the Registry of Insurance Policy Models and Technical Notes is replaced by Registry of Insurance Policy Models.

Article Third.- Eliminate the Third Final and Transitory Provision of the Actuarial Management Regulation for Insurance Companies, approved by Resolution SBS N° 3863-2016.

Article Fourth.- Modify the first paragraph and eliminate literal c) of article 14 of the Microinsurance Policy Regulation, approved by Resolution SBS N° 2829-2016, in accordance with the following text:

“Article 14.- Registry of policy models For the incorporation of microinsurance policy models into the Registry, companies must submit the following information, through the electronic means determined by the Superintendency: (…)”

Article Fifth.- Modify Annex 3 of the Infractions and Sanctions Regulation of the Superintendency of Banking, Insurance and Private Pension Fund Administrators, approved by Resolution SBS N° 2755-2018 and amendments, in accordance with the following:

1. Incorporate the following infraction, in accordance with the following text:

“I. Serious infractions (…)

Insurance System Companies 107) Marketing insurance policies that do not have the corresponding technical note.”

2. Replace numeral 10 of the minor infractions, in accordance with the following text: “Failure to communicate the representative responsible for coordination related to the procedure for approval and/or modification of general contracting clauses, registration and/or modification of insurance policy models, in accordance with the provisions of current regulations.”

3. Modify numeral 13 of the minor infractions, in accordance with the following text: “Use for the calculation of premiums, methodologies, hypotheses, and other formulas different from those contained in the technical note.”

Article Sixth.- Repeal numerals 2 and 9 of Annex N° 1 “List of main officers” of Circular G-119-2004, referring to the “Rules for the Registration of Directors, Managers and Main Officers – REDIR”

Article Seven.- Modify procedure No. 71 "Registration and modification of Insurance Policy Models in the registry of Insurance Policy Models and Technical Notes" in the Single Text of Administrative Procedures–TUPA of the Superintendency of Banking, Insurance and AFP, approved by SBS Resolution No. 1678-2018 and amendments, in accordance with the text attached to this Resolution and published on the institutional Portal (www.sbs.gob.pe).

Article Eight.- This Resolution enters into force as of the day following its publication in the Official Gazette "El Peruano".

Register, communicate and publish.

SOCORRO HEYSEN ZEGARRA
Superintendent of Banking, Insurance and
Private Administrators of Pension Funds