Resolution SBS No. 6394-2016: Regulation of the Reserve for Unearned Risks

Los Laureles Nº 214 - Lima 27 - Perú Telf. : (511)6309000 Fax: (511) 6309239 1/14 Lima, December 7, 2016 Resolution S.B.S.
No. 6394-2016
The Superintendent of Banks, Insurance and
Private Pension Fund Administrators

CONSIDERING:

That, Article 306 of the General Law of the Financial System and of the Insurance System and Organic Law of the Superintendency of Banks and Insurance, Law No. 26702 and its amendments, hereinafter General Law, establishes that insurance and/or reinsurance companies must constitute technical reserves monthly, among which is included the reserve for unearned risks;

That, Article 309 of the General Law establishes that the Superintendency may establish procedures for determining the reserve for unearned risk;

That, by Resolution SBS No. 1142-99 and its amending norm, the Regulation of the Reserve for Unearned Risks was approved, through which the calculation methodology for said reserve was established, specifying that it is composed of two components: the Reserve for Unearned Premiums and the Reserve for Premium Insufficiency;

That, by Resolution SBS No. 348-95 and its amending norms, the Chart of Accounts for Companies in the Insurance System was approved, hereinafter Chart of Accounts;

That, it is necessary to modify the Regulation of the Reserve for Unearned Risks, in order to incorporate improvements in the methods and procedures for calculating the reserve, and in the related provisions and norms;

That, with a view to collecting opinions from the general public regarding the proposal to modify the regulations, the pre-publication of the draft resolution was ordered on the electronic portal of this Superintendency, under the provisions of Supreme Decree No. 001-2009-JUS;

Having the approval of the Adjunct Superintendencies of Insurance, Economic Studies and Legal Advisory; and,

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

RESOLVES:

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Article First.- Approve the Regulation of the Reserve for Unearned Risks, as indicated below:

“REGULATION OF THE RESERVE FOR UNEARNED RISKS

Article 1°.- Scope
This regulation applies to the companies referred to in paragraph D of Article 16 of the General Law, hereinafter the companies.

Article 2°.- General Provisions
2.1 Insurance companies must estimate the Reserve for Unearned Risks applying criteria of prudence and good actuarial and technical risk management practices.

2.2 Companies must keep properly organized and complete the files and information systems of insurance contracts, accepted and ceded reinsurance, and received and ceded co-insurance, which support the databases and estimates of the Reserve for Unearned Risks, so as to facilitate adequate risk management. This information must be available to the Superintendency.

2.3 In co-insurance operations, the lead company must provide all necessary information to the other companies participating in such operations, so that such companies can comply with the provisions of this Regulation.

2.4 In local reinsurance operations, the cedent must also facilitate the necessary information so that the cessionary company can comply with the provisions of this Regulation.

Article 3°.- Reserve for Unearned Risks
3.1 The Reserve for Unearned Risks (RRC) represents the estimate of future claims and expenses that will be assumed by companies for those retained active risks, and is determined based on the premiums that companies have established to finance such claims and expenses.

3.2 This reserve is constituted for insurance contracts, accepted reinsurance and received co-insurance of general lines, and accident and health lines. In case insurance in the accident and health line provides long-term coverage on biometric risks, such as mortality, survival, disability or morbidity, they must constitute reserves in accordance with the provisions of the Mathematical Reserves Regulation.
1

3.3 The provisions of this Regulation also apply to the mathematical reserve of short-term group or individual life insurance (with a validity of less than or equal to one year). The mathematical reserves of life insurance that provide long-term coverage are subject to the provisions of the Mathematical Reserves Regulation.
2

1 Paragraph modified by Resolution SBS No. 1143-2021 published on 19/04/2021, effective from 20/04/2021.
2 Paragraph modified by Resolution SBS No. 1143-2021 published on 19/04/2021, effective from 20/04/2021.

