Lima, 03 June 2011

S.B.S. Resolution No. 6599 -2011

The Superintendent of Banking, Insurance and
Private Pension Fund Administrators (a.i.)

WHEREAS:

That, 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 amendments, hereinafter General Law, empowers insurance system companies to issue and incur subordinated debt;

That, article 299° of the General Law establishes the components of the effective equity of insurance system companies destined to cover insurance and/or reinsurance operations, among which is the computable portion of subordinated debt that meets the requirements that, for such purpose and in general terms, the Superintendency establishes;

That, in accordance with the provisions of article 301° of the General Law, the subordinated bonds issued by insurance companies shall have the characteristics and limits specified in article 233° of the General Law, as well as those that, as the case may be, the Superintendency establishes through general regulations;

That, article 233° of the General Law, amended by Legislative Decree No. 1028, sets forth the general characteristics that subordinated debt must meet to be computable as part of effective equity, and establishes that the Superintendency shall determine the specific requirements that the aforementioned instruments must meet and shall authorize their computation in effective equity;

That, consequently, it is necessary to establish the characteristics, requirements and modalities of subordinated debt for it to be considered in effective equity;

SUPERINTENDENCY OF BANKING, INSURANCE AND AFP

That, in order to gather the opinions of the general public regarding the proposals to amend the regulations of the Insurance System, the pre-publication of the draft resolution amending the Subordinated Debt Regulation was ordered on the electronic portal of the Superintendency, under the provisions of Supreme Decree No. 001-2009-JUS;

Having regard to the opinion of the Deputy Superintendencies of Insurance, of Risks, of Economic Studies and of Legal Counsel; and,

In use of the powers conferred in numerals 7, 9 and 13 of
article 349º of the aforementioned General Law and SBS Resolution No. 6389-2011.

RESOLVES:

Article One.- To approve the Subordinated Debt Regulation applicable to Insurance Companies, which forms an integral part of this Resolution, as indicated below:

“SUBORDINATED DEBT REGULATION APPLICABLE TO INSURANCE COMPANIES

CHAPTER I GENERAL PROVISIONS

Article 1°.- Scope

This Regulation applies to the companies included in literal D of article 16° of the General Law, hereinafter companies.

Article 2°.- Definitions

For the purposes of the provisions of this regulation, consider the following definitions:

a) Subordinated debt: Subordinated debt, represented through debt instruments or through loans, must have the following general characteristics: i) It cannot be, totally or partially, guaranteed by the company itself or by a person of its economic group; ii) Payment of principal before its maturity is not permitted, nor redemption by drawing, without prior authorization from the Superintendency; iii) It shall be valued at the amount of its placement or granting and said amount must be fully paid; and, iv) In case of intervention, or dissolution and liquidation, the interest and principal of the subordinated debt, in that order, are subject to their application to absorb the losses of the company that remain after accounting equity has been fully applied to said purpose.

b) Redeemable subordinated debt: Subordinated debt whose principal is paid within a determined term.

c) Non-redeemable subordinated debt: Subordinated debt whose principal is not amortized and generates a periodic return perpetually.

d) Subordinated debt convertible into shares: Subordinated debt that prior to its maturity date or on the latter, by decision of the company issuing the debt instruments or of the holders of said instruments, or by decision of the receiver or grantor of the loan, can be converted into shares of the company issuing the instruments or receiving the loan.

e) Subordinated debt with non-cumulative interest: When the issuer of the instrument representing subordinated debt or the receiver of the subordinated loan does not make the payment of interest within the established term, the holder of the instruments representing subordinated debt or the grantor of the subordinated loan loses the right to receive said interest, such that the interest not paid within the reference term are not enforceable.

f)
Subordinated debt with cumulative interest: When the issuer of the instrument representing debt subordinated or the receiver of the subordinated loan does not make the payment of interest within the term established, the holder of the instruments representing subordinated debt or the grantor of the subordinated loan does not lose the right to receive said interest, such that the interest not paid within the established term are enforceable in the future.

g) Securities Market Law: Securities Market Law approved by Legislative Decree No. 861 and its amendments.

h) General Law: 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 amendments.

i)
Accounting equity: As defined in the Glossary Annex of the General Law.

j)
Required equity: As defined in the Regulation of equity requirements.
It is the minimum effective equity destined to cover the following requirements: i) the equity of solvency, ii) the guarantee fund and iii) the effective equity intended to cover credit risk.

k) Distributable results: Accumulated profits without a capitalization agreement and discretionary reserves that may be reduced without prior authorization from the Superintendency.

l)
Regulation of capital requirements: Regulation of capital requirements of insurance and reinsurance companies, approved by SBS Resolution No. 1124 -2006 of 29 August 2006 and its amending regulations.

m) Step – up: One or more increases in the rate, calculated as the yield on the placement or grant date, during the term of the instrument, on pre-established dates.

n) Superintendency: Superintendency of Banking, Insurance and Private Pension Fund Administrators Pensions.

