SBS Resolution No. 1287-2020: Regulation for the Direct Administration of the Surplus of the Fund for Investments of AFOCATs

Los Laureles Nº 214 - Lima 27 - Perú Telf. : (511)6309000 Fax: (511) 6309239 1/8

Lima, April 14, 2020

S.B.S. Resolution
No. 1287-2020

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

WHEREAS:

That paragraph 30.1 of article 30 of the General Law of Land Transport and Traffic, Law No. 27181 and its amending norms, states that the Associations of Regional or Provincial Funds against Traffic Accidents (AFOCAT) are regulated, supervised, audited and controlled by the Superintendency of Banking, Insurance and Private Pension Fund Administrators, in accordance with the powers established in article 345 and following articles 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;

That the Regulation for the Supervision of the Associations of Regional or Provincial Funds against Traffic Accidents and for the Operation of the Central Registry of Accident Claims derived from Traffic Accidents, approved by Supreme Decree No. 040-2006-MTC and amending norms, hereinafter the AFOCAT Regulation, considers among its objectives to regulate the constitution, characteristics and administration regime of the Regional or Provincial Fund against Traffic Accidents (AFOCAT);

That paragraph 27.6 of article 27 of the AFOCAT Regulation establishes that the Superintendency may authorize, to the AFOCATs that so request, the direct administration of the surpluses of the Fund with respect to the Solvency Fund, provided that the latter is greater than the Minimum Fund;

That by Supreme Decree No. 044-2020-PCM the National State of Emergency was declared as a consequence of the outbreak of the Coronavirus (COVID-19) and various exceptional and temporary measures were adopted regarding the spread of COVID-19;

That, within the framework of the provisions of the AFOCAT Regulation and the declaration of National State of Emergency referred to above, the Superintendency considers it necessary to establish the conditions and requirements that must be met in order for the AFOCATs to request the direct administration of the surpluses of the Fund with respect to the Solvency Fund;

That, in situations in which a State of Emergency is declared at the national level, it is necessary that the AFOCATs may request, exceptionally, authorization for the direct administration of surpluses in order to be able to cover their administrative expenses and thus maintain the continuity of their operations;

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That paragraph 29.2 of article 29 of the AFOCAT Regulation establishes that the methodology for calculating the Solvency Fund and other provisions regarding its control and supervision shall be established by the Superintendency;

That by SBS Resolution No. 931-2017 the Regulation of the Solvency Fund for AFOCATs was approved, which establishes the methodology for calculating the Solvency Fund;

With the approval of the Deputy Superintendencies of Insurance and Legal Advisory; and,

In use of the powers conferred by article 30 of the General Law of Land Transport and Traffic, as well as by numerals 7, 9 and 13 of article 349 of the General Law and in accordance with the exception conditions set forth in numeral 3.2 of article 14 of Supreme Decree No. 001-2009-JUS and its amending norms;

RESOLVES:

Article One.- To approve the Regulation for the direct administration of the surplus of the Fund for the investments of the AFOCATs, according to the following text:

“REGULATION FOR THE DIRECT ADMINISTRATION OF THE SURPLUS OF THE FUND FOR THE INVESTMENTS OF THE AFOCATs

Article 1.- Scope
The present regulation is applicable to the Associations of Regional or Provincial Funds against Traffic Accidents, hereinafter the AFOCATs.

Article 2.- Definitions
For the purposes of the present regulation, the following definitions must be considered:

1. Surpluses: determined as the difference between the resources of the Fund deposited in the Trust and the Solvency Fund requirement, provided that the latter is greater than the Minimum Fund.
2. Fund (Regional or Provincial Fund against Traffic Accidents): as defined in the AFOCAT Regulation or in the norm that replaces it.
3. Solvency Fund: as defined in the AFOCAT Regulation and in the Solvency Fund Regulation, or in the norms that replace them.
4. Minimum Fund: Minimum amount set in the AFOCAT Regulation or in the norm that replaces it.
5. Real Estate: That asset comprised in article 885 of the Civil Code, in the name of the AFOCAT, registered in the SUNARP Property Registry.
6. AFOCAT Regulation: Regulation for the Supervision of the Associations of Regional or Provincial Funds against Traffic Accidents (AFOCAT) and for the Operation of the Central Registry of Accident Claims derived from Traffic Accidents, approved by Supreme Decree No. 040-2006-MTC and its amending norms.
7. Solvency Fund Regulation: Regulation of the Solvency Fund for AFOCATs, approved by SBS Resolution No. 931-2017 and amending norms.
8. Superintendency: Superintendency of Banking, Insurance and Private Pension Fund Administrators.