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3.4 The RRC must be calculated at the close of each month, as the result of the sum of two components:
a) The Retained Unearned Premium Reserve (RPNDR), whose purpose is to support the obligations of insurance contracts, accepted reinsurance and received co-insurance that remain active at the close of the calculation period, and is composed of the valid premiums of the insured portfolio pending to be earned; and, b) The Premium Deficiency Reserve (RIP), intended to complement the previous one, which is constituted when the RPNDR proves insufficient to cover the estimated obligations corresponding to the unextinguished coverage period of insurance contracts, accepted reinsurance and received co-insurance at the date of calculation.

Article 4°.- Retained Unearned Premium Reserve
4.1 The Retained Unearned Premium Reserve (RPNDR) is calculated monthly for each insurance contract, accepted reinsurance and received co-insurance, and is equivalent to the difference between the Total Unearned Premium Reserve (RPNDT) and the Ceded Unearned Premium Reserve (RPNDC).

However, for domestic credit insurance and export credit insurance, the calculation of the Retained Unearned Premium Reserve (RPNDR) is carried out in accordance with the specific instructions contained in the Annex “Calculation of the RPNDR of domestic credit insurance and export credit insurance”, which forms part of this Regulation. This does not exclude the possibility that the company presents its own methodology for these insurances, as stated in article 5. 3

4.2 The Total Unearned Premium Reserve (RPNDT) is calculated for each insurance contract, accepted reinsurance and received co-insurance, applying the following methodology:

4.2.1 The premiums of each contract that are valid at the date of calculation of the reserve, as well as their amounts and the start and end dates of validity, are identified.
The premiums must be considered net of ceded co-insurance.

4.2.2 Unissued premiums for risk already assumed (premiums not registered at the close of the Financial Statements and which are known after the date of calculation of the reserve) are estimated, based on actuarial methods and with prudent criteria, and must be supported by the company's own statistics. This estimate must be carried out monthly and the methodology must be collected in a document signed by the person responsible for the calculation of technical reserves, and be available to this Superintendency. With a minimum frequency of semi-annually, validation (backtesting) of this applied methodology must be performed and adjustments made if necessary. Unissued premiums for risk already assumed must also be recorded as an account receivable. 4

4.2.3 The amount of the Calculation Base of each contract is determined, equivalent to the difference between total premiums (excluding taxes) and acquisition costs that are directly associated with the insurance contract, accepted reinsurance and received co-insurance.

3 Paragraph modified by Resolution SBS No. 332-2020 published on 02/02/2023, effective from 01/01/2025.
4 Subparagraph modified by Resolution SBS No. 1856-2020 published on 27/07/2020.

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4.2.4 Acquisition costs represent brokerage charges for the intermediation of insurance brokers, contracting of marketers (including bancassurance) or insurance promoters, direct marketing by companies and other distribution channels exclusively related to the sale of insurance contracts.
They also include direct costs associated with the sale of insurance, in which costs would not have been incurred had the insurance contracts not been issued, such as inspection costs of the insured matter, issuance costs, among others, having as maximum the amounts indicated in the technical note or methodological document for the calculation of technical reserves referred to in the Actuarial Management Regulation for Insurance Companies. These acquisition costs may be deducted from the Calculation Base, provided that they are identified for each insurance contract. 5

4.2.5 In the case of accepted reinsurance and/or received co-insurance schedules, alternatively the total amount of the schedule may be considered as if it were a single document whose validity corresponds to the period of the contract contained in said schedule with the longest earning period.

4.2.6 Under the assumption of uniform distribution of coverage during the validity of the contract, the unearned portion of premiums (pnc) is obtained in the following manner:

pnc = (FF - FI) / max(FC, FI)

Where,
FI : Start date of policy validity
FF : End date of policy validity or end date of the current policy year, whichever is smaller (closest to FC) FC : Date of calculation of reserves and close of Financial Statements

The expression “max(FC,FI)” designates, between FC and FI, the date whose occurrence is later than the other.

4.2.7 The Total Unearned Premium Reserve (RPNDT) per contract is equivalent to the multiplication of the Calculation Base by the unearned portion of premiums.
RPNDT = (Calculation Base) * pnc

4.2.8 Provisional coverages obligations form part of the RPNDT, for which an estimation methodology must be maintained. Provisional coverages must also be recorded as an account receivable.

