Resolution SBS No. 886-2018: Approves Mandatory Use of Mortality Tables for Calculating Mathematical Reserves of Pension Annuities

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Resolution S.B.S
No. 886 - 2018

The Superintendent of Banks, Insurance, and Private Pension Fund Administrators

CONSIDERING:

That a fundamental aspect of this Superintendence's mission is to protect the interests of the public, safeguarding the stability, solvency, and transparency of the supervised systems, for which various regulation and supervision tools are used;

That the General Law of the Financial System and the Insurance System and the Organic Law of the Superintendence of Banks and Insurance, Law No. 26702 and its amendments, 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 force, catastrophic risks, and health insurance;

That, by Resolution SBS No. 309-93 of June 18, 1993, the technical bases for the calculation of mathematical reserves for pension insurance and life annuities from the Private Pension System (SPP) were approved, which included, among other aspects, the use of mortality tables for principal annuitants (RV-85-H and RV-85-M), survivors (B-85-H and B-85-M), and invalids (MI-85-H and MI-85-M);

That, by Resolution SBS No. 354-2006 of March 21, 2006, the use of the "Modified RV-2004" tables was approved, applied only to principal annuitants of the SPP for the calculation of mathematical reserves for retirement pensions in the life annuity modality, as well as for the annual calculation of amounts in the programmed withdrawal modality;

That, by Resolution SBS No. 17728-2010 of December 27, 2010, the use of the "Adjusted RV-2004 Modified" tables was approved, to be applied to retirement and early retirement pensioners in replacement of the "Modified RV-2004" tables for the calculation of mathematical reserves for retirement life annuities; and the "Adjusted B-85" tables to be applied to partial invalidity pensioners and beneficiaries, in replacement of the B-85 mortality tables, for the calculation of mathematical reserves for survivorship annuities; as well as for the annual calculation in the programmed withdrawal modality;

That, the purpose of mortality tables is to guarantee that there are sufficient resources for the payment of pensions by insurance companies and for the distribution of resources over time in the programmed withdrawal modality by AFPs, thereby offering adequate protection to affiliates and their beneficiaries against longevity, invalidity, or death risks, in fulfillment of this Superintendence's mission;

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That, in accordance with international actuarial and accounting standards, it is necessary to update mortality tables permanently over time and migrate from a static mortality table to a dynamic mortality table, in order to reflect recent changes in mortality or life expectancy, as well as improvement factors in mortality rates, of the population under study, the affiliates and pensioners of the Private Pension Fund Administration System (SPP);

That, it corresponds to the Superintendence to approve the mortality tables for annuitants, beneficiaries, and invalids that insurance companies must use for the constitution of mathematical reserves for life annuities from the SPP and from the Complementary Insurance for Work of Risk (SCTR), as well as for AFPs in the case of programmed withdrawal and the actuarial calculations derived therefrom;

That, in order to collect opinions from the general public regarding the draft regulation, the prepublication of the draft resolution approving the mandatory use of the SPP-S-2017 and SPP-I-2017 mortality tables (men and women) for the constitution of mathematical reserves for life annuities, corresponding to retirement, invalidity, and survivorship, was ordered on the electronic portal of the Superintendence, under the provisions of the thirty-second final and complementary provision of the General Law and Decree Supreme No. 001-2009-JUS;

With the approval of the Adjunct Superintendences of Insurance, of Private Pension Fund Administrators, of Legal Advisory, and of Economic Studies; and,

In exercise of the powers conferred by numeral 9 of article 349° of the General Law, and subsection d) of article 57° of the Single Text of the SPP Law;

RESOLVES:

Article First.- Approve the mandatory use of the following mortality tables detailed in the Annex of this resolution and published on the Institutional Portal (www.sbs.gob.pe), in accordance with the provisions of Decree Supreme No. 001-2009-JUS:

a) SPP-S-2017 (healthy men and women) regarding retirement pensioners, early retirement pensioners, and beneficiaries, in replacement of the current mortality tables RV-2004 Adjusted and B-85 Adjusted for men and women; b) SPP-I-2017 (men and women with the condition of invalidity) regarding partial and total invalidity pensioners, in replacement of the current mortality tables B-85 Adjusted and MI-85 for men and women.

Article Second.- The aforementioned SPP-S-2017 and SPP-I-2017 tables shall be mandatory for calculating the mathematical reserves of pensions in the family life annuity and deferred life annuity modalities, as well as having gradual and mandatory application for the annual calculation of the programmed withdrawal modality in the SPP, for requests available for quotation from January 1, 2019, inclusive, as well as for calculating the mathematical reserves of SCTR annuities. Likewise, they shall be mandatory for the purpose of sending the format contained in Annex No. 6, which insurance companies must submit through the Electronic Market Platform for Annuities and Withdrawals of the SPP (MELER-SPP), in accordance with

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the provisions of Title VII of the Compilation of Regulatory Superintendence Norms of the SPP.
For this effect, it shall be understood that a request is available for quotation when the "Date of Submission" subsection recorded in the MELER Electronic Procurement Platform, registers the date indicated in the preceding paragraph.