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Article 3.- Conditions prior to the request for administration of surpluses
The AFOCATs may request authorization from the Superintendency to directly administer the surpluses, provided that, prior to the submission of the request, they comply with all of the following conditions:

1. The AFOCAT must have maintained the amount of the Fund in the Trust above the Solvency Fund and the Minimum Fund for a period of not less than one year, permanently and uninterruptedly.
2. The Solvency Fund must be calculated for a period of not less than one year, considering that the variable “e” (Rate of application of the Solvency Fund for Claims Deviation) has the value of 100%.
3. The AFOCAT must maintain the amount of the basic cash in its paying account, in accordance with the provisions of Circular No. AFOCAT-8-2013, for a period of not less than six months, permanently and uninterruptedly.
4. The AFOCAT must carry out the operation of the trust through its paying account, in accordance with the provisions of Circular No. AFOCAT-8-2013 and the conditions set forth in the Trust Agreement, for a period of not less than six months, permanently and uninterruptedly.
5. The Board of Directors that administers the Fund must have a current registration in SUNARP.

Article 4.- Use of the surplus of the Fund
4.1 The AFOCAT may directly administer the surpluses of the Fund to make investments provided that they are linked to activities related to the purpose of the Fund. For this purpose, it may make the following investments:

1. Real Estate.- Comprises the purchase of land or finished real estate in the name of the AFOCAT, for the exclusive use of the AFOCAT. Likewise, it comprises construction, expansion, repair or remodeling activities of the land or real estate owned by the AFOCAT. For this, the real estate must comply with the following requirements:
   a) Be located in Peruvian territory, within the region or province in which the AFOCAT operates. b) The property right in favor of the AFOCAT must be registered in the Real Estate Property Registry. c) Be free of liens and encumbrances. d) Have appraisals carried out by an appraiser registered in the Registry of Appraisers (REPEV) under the Superintendency. e) Be registered as urban real estate.
2. Term deposits.- Comprises fixed-term deposits in soles made in financial institutions of the country authorized to receive deposits from third parties, according to the diversification policies adopted by the AFOCAT, with the sole purpose of increasing the existing surpluses in the Fund for future investments indicated in this article. Such deposits cannot be pledged as collateral, nor be subject to restrictions, and the risks of possible losses must be assumed by the AFOCAT. The capital and interest generated must be deposited in the Trust once the contract with the financial institution ends.
3. Rapid intervention vehicles.- Comprises the acquisition and equipping of emergency vehicles intended to provide urgent attention to the occupants or third parties not

Los Laureles Nº 214 - Lima 27 - Perú Telf. : (511)6309000 Fax: (511) 6309239 4/8 occupants of the motor vehicle covered by the AFOCAT, as a consequence of a traffic accident in which said vehicle has intervened. In such vehicles, the logo and name of the AFOCAT must be placed in a visible place. Operating and maintenance expenses are not considered part of the investment and must be assumed with resources other than the Fund.
4. Computer equipment and systems.- Comprises the acquisition of computer equipment (hardware), operating systems (software) and the payment of licenses or authorizations for the use of the software installed in the computers used by the AFOCAT at its administrative headquarters, in such a way as to allow it to guarantee the integrity, security and reporting of the information it administers, referring to the issuance of CATs, claims paid and payable, as well as financial information.
5. Training.- Comprises the updating of knowledge of the AFOCAT's personnel in educational institutions of higher education specialized in insurance training, information technologies or related institutions, following training courses or seminars to fully understand the product they offer and that allow them to respond technically and efficiently to the requirements of the Superintendency, its members, traffic accident victims and the general public.
6. Other investments related to the purpose of the Fund, subject to prior evaluation and approval by this Superintendency.
4.2 All assets acquired with the surplus of the Fund must be recorded in the financial statements of the AFOCAT.
4.3 For any disposal of the assets acquired with the surplus of the Fund, prior approval from the Superintendency is required, and the money obtained from such disposal must be returned to the Trust.
4.4 In the event of liquidation of the Fund, the assets acquired through the administration of surpluses must be made available to the liquidators of the Fund and form part of the mass to be liquidated. Once the liberatory prescription period has expired, such assets or what remains of them, after payment of indemnities and benefits, are returned to the Association.