4.3 The Ceded Unearned Premium Reserve (RPNDC) is calculated for each insurance contract, accepted reinsurance and received co-insurance, according to the conditions, limits and percentages of cession of valid proportional reinsurance contracts, as applicable.
The company must substantiate the calculation of the RPNDC. Such substantiation must be available to the Superintendency and must consider especially the following cases:

5 Paragraph modified by Resolution SBS No. 332-2020 published on 02/02/2023, effective from 01/01/2025.

Los Laureles Nº 214 - Lima 27 - Perú Telf. : (511)6309000 Fax: (511) 6309239 5/14 a) The limit of coverage of the ceded reinsurance contract is lower than the insured sum of the insurance contract. b) The validity of the ceded reinsurance contract does not encompass the full validity of the insurance contract (in multi-year contracts). c) The coverages of the ceded reinsurance contract do not include all coverages of the insurance contract and/or there could be several proportional reinsurance contracts, or different reinsurance schemes, applicable to the insurance contract.

Article 5°.- Own Methodology for the Estimation of the Retained Unearned Premium Reserve (RPNDR)
5.1 Based on what is established in the Actuarial Management Regulation for Insurance Companies, if the results of the backtesting study evidence that there are risks in which the methodology established in this Regulation is not applicable, the company must use its own methodology for the estimation of the RPNDR, prior authorization of this Superintendency. For this, the company will present a request signed by the General Manager, attaching the following: 6

1. Certified copy of the Board of Directors agreement or equivalent body where the decision to request authorization from the Superintendency to use a own methodology for the estimation of the RPNDR is recorded.
2. The methodological document for the calculation of technical reserves, signed by the person responsible for the calculation of technical reserves, which must contain at least the following information: 7
   a) The detail of the chosen methodology and the support for its application compared to the methodology established in this Regulation; b) Hypotheses, assumptions and considerations that have been made in the realization and application of the methodology and that influence the results; c) The statistics on which the valuation and constitution of the RPNDR is based; d) A valuation exercise through which the results of the application of the methodology submitted for approval are exhibited, and its comparison with the results of applying the regulatory methodology. e) A “backtesting” type analysis, which shows that the chosen methodology has adequate capacity to estimate future obligations.
3. Certified copy of the minutes of approval of the Board of Directors or equivalent body where the approval of the methodological document for the calculation of technical reserves is recorded.
4. 8

5.2 In case of changes in the methodology, the company must request authorization for its use from the Superintendency, demonstrating that the new methodology reflects its experience better. For this, the company will present a request signed by the General Manager, attaching the following: 9

1. Updated methodological document for the calculation of technical reserves, duly signed by the person responsible for the calculation of technical reserves, which must contain at least the information indicated in subparagraph 2 previously indicated in paragraph 5.1, and include a comparative analysis between the results obtained in accordance with the new methodology and the previous one. 10

2. Certified copy of the minutes of approval of the Board of Directors or equivalent body where the approval of the methodological document for the calculation of technical reserves is recorded.

3. 11

5.3 The new methodology may be applied from its authorization. 12

5.4 During the authorization process for the use or update of the own methodology for the estimation of the RPNDR, the Superintendency may require any other related information that allows confirming the technical reasonableness of the methodology for which authorization is requested.
13

5.5 The Superintendency approves or denies the authorization to use own methodology for the estimation of the RPNDR or for the respective update, within a maximum term of one hundred twenty (120) calendar days. 14

Article 6°.- Premium Deficiency Reserve
6.1 The Premium Deficiency Reserve (RIP) is constituted when the RPNDR does not sufficiently represent the retained obligations that will be generated in the unextinguished coverage period of insurance contracts, accepted reinsurance and received co-insurance. Therefore, the RIP is a type of additional technical reserve governed by the provisions of the Actuarial Management Regulation for Insurance Companies, and its constitution is governed by what is established in this Regulation.