Article Third.- The SPP-S-2017 and SPP-I-2017 tables are also applicable for the settlement and payment of claims (additional contribution) whose accrual dates correspond to the SISCO IV policy onwards, referring to the collective insurance for the administration of risks of invalidity, survivorship, and funeral expenses.
Claims from this insurance whose accrual dates correspond to the administration contracts signed with Private Pension Fund Administrators, and to the SISCO I, SISCO II, and SISCO III policies, are settled and paid with the respective mortality tables in force at that time.

Article Fourth.- The SPP-S-2017 and SPP-I-2017 tables are also applicable for calculating the following mathematical reserves:
a) Mathematical reserves of life annuities whose quotation requests are prior to January 1, 2019; b) Mathematical reserves of invalidity and survivorship pensions of the Temporary Regime of the Private Pension System; c) Mathematical reserves of SCTR annuities originating from claims prior to January 1, 2019.

Article Fifth.- The Superintendence, within a maximum period of six (6) years, must conduct an evaluation and review of the actuarial studies referring to changes in mortality or life expectancy of the SPP population under study, so that, based on this, it may order the update of the corresponding mortality tables.

TRANSITIONAL COMPLEMENTARY PROVISIONS

FIRST.- In order to comply with what is stated in the fourth article of this resolution, and to recognize in financial statements the difference obtained between the previous tables and the SPP-S-2017 and SPP-I-2017 tables, the difference in reserves will be recognized with quarterly frequency, during a period of ten (10) years. The recognition to be made in quarter "t" (where t=0 is equal to 03.31.2019), will represent

of the difference in reserves between the current and new tables. The effect on the mathematical reserve will be accounted for as a charge or credit in accumulated results.
Once the 10 years have elapsed, the mathematical reserve will be calculated entirely using the SPP-S-2017 and SPP-I-2017 tables.

SECOND.- Calculations under the Programmed Withdrawal modality will be performed taking into account the following conditions:

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a) Those requests available for quotation prior to January 1, 2019, will use the RV-2004 Adjusted Modified, B-85 Adjusted, and MI-85 tables, as applicable, in the annuity calculations. b) Those requests available for quotation between January 1, 2019, and December 31, 2019, will calculate annuities, as applicable to the type of benefit, as follows:

Retirement
1st Annuity: RV-2004-Adjusted Modified
2nd Annuity: RV-2004-Adjusted Modified (80%) / SPP-S-2017 (20%) 3rd Annuity: RV-2004-Adjusted Modified (60%) / SPP-S-2017 (40%) 4th Annuity: RV-2004-Adjusted Modified (40%) / SPP-S-2017 (60%) 5th Annuity: RV-2004-Adjusted Modified (20%) / SPP-S-2017 (80%) 6th Annuity and onwards: SPP-S-2017 at 100%

Invalidity
1st Annuity: B-85 Adjusted or MI-85
2nd Annuity: B-85 Adjusted or MI-85 (80%) / SPP-I-2017 (20%) 3rd Annuity: B-85 Adjusted or MI-85 (60%) / SPP-I-2017 (40%) 4th Annuity: B-85 Adjusted or MI-85 (40%) / SPP-I-2017 (60%) 5th Annuity: B-85 Adjusted or MI-85 (20%) / SPP-I-2017 (80%) 6th Annuity and onwards: SPP-I-2017 at 100%

Survivorship
1st Annuity: B-85 Adjusted
2nd Annuity: B-85 Adjusted (80%) / SPP-S-2017 (20%) 3rd Annuity: B-85 Adjusted (60%) / SPP-S-2017 (40%) 4th Annuity: B-85 Adjusted (40%) / SPP-S-2017 (60%) 5th Annuity: B-85 Adjusted (20%) / SPP-S-2017 (80%) 6th Annuity and onwards: SPP-S-2017 at 100%

c) Those requests available for quotation from January 1, 2020, will mandatorily use the SPP-S-2017 and SPP-I-2017 mortality tables, as applicable, in the annuity calculations.
The status of "requests available for quotation" referred to in this transitional complementary provision is that referred to in the second paragraph of Article Second of this resolution.

FINAL COMPLEMENTARY PROVISIONS

FIRST.- This resolution shall enter into force from January 1, 2019.

Registered, communicated, and published

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