Article 5.- Requirements to request the use of the surplus of the Fund
The AFOCATs that comply with the conditions indicated in article 3 of this Regulation may request authorization for the direct administration of surpluses, for which they must submit the following documents:

1. Request signed by the President of the Board of Directors of the AFOCAT.
2. Copy of the minutes of the General Assembly of Members, recording the agreement to directly administer the surplus of the Fund and the approval of the investment plan. Likewise, the documentation supporting the call made to the members of the AFOCAT must be submitted.
3. The investment plan of the surpluses, duly supported, containing an analysis of the benefits, in the short and medium term, that the AFOCAT intends to obtain with the investment to be made, indicating the profitability or benefit it expects to achieve.
4. When the surpluses are intended for the purchase of real estate, an appraisal report with an age of no more than three (3) months must be submitted, carried out by an appraiser

Los Laureles Nº 214 - Lima 27 - Perú Telf. : (511)6309000 Fax: (511) 6309239 5/8 registered in the REPEV under the Superintendency. In the case of the use of the surplus of the Fund for construction, expansion, repair or remodeling of the land or real estate owned by the AFOCAT or equipping of the rapid intervention vehicle, the budget of the total cost must be submitted.

Article 6.- Authorization to use the surplus of the Fund
6.1 The Superintendency authorizes or denies the request of the AFOCAT within forty-five (45) calendar days following the submission of the documentation established in article 5 of this Regulation. If the Superintendency authorizes the request, it must also communicate to the Trustee to proceed with the disbursement of the surplus. 1
6.2 The AFOCAT may directly administer the surpluses after the Superintendency has granted the corresponding authorization.

Article 7.- Information to the Superintendency
7.1 Once this Superintendency authorizes the AFOCAT to dispose of the surplus of the Fund, within a period not exceeding sixty (60) calendar days, counted from the date on which the authorization was granted, the AFOCAT must submit to this Superintendency the documentation accrediting having made the investment for which it was authorized.
7.2 Likewise, on a quarterly basis and together with the financial statements of the AFOCAT, the association must submit as a sworn statement a report containing the results of the investment made. In the case of term deposits, it must additionally send the respective account statement.
7.3 Without prejudice to the foregoing, the Superintendency may require the supporting documentation of the investment made, the information on profitability or benefit and the situation of the assets resulting from the investment made at any time. Such documentation and information must be available to the Superintendency.

FINAL COMPLEMENTARY PROVISION 2

SOLE.- Exceptional use of surpluses in the event of national, regional and local emergencies In the event of declarations of State of Emergency by the National Government, the AFOCATs may request, exceptionally, authorization for the direct administration of surpluses in order to cover their administrative expenses and thus maintain the continuity of their operations. To do so, they must comply with the conditions that the Superintendency establishes through multiple official letter or general norm, on each occasion.

TRANSITORY COMPLEMENTARY PROVISIONS

FIRST.- Exceptional request for the use of surpluses in the event of the declaration of State of Emergency at the National Level by Supreme Decree No. 044-2020-PCM 3 Considering the declaration of the National State of Emergency as a consequence of the outbreak of the Coronavirus (COVID-19) by Supreme Decree No. 044-2020-PCM, the AFOCATs may

1 Errata published in the Official Gazette El Peruano on 04.21.2020.
2 Final Complementary Provision incorporated by SBS Resolution No. 2137-2020, published on 09.07.2020.
3 Transitory Complementary Provision modified by SBS Resolution No. 2137-2020, published on 09.07.2020.