6.2 The RIP is calculated with a minimum frequency of quarterly, using historical information contained in the Financial Statements based on the following grouping by risk: i) vehicle insurance and its allied lines, ii) credit and surety insurance, iii) civil liability insurance, iv) other general lines insurance, v) accident and health insurance (including SOAT), vi) short-term group or individual life insurance (with a validity of less than or equal to one year) and vii) law life insurance for workers and former workers of the second regime (with a validity of less than or equal to one year). The RIP is calculated through the following procedure: 15

6.2.1 The information to be considered for the calculation of the RIP corresponds to the last twenty-four (24) months (reference period); except for the following risk groupings “Civil Liability” and “Credit and Surety”, where said period is forty-eight (48) months.
16

6.2.2 The combined ratio is obtained, defined as the quotient between the following concepts (a divided by b):
a) Claims, plus acquisition costs defined in subparagraph 4.2.4 of this Regulation, plus various technical expenses, plus administrative expenses.

10 Subparagraph modified by Resolution SBS No. 1856-2020 published on 27/07/2020.
11 Subparagraph repealed by Resolution SBS No. 1856-2020 published on 27/07/2020.
12 Paragraph numbered by Resolution SBS No. 1856-2020 published on 27/07/2020.
13 Paragraph incorporated by Resolution SBS No. 1856-2020 published on 27/07/2020.
14 Paragraph incorporated by Resolution SBS No. 1856-2020 published on 27/07/2020.
15 Paragraph modified by Resolution SBS No. 3299-2022, published on 02/11/2022, effective from 01/01/2023.
16 Paragraph modified by Resolution SBS No. 2239-2021 of 31/07/2021. Subsequently, modified by Resolution SBS No. 552-2023 published on 20/02/2023, effective from 01/07/2023.

Los Laureles Nº 214 - Lima 27 - Perú Telf. : (511)6309000 Fax: (511) 6309239 7/14 b) Earned premiums plus various technical income.

6.2.3 The mentioned amounts are annualized and net of ceded co-insurance and ceded reinsurance. The methodology for distribution by risk grouping of administrative expenses must be recorded in a technical document approved by the Board of Directors, which cannot be modified for at least one year and must be available to the Superintendency.

6.2.4 If the combined ratio obtained in subparagraph 6.2.2 is less than 1.0, then the company is not obliged to constitute the RIP. If the combined ratio is greater than 1.0, then the excess over 1.0 will indicate the deficiency ratio.

6.2.5 The Premium Deficiency Reserve (RIP) is equivalent to the multiplication of the deficiency ratio, by the net unearned premium net of ceded reinsurance and ceded co-insurance.

6.2.6 RIPs by risk grouping cannot be offset against each other.

6.2.7 In the case of law life insurance for workers and former workers of the second regime (with a validity of less than or equal to one year), the combined ratio is defined as the quotient between the following concepts (a divided by b):
a) Claims, plus acquisition costs defined in subparagraph 4.2.4 of this Regulation, plus various technical expenses, plus administrative expenses, plus the cost or future deficit of premiums of the Law Life Insurance for former workers of the third regime estimated at the date of cessation or at the first date of start of validity of the policies of the former workers after their cessation. b) Earned premiums plus various technical income. 17

6.2.8 The cost or future deficit of premiums of the Law Life Insurance for former workers of the third regime, referred to in paragraph a) of subparagraph 6.2.7, corresponds to the policies of former workers whose first date of start of validity after their cessation is comprised within the last 24 months. 18

6.3 The calculation of the RIP is exempted for the Earthquake risk, and for those insurance contracts that belong to a product that is no longer marketed in the market and does not have automatic renewal (run-off portfolio).

6.4 If during twelve (12) consecutive months the RIP is constituted in some determined risk, the company must present to this Superintendency the “RIP Evaluation Report”, approved by the Board of Directors, which must detail at least, the evaluation carried out to reach premium sufficiency, the causes that have provoked the insufficiency, the measures adopted and the estimated time frame in which they will take effect. Likewise, if applicable, the company must update the technical note. These documents must be sent to the Superintendency within thirty (30) calendar days following the close of the Financial Statements. The statistical information and calculations used as part of the evaluation must be available to this Superintendency. 19

17 Paragraph incorporated by Resolution SBS No. 3299-2022, published on 02/11/2022, effective from 01/01/2023.
18 Paragraph incorporated by Resolution SBS No. 3299-2022, published on 02/11/2022, effective from 01/01/2023.
19 Paragraph modified by Resolution SBS No. 1143-2021 published on 19/04/2021, effective from 20/04/2021.