Article 3.- Authorization from the Superintendency

To issue representative instruments of subordinated debt or to enter into subordinated loans, companies must submit to the Superintendency a request for favorable opinion or authorization, respectively. The request must indicate whether the representative instruments of debt or the loans will be used for the computation of effective equity, and must attach the information required in articles 7 or 10, as applicable.

The Superintendency, if it deems it appropriate, will issue its favorable pronouncement or authorization within thirty (30) business days following the submission of the request and corresponding information. If such communication has not been issued within the aforementioned period, the request shall be deemed denied.

Any modification in the conditions of the issuance contract of representative instruments of subordinated debt or subordinated loans, which affects their computation in effective equity, requires the favorable opinion or prior authorization of the Superintendency, as applicable.

Article 4.- Limitations on the granting of credits for acquisition or granting of subordinated debt

Companies may not, directly or through third parties, grant credits for the purpose that such financing be destined to the acquisition or granting of subordinated debt issued or contracted by the company itself.

Article 5 Convertible subordinated debt into shares
To creditors and/or holders of convertible subordinated debt into shares, the provisions of
Chapter I of Title III of Section One of the General Law shall apply, to the extent pertinent,
at the time of conversion.

CHAPTER II REPRESENTATIVE INSTRUMENTS OF SUBORDINATED DEBT

Article 6.- Definition

Representative instruments of subordinated debt are considered to be redeemable and non-redeemable subordinated bonds, subordinated bonds convertible into shares and others of a similar nature.

Article 7.- Requirements for issuance of representative instruments of subordinated debt

For the issuance of representative instruments of subordinated debt, companies must attach to the request referred to in article 3, a certified copy of the resolution of the respective corporate body, a copy of the draft issuance contract and a technical study thereof.

The technical study of the issuance shall comprise an evaluation report of the impact of the financial instrument on the risk profile of the issuing company, which must include at least:

a) Executive Summary: Main aspects of the impact study on the company's risk profile.

b) Background: Objectives of the issuance and use of funds, previous issuances of the company and their risk classifications.

c) Description of the Program / Issuance: Characteristics of the issuance and the financial instrument and the projected schedule for the issuances.

d) Market Analysis: Analysis of supply and demand of the financial instrument and potential investors.

e) Economic-financial evaluation: Includes, among others, risk analysis and financial projections:

e.1) Risk analysis: Impact on interest rate risk; impact on exchange rate risk (limits on the global oversold and overbought position); impact on liquidity position; for structured financial products, design, performance, risks and hedging mechanisms in accordance with current regulations.

e.2) Impact on financial indicators: Effective equity, leverage ratio and structure of assets and liabilities.

e.3) Financial projections for a 3-year period: Assumptions of the projections, estimation of issuance rates, projected cash flow of the issuances (monthly flows), impact on the income statement, net present value (sensitivity analysis with scenarios).

The issuance of these instruments is subject, to the extent applicable, to the provisions established in Circular S-0583-2000 which regulates the serial issuance of financial instruments.

Article 8.- Placement

Representative instruments of subordinated debt may be placed through public or private offering. In case the issuance of representative instruments of debt is made in Peru, for purposes of their placement through public offering, the issuing companies must adhere to the provisions established in the Securities Market Law. The registration of the instruments in the Public Registry of the Securities Market, under the charge of the National Supervisory Commission of Companies and Securities (CONASEV),

requires the prior presentation of the favorable opinion of the Superintendency, in accordance with article 3 of this Regulation.

CHAPTER III SUBORDINATED LOANS

Article 9.- Definition

Subordinated loans correspond to a type of subordinated debt and are represented by contracts under which companies contract redeemable, non-redeemable or convertible into shares subordinated debt.

Article 10.- Requirements for entering into subordinated loans

Companies wishing to take out subordinated loans must attach to the application referred to in Article 3°, a certified copy of the resolution of the respective corporate body, a copy of the draft loan agreement and a technical study thereof.