Los Laureles Nº 214 - Lima 27 - Perú Telf. : (511)6309000 Fax: (511) 6309239 6/8 request the direct administration of surpluses to cover their administrative expenses, for which they must comply only with the special conditions and requirements set forth below. The conditions for the AFOCATs to access the surpluses are the following:
1. The Board of Directors that administers the Fund must have a current registration in SUNARP.
2. The resources of the Fund deposited in the Trust as of the date must exceed the Solvency Fund requirement as of June 30, 2019 submitted by the AFOCAT or communicated by this Superintendency.
3. Have a deposit account in the name of the AFOCAT in an entity of the financial system, duly accredited before COFIDE.
4. The maximum amount to be granted is the equivalent to the estimated average amount to cover administrative expenses for forty-two (42) days, based on the 2019 financial information of the AFOCATs themselves.
5. The remaining amount in the Trust cannot be less than the maximum amount between the Adequate Solvency Fund as of June 30, 2019 and the Minimum Fund.
6. The return of the amount granted must be made in up to three years (2023, 2024 and 2025).
7. The expenses for the liquidation of assets of the Fund so that the AFOCAT accesses the surplus shall be assumed by the association itself.
The AFOCATs that meet the conditions indicated in the preceding paragraph and that require access to the surpluses of the Trust must follow the following procedure:
1. The President of the AFOCAT must submit to this Superintendency a request as a Sworn Statement, duly signed by him, indicating the amount, the term in which the return of said amount to the Fund will be made effective (which must not exceed two years), the veracity of the required documents and committing to use said resources to cover the administrative expenses for which it was requested.
2. Said request must be sent to the email address afocat@sbs.gob.pe. The result of the request will be communicated to the association's email address within a maximum period of three (3) business days. Without prejudice to the foregoing, until this Superintendency issues a favorable pronouncement, the AFOCAT cannot dispose of the resources of the Fund.
3. The request may be sent up to thirty (30) calendar days after the end of the National State of Emergency declared by Supreme Decree No. 044-2020-PCM.
After the approval of the Superintendency, the AFOCATs must comply with the following:
1. The request submitted and approved by this Superintendency must be regularized by minutes of agreement of the Board of Directors, presented at the Filing Desk up to forty (40) calendar days after the end of the National State of Emergency.
2. For supervision purposes, within thirty (30) calendar days after the delivery of the resources, the AFOCAT must send to this Superintendency, through the Filing Desk, a detailed report with the corresponding support, indicating the destination of the resources of the Fund to cover administrative expenses.”
As long as the AFOCAT has not completed the return of the resources it received from the Fund and a deficit of the Fund's resources with respect to the Solvency Fund requirement is detected, the following must be taken into account:
1. The Solvency Fund requirement is determined in accordance with the Solvency Fund Regulation.
2. Until the month of December 2022, the deficit cannot be greater than the amount that the AFOCAT has pending return to the Fund.

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3. In June 2023, the deficit cannot exceed the lesser value between the amount pending return as of that date and 83.5% of the amount initially received by the AFOCAT.
4. In December 2023, the deficit cannot exceed the lesser value between the amount pending return as of that date and 67% of the amount initially received by the AFOCAT.
5. In June 2024, the deficit cannot exceed the lesser value between the amount pending return as of that date and 50.5% of the amount initially received by the AFOCAT.
6. In December 2024, the deficit cannot exceed the lesser value between the amount pending return as of that date and 33% of the amount initially received by the AFOCAT.
7. In June 2025, the deficit cannot exceed the lesser value between the amount pending return as of that date and 16.5% of the amount initially received by the AFOCAT.
8. As of December 2025, the deficit is determined in accordance with the provisions of the Solvency Fund Regulation.”

Second.- Modification of the schedule for the return of the requested surpluses 4 The AFOCATs that, within the framework of the provisions of the First Transitory Complementary Provision of the Regulation and that have already requested the referred use of surpluses, may submit a new return schedule. The new schedule must be signed by the President of the AFOCAT and must not exceed three (3) years, comprised between the years 2023 to 2025.

Third.- Exception for the use of Fund resources made before the effective date of this Regulation 5 The resources of the Fund already used by the AFOCAT and that are already recorded as debts of the latter to the Fund, may be validated and recognized by this Superintendency for the only time, as part of the direct administration of the surpluses of the Fund to make investments, provided that they comply with the following conditions:

1. The AFOCAT has maintained in the Trust the amount of the Fund above the Solvency Fund at 100% in force and the Minimum Fund, for a period of not less than three (3) consecutive months.
2. Maintain the amount of its basic cash in the paying account in accordance with the provisions of Circular No. AFOCAT-8-2013, for a period of not less than three (3) consecutive months.
3. Carry out the operation of the trust through its paying account, for a period of not less than three (3) consecutive months.
4. The investments with resources of the Fund that it has made are framed in the investment activities detailed in numerals 1, 3 or 4 (real estate, rapid intervention vehicles, computer equipment and systems) of paragraph 4.1 of article 4 of this Regulation.
5. The amount of resources of the Fund used for the investments detailed in the preceding literal must be previously recognized as debts of the AFOCAT to the Fund.
   The AFOCAT that avails itself of this exception must submit to the Superintendency the documentation accrediting compliance with the conditions indicated above. The deadline for the submission of requests must not exceed two hundred forty (240) calendar days, counted from the entry into force of SBS Resolution No. 2137-2020.

Article Two.- To eliminate article 5 of the Regulation of the Solvency Fund for AFOCATs, approved by SBS Resolution No. 931-2017.

4 Transitory Complementary Provision incorporated by SBS Resolution No. 2137-2020, published on 09.07.2020.
5 Transitory Complementary Provision incorporated by SBS Resolution No. 2137-2020, published on 09.07.2020.

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Article Three.- This resolution enters into force on the day following its publication in the Official Gazette “El Peruano”.

Register, communicate and publish.

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