Resolution SBS No. 5587-2009: Modification of the Regulation on Classification and Valuation of Investments of Insurance Companies

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Lima, June 11, 2009
Resolution S.B.S. Resolution S.B.S.
No. 5587 No. 5587-2009

The Superintendent of Banks, Insurance and
Private Pension Fund Administrators

CONSIDERING:

That item 13 of Article 349 of the General Law of the Financial System and of the Insurance System and the Organic Law of the Superintendence of Banks and Insurance, Law No. 26702 and its amendments, hereinafter General Law, states that the Superintendence has the authority to issue general norms to specify the preparation, presentation and publication of financial statements, and any other complementary information, ensuring that the real economic-financial situation of the companies under its supervision is reflected;

That, through Resolutions SBS No. 513-2009 and SBS No. 514- 2009, the Regulation on Classification and Valuation of Investments of Insurance Companies and the Regulation for the Trading and Accounting of Derivative Financial Products in Insurance Companies were approved, respectively;

That, it is convenient to incorporate modifications to the Regulations described in the previous consideration, in order to incorporate clarifications to the provisions approved by said regulations; as well as incorporate a new typification into the Regulation of Sanctions approved by Resolution SBS No. 816-2005;

That, in order to collect the opinions of the general public regarding the proposed modifications to the regulations of the Insurance System, the pre publication of the draft resolution on the matter was ordered on the electronic portal of the Superintendence, in accordance with the provisions of Supreme Decree No. 001-2009-JUS;

Being in accordance with the opinion of the Deputy Superintendencies of Insurance, of Risks, of Economic Studies and of Legal Advice; and,

In exercise of the powers conferred by items 7, 9 and 13 of Article 349 of the General Law;

RESOLVES:

Article First.- Modify the Regulation on Classification and
Valuation of Investments of Insurance Companies, approved by Resolution SBS No.
513-2009, according to the following indications:

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1. Modify the penultimate paragraph of Article 10:

“Article 10.- Impairment
...
The impairment affecting debt instruments may be reversed through the result of the fiscal year if there is objective evidence of its recovery as established in each classification category. However, the impairment affecting equity instruments, may not be reversed through the result of the fiscal year.”

2. Modify the Second Final and Complementary Provision:

“Second.- Exceptional treatment for the sale of investments at maturity for matching reasons

Exceptionally, companies may carry out early sales of investments registered in the category of investments at maturity for reasons of asset and liability matching, in accordance with what is established in the Regulation on the Constitution of Mathematical Reserves of Insurance on the Basis of Matching between Assets and Liabilities of Insurance Companies, approved by Resolution SBS No. 562-2002. Companies must communicate to the Superintendence the execution of such early sales attaching the appropriate justification, within the next five (5) business days following the date on which such early sales were made.

3. Modify the second paragraph of the Ninth Final and Complementary Provision, regarding
   Effective Equity:

“Ninth.- Distribution of profit and effective equity

Effective Equity

Unrealized gains due to fair value fluctuations of investments available for sale, for which it has been agreed that once realized they will be capitalized, shall be added to effective equity. In the case of unrealized losses due to the aforementioned fluctuations, they shall be deducted from effective equity.”

4. Approve the Eleventh Final and Complementary Provision:

“Eleventh.- Treatment of investment excesses.

With respect to the limits established in the Regulation on diversification by issuer of the investments of insurance companies, approved by Resolution SBS No. 829-2005, excesses to the limits that occur due exclusively to variations in the fair value of investments shall not be sanctionable. In this case, the company may not increase its exposure until it is again within the legal limit. However, if the Superintendence deems it necessary, it may require, due to the magnitude of the excess or the quality of the company's risk management, a plan to adjust such excesses, case by case.”

Article Second.- Modify Annex 3 of the Regulation of
Sanctions, approved by Resolution SBS No. 816-2005, regarding specific infractions of the Insurance System, according to the following indications:

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Add the following typification in the section of Serious Infractions:

" 22 A) Improperly carrying out early sales of investments registered in the category of investments at maturity without there being reasons for asset and liability matching, or for reasons other than those indicated in article 16 and the Second Final and Complementary Provision, of the Regulation on Classification and Valuation of Investments of Insurance Companies.”

Article Third.- Repeal the First Final and Transitional Provision of the Regulation for the Trading and Accounting of Derivative Financial Products
in Insurance Companies, approved by Resolution SBS No. 514-2009.

Article Fourth.- Insurance and/or reinsurance companies
included in letter D of Article 16 of the General Law that, on the date of entry into force of the Regulation for the Trading and Accounting of Derivative Financial Products in Insurance Companies, had contracted operations with derivative financial products, must submit the information referred to in articles 6, 7, 8 and 9 of said regulation no later than June 30 2009.

Article Fifth.- This Resolution shall enter into force on
the day following its publication in the Official Newspaper El Peruano.

Register, communicate and publish,

FELIPE TAM FOX
Superintendent of Banks, Insurance and
Private Pension Fund Administrators