The technical study of the loan shall include an evaluation report on the impact of taking out the loan on the risk profile of the issuing company, which must include at least the following:

a) Executive Summary: Main aspects of the impact study on the company's risk profile.

b) Background: Objectives of the loan and use of the funds.

c) Description of the loan: Identification of the lender, loan amount, currency, maturity, interest and interest payment period.

d) Market analysis: Analysis of supply and demand for the loan and potential lenders.

e) Economic and financial evaluation: Includes, among others, risk analysis and financial projections:

e.1) Risk analysis: Impact on interest rate risk; impact on foreign exchange risk (limits on the global oversold and overbought position); impact on the liquidity position; for structured financial products, design, performance, risks and hedging mechanisms in accordance with current regulations.

e.2) Impact on financial indicators: Effect of the loan on effective equity, debt ratio, debt limit and asset and liability structure.

e.3) Assumptions of the projections and sensitivity analysis of the flows destined for loan payment for a period of 3 years; and the impact on the income statement for a period of 3 years.

CHAPTER IV COMPUTATION OF SUBORDINATED DEBT IN EFFECTIVE EQUITY

Article 11°.- Non-redeemable subordinated debt

Non-redeemable subordinated debt may be considered as part of effective equity provided that it complies, at a minimum, with the following requirements:

1) Permanence: The subordinated debt must be perpetual, that is, it must not have a maturity date. However, it may include an early redemption option, which must comply with the following conditions:

i) The redemption option must be only at the initiative of the issuer or borrower of the loan, with prior authorization from the Superintendency. For this purpose, it will be evaluated whether the company has sufficient effective equity to cover the required equity; otherwise, it will be required that the

company replace totally or partially the subordinated debt to be redeemed with instruments that can be considered in effective equity.

ii) The early redemption option may only be exercised after a minimum period of five (5) years, counted from the date of issuance or contracting.

iii) In case the early redemption option is associated with an incentive to redeem said debt, (for example, bonds with step-up coupons), the referred option may only be contemplated after a minimum period of ten (10) years counted from its issuance or contracting.

iv) Regarding the incentive referred to in the previous paragraph, only step-ups will be allowed, which result, throughout the life of the instrument, in an increase in the rate, calculated as the yield at the date of placement or granting, that do not exceed:

• 30% of the aforementioned rate or 300 basis points, whichever is greater, in the case of subordinated debt with a fixed rate or

• 50% of the spread at the date of placement or granting or 300 additional basis points to the spread at the date of placement or granting, whichever is greater, in the case of subordinated debt with a variable rate.

Changes from fixed to variable rate are permitted. In these cases, for the calculation of the limit, the fixed rate will be converted to variable at the time of placement or granting of the subordinated debt, and the step-up will be determined, as for subordinated debt with a variable rate, by the difference in spreads.

Early redemptions due to changes in legislation or the occurrence of events beyond the control of the company are not subject to the aforementioned periods of 5 and 10 years.

2) Availability for loss absorption: In case of intervention, or dissolution and liquidation, the holders of subordinated debt will only have a priority better than the holders of instruments representing capital. When the company is subjected to a surveillance regime, the accrued but unpaid interest and the principal of the subordinated debt, in that order, may be allocated totally or partially to absorb losses.

3) Flexibility in interest payment: It may be debt with non-cumulative or cumulative interest. In the case of subordinated debt with non-cumulative interest, interest is not accrued or paid when the company does not present distributable results or when the effective equity of the company is less than the required equity. Interest that has already accrued but has not been paid must be reversed. Interest will accrue again when the effective equity of the company is greater than the required equity and when the company presents distributable results. In the case of subordinated debt with cumulative interest, the payment of interest may be deferred for an indefinite period if the company does not present distributable results or when the effective equity of the company is less than the required equity.

Article 12°.- Redeemable subordinated debt

Redeemable subordinated debt may be considered as part of effective equity provided that it complies, at a minimum, with the following requirements:

1) Have an original maturity of five (5) years or more.

2) If it includes an early redemption option, said option may only be exercised after a minimum period of five (5) years, counted from the date of issuance or contracting.

3) In the case of subordinated debt that contains an early redemption option, the earliest date for exercising the option shall be considered as the maturity of said debt, except in the case where the early redemption option can only be executed at the initiative of the issuer or recipient of the

Los Laureles No. 214 - Lima 27 - Peru Tel.: (511)2218990 Fax: (511) 4417760 7

loan and subject to prior approval by the Superintendency, in which case the originally agreed date shall be considered as the maturity of the debt.