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6.5 Exceptionally, in cases where new risks are initiated in already established insurance companies, the calculation of the Risk Reserve for Insufficiency of Premiums (RIP) must be performed after twenty-four (24) months from the initiation of operations in that risk, except for liability, credit, and suretyship risks, where the calculation of the RIP must be performed after forty-eight (48) months from the initiation of said operations. In the case of new companies, for the calculation of the RIP, an additional period of twenty-four (24) months shall be available beyond that established for new risks in already established insurance companies.

Article 7th.- Insurance with a validity period greater than one year

For the calculation of the reserve for insurance with a validity period greater than one year, the calculation method contemplated in this Regulation shall be used, considering the current portion of the premium for such insurance, that is, that corresponding to one year of coverage from the date of initiation of the policy's validity, in accordance with the “Special norms applicable to general branch insurance with a validity period greater than one year”, approved by Resolution SBS No. 924-98 and its modifying norms, or in accordance with the company's own methodology for estimating the Retained Unearned Premium Reserve (RPNDR), if applicable.

Article 8th.- Information system for reserve calculation

8.1 The database supporting the calculation of the Risk Reserve in Course (RRC) and its components must be available to the Superintendence.

8.2 Companies must be capable of obtaining the automatic calculation of total unearned premium reserves (RPNDT), ceded (RPNDC), and retained (RPNDR) reserves through their systems, whose database(s) must contain at least the following information for each insurance contract and/or coverage, for accepted reinsurance and received co-insurance.

a) Name and code of the risk, according to the Chart of Accounts.

b) Type of contract. Enter “01” for insurance policies, “02” for certificates in the case of group or floating policies, “03” for received co-insurances and “04” for accepted reinsurance.

c) Number or code of the policy or contract.

d) Premium collection document.

e) Start date of validity corresponding to the premium.

f) End date of validity corresponding to the premium.

g) Total validity period (reference period) in number of days.

h) Unrun validity period in number of days.

i) Unrun portion of premiums (pnc).

j) Cession percentage in co-insurance.

k) Total premium amount (reference period).

l) Total Ceded Premium

m) Ceded Premium by type of proportional reinsurance contract in force, as applicable.

n) Computable acquisition costs, according to the indications of numeral 4.2.4 of Article 4th of this Regulation.

o) Calculation Base.

p) Total Unearned Premium Reserve.

q) Ceded Unearned Premium Reserve.

r) Retained Unearned Premium Reserve.

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8.3 In the event that the company has an approved proprietary methodology for constituting the retained unearned premium reserve, the fields indicated in numeral 8.2 shall be considered on a reference basis.

FINAL AND TRANSITORY PROVISIONS

First.- Adaptation plan

Companies must prepare an adaptation plan to this Regulation, which must be approved by the Board of Directors and sent to the Superintendence no later than 31.03.2017. The aforementioned plan must include quarterly progress reports, which must be presented within fifteen (15) calendar days following the close of each quarter.

Second.- First evaluation and constitution of the reserve for insufficiency of premiums (RIP)

To carry out the evaluation indicated in Article 6th of this Regulation and to constitute the RIP, if applicable, the reference period is twenty-four (24) months or forty-eight (48) months, as indicated in numeral 6.2.1, counted retrospectively from 31.12.2017.

Third.- Accounting registration of the change in reserve constitution methodology

The net changes resulting from the accounting registration of the change in methodology of the Retained Unearned Premium Reserve constituted at the end of the adaptation period of this Regulation, as well as the first calculation of the Reserve for Insufficiency of Premiums, must be made affecting accumulated results.

Subsequently, the accounting registration of the two components of the Risk Reserve in Course will affect the results of the fiscal year, affecting the respective accounting accounts.

Fourth.- Methodology for the distribution of administrative expenses

Companies must send no later than 30.06.2017, the methodology for the distribution of administrative expenses, approved by the Board of Directors, which will be applied for the calculation of the premium insufficiency reserve. This methodology must be detailed for each of the risk aggregations defined in Article 6th of this Regulation.”