4) During the five (5) years prior to its maturity, for purposes of its computation in effective equity, an annual discount factor of 20% shall be applied proportionally to the outstanding principal balance of the subordinated debt, such that in the last year it is not computable.

Early redemptions due to changes in legislation or the occurrence of events beyond the control of the company are not subject to the 5-year term.

Article 13°.- Subordinated debt convertible into shares computable in effective equity

Non-redeemable subordinated debt convertible into shares at the option of the issuer, its holders, the loan recipient or at the option of the loan grantor, as well as subordinated debt mandatorily convertible into shares, shall be treated as perpetual subordinated debt when said debt complies with the requirements set forth in Article 11°, and the shares comply with the characteristics to be computable in effective equity.

Redeemable subordinated debt convertible into shares at the option of the issuer, its holders, the loan recipient or the loan grantor, shall be treated as redeemable subordinated debt computable in effective equity and the provisions of Article 12° shall apply.

Article 14°.- Redeemable subordinated debt with a term equal to or greater than thirty (30) years

When redeemable subordinated debt, convertible or not into shares, has an original maturity equal to or greater than thirty (30) years, it shall be considered to comply with the permanence requirement referred to in numeral 1) of Article 11°, provided that it has a residual term equal to or greater than fifteen (15) years and, therefore, may be treated as non-redeemable subordinated debt, provided that it complies with the requirements set forth in Article 11° and the limits contemplated in Article 15°.

When the residual term of the aforementioned subordinated debt is less than fifteen (15) years, it shall be treated as the redeemable subordinated debt referred to in Article 12°, taking into account the limits contemplated in Article 15°.

Article 15°.- Limits for the computation of subordinated debt in effective equity

Companies may compute subordinated debt as part of their effective equity, subject to the following limits:

1. Redeemable subordinated debt may not exceed fifty percent (50%) of the sum of common shares, perpetual preferred shares with non-cumulative dividend rights, additional paid-in capital, legal reserve, discretionary reserves that may only be reduced with prior approval of the Superintendency, retained earnings from previous years and the current year that have a capitalization agreement, minus losses from previous years and the current year; and minus the amount of goodwill or credit goodwill (goodwill) resulting from the reorganization of the company, as well as from the acquisition of investments.

2. The sum of subordinated debt may not exceed one hundred percent (100%) of the sum of the sum of common shares, perpetual preferred shares with non-cumulative dividend rights, additional paid-in capital, legal reserve, discretionary reserves that may only be reduced with prior approval of the Superintendency, retained earnings from previous years and the current year that have a capitalization agreement, minus losses from previous years and the current year

year; and minus the amount of goodwill or credit goodwill (goodwill) resulting from the reorganization of the company, as well as from the acquisition of investments.

Article 16°.- Control of subordinated debt

For purposes of controlling subordinated debt, companies must submit to the Superintendency within fifteen (15) calendar days following the close of each month, the annexes on “control of subordinated debt” and “subordinated debt assigned to effective equity.”

Article Second.- Modify Annexes ES-23A1 "Control of Subordinated Debt - Law No. 26702 and ES-23B1 “Subordinated Debt assigned to Effective Equity” approved by SBS Resolution 234-99. The new annex formats shall be published on the institutional Portal (www.sbs.gob.pe), in accordance with the provisions of Supreme Decree No. 001-2009-JUS.

Article Third.- Approve procedure No. 28 “Pronouncement on the issuance of instruments representing subordinated debt - Insurance Companies” and procedure No. 29 “Authorization to contract subordinated loans – Insurance Companies”, of the Single Text of Administrative Procedures – TUPA of the Superintendency of Banking, Insurance and Private Pension Fund Administrators, approved by SBS Resolution No. 131-2002, whose texts are annexed to this Resolution and are published in accordance with the provisions of Supreme Decree No. 004-2008-PCM, Regulation of Law No. 29091. (Institutional electronic portal: www.sbs.gob.pe).

Article Fourth.- This Resolution shall enter into force as of 1 July 2011. As of said date, the subordinated debt regulation applicable to companies in the insurance system approved by SBS Resolution No. 234-99 of 31 March 1999 is repealed.

Register, communicate and publish,

JAVIER POGGI CAMPODÓNICO
Superintendent of Banking, Insurance and
Private Pension Fund Administrators (a.i.)

[1] Annex numbering modified by SBS Resolution No. 2842-2012 of 11-05-2012.