Article Second.- Companies cannot accountably register the issuance right in account 5406 “Issuance Rights”. The issuance right shall be registered as part of the commercial premium.

Article Third.- Modify the Chart of Accounts for companies in the Insurance System, approved by Resolution SBS No. 348-95 and its modifying norms, according to Annex No. 1 “Modifications to the Chart of Accounts of companies in the Insurance System” attached to this resolution and available on the website of this Superintendence (www.sbs.gob.pe), in accordance with what is provided by Supreme Decree No. 001-2009-JUS.

Article Fourth.- Modify the “Regulation of Investments of Insurance Companies”, approved by Resolution SBS No. 1041-2016 and its modifying norms, according to the following:

1. Modify letter k) of Article 25th according to the following text:

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“ k) Unmatured and unearned premiums receivable.- Corresponds to the lesser amount resulting from comparing: i) the total of unmatured premiums receivable from insured parties, less interest on premium installments and the general sales tax (if applicable), and ii) the respective technical reserves (risks in course, deferred premiums and/or mathematics, as applicable), net of co-insurance and reinsurance. In both cases, the estimation of unissued premiums for risk already assumed and provisional coverages must be considered, as indicated in the Regulation of the Risk Reserve in Course.

Its calculation is performed separately for: i) vehicle insurance and its allied lines, ii) credit and suretyship insurance, iii) other general branch insurance, iv) accident and illness insurance (including SOAT), and v) individual or group short-term life insurance (with a validity of less than or equal to one year)”.

2. Modify letter g) of Article 36th, “Limits by asset class”, according to the following text:

“ASSET CLASS GENERAL BRANCHES LIFE BRANCHES CALCULATION BASE … … … … … g) Unmatured and unearned premiums receivable Up to 100% of the respective technical reserves of premiums (risks in course, deferred premiums and/or mathematics, as applicable), net of co-insurance and reinsurance; separately for: i) vehicle insurance and its allied lines, ii) credit and suretyship insurance, iii) other general branch insurance, iv) accident and illness insurance, and v) individual or group short-term life insurance”.

3. Modify methodological note 4 of Annex No. ES-4G “Premiums receivable from insured parties unmatured and unearned” (i), (ii) as follows:

“Identifier code. Indicate "VLS" for Vehicles and Allied Vehicle Lines (codes 21 and 22), "CC" for Credit and Suretyship Insurance (codes 54, 55 and 56), "ORG" for Other General Branches (codes from 01 to 59, except 21, 22, 54, 55 and 56), "AE" for Accidents and Illnesses (codes 61, 63, 64 and 66), or "VID" for Individual or Short-Term Group Life (codes 72, 73, 74, 80, 81 and 82).”

Article Fifth.- Modify the “Regulation of patrimonial requirements of insurance and reinsurance companies”, approved by Resolution SBS No. 1124-2006 and its modifying norms, according to the following:

1. Modify letter a.2) of numeral 6.1 “General branch insurance” of Article 6th, according to the following text:

“a.2) It will be obtained as 23.5% of a.1).”

2. Modify letter a.2) of numeral 6.2 “Accident and illness insurance” of Article 6th, according to the following text:

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“a.2) It will be obtained as 23.5% of a.1).”

3. Modify letter a.2) of numeral 6.3 “Group life insurance” of Article 6th, according to the following text:

“a.2) It will be obtained as 23.5% of a.1).”

4. Modify letter a.2) of numeral 6.4.2 “SCTR” of Article 6th, according to the following text:

“a.2) It will be obtained as 26.5% of a.1).”

5. Modify Table No. 1 “General Branch Insurance – Based on premiums” of Annex ES-7C “Information on Solvency Margin”, according to the following:

Table No. 1
GENERAL BRANCH INSURANCE - BASED ON PREMIUMS
LAST TWELVE MONTHS
OPERATION ____ months ____ months TOTAL
Year___ current
(a) (b) (c) = (a+b)

1. Net Insurance Premiums

2. Net Accepted Reinsurance

3. Total Net Premiums = (1c + 2c)

4. Basic calculation amount = 0.235 * (3c)

5. Net Insurance Claims

6. Net Accepted Reinsurance Claims

7. Total Net Claims = (5c + 6c)

8. Net Ceded Premium Claims

9. Retained Claims = (7c - 8c)

10. Retention Ratio (not less than 0.50) = (9c / 7c)

11. SOLVENCY MARGIN = (4c * 10c)

12. Modify Table No. 3 “Accident and Illness Insurance – Based on premiums” of Annex ES-7C “Information on Solvency Margin”, according to the following:

Table No. 3
ACCIDENT AND ILLNESS INSURANCE - BASED ON PREMIUMS LAST TWELVE MONTHS OPERATION ____ months ____ months TOTAL Year___ current (a) (b) (c) = (a+b)

1. Net Insurance Premiums
2. Net Accepted Reinsurance
3. Total Net Premiums = (1c + 2c)
4. Basic calculation amount = 0.235 * (3c)
5. Net Insurance Claims
6. Net Accepted Reinsurance Claims
7. Total Net Claims = (5c + 6c)
8. Net Ceded Premium Claims
9. Retained Claims = (7c - 8c)
10. Retention Ratio (not less than 0.50) = (9c / 7c)

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11. SOLVENCY MARGIN = (4c * 10c)

12. Modify Table No. 5 “Group Life Insurance – Based on premiums” of Annex ES-7C “Information on Solvency Margin”, according to the following:

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Table No. 5
GROUP LIFE INSURANCE - BASED ON PREMIUMS
LAST TWELVE MONTHS
OPERATION ____ months ____ months TOTAL
Year___ current
(a) (b) (c) = (a+b)

1. Net Insurance Premiums

2. Net Accepted Reinsurance

3. Total Net Premiums = (1c + 2c)

4. Basic calculation amount = 0.235 * (3c)

5. Net Insurance Claims

6. Net Accepted Reinsurance Claims

7. Total Net Claims = (5c + 6c)

8. Net Ceded Premium Claims

9. Retained Claims = (7c - 8c)

10. Retention Ratio (not less than 0.50) = (9c / 7c)

11. SOLVENCY MARGIN = (4c * 10c)

12. Modify Table No. 7.2 “SCTR – Based on premiums” of Annex ES-7C “Information on Solvency Margin”, according to the following:

TABLE NO. 7.2: SCTR – BASED ON PREMIUMS
Article Sixth.- Incorporate procedure No. 169 “Authorization to use the proprietary methodology for the estimation of the Retained Unearned Premium Reserve” into the Single Text of Administrative Procedures – TUPA of the Superintendence of Banking, Insurance and Private Pension Fund Administrators approved by Resolution SBS No. 3082-2011, in accordance with the text attached to this Resolution and published in accordance with what is provided by Supreme Decree No. 004-2008-PCM, Regulation of Law No. 29091. (Institutional portal: www.sbs.gob.pe).

Article Seventh.- The validity of this Resolution must take into consideration the following:

LAST TWELVE MONTHS
OPERATION Months Months TOTAL previous year current year c = (a) (b) (a+b)

1. Net Insurance Premiums
2. Net Accepted Reinsurance
3. Total Net Premiums = (1c + 2c)
4. Basic calculation amount = 0.265 * (3c)
5. Net Insurance Claims
6. Net Accepted Reinsurance Claims
7. Total Net Claims=(5c+6c)
8. Net Ceded Premium Claims
9. Retained Claims = (7c - 8c)
10. Retention Ratio (not less than 0.50) = (9c/7c)
11. SOLVENCY MARGIN = (4c * 10c)

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• The Regulation of the Risk Reserve in Course, approved by Article First of this Resolution, will enter into force on January 1, 2018, with the exception of the First and Fourth Final and Transitory Provision which will govern from the day following the publication of this resolution. On January 1, 2018, the Regulation of the Risk Reserve in Course approved by Resolution SBS No. 1142-99 and its modifying norm will be repealed.

• Articles Second, Third, Fourth, Fifth and Sixth of this Resolution will enter into force from January 1, 2018.

Register, communicate and publish.

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