Technical Norms for the Control of the Diversification of Investments of Insurance Companies

NRP-57
OF THE INVESTMENTS OF INSURANCE COMPANIES

Approval: 05/06/2024
Validity: 20/06/2024

THE COMMITTEE OF NORMS OF THE CENTRAL RESERVE BANK OF EL SALVADOR,

CONSIDERING:
I. That Article 34 of the Insurance Companies Law establishes that the net technical reserves and the minimum net equity of insurance companies must be backed at all times by investments made seeking the effective fulfillment of the obligations they have undertaken, the security of the operations carried out, adequate liquidity, and the diversification of risks of their assets. Likewise, it establishes the instruments and assets in which insurance companies may make such investments.
II. That Article 35 of the Insurance Companies Law establishes the limits for the sums of the investments that an insurance company makes by issuer, individual debtor, or business group.
III. That Article 35 of the Financial System Supervision and Regulation Law establishes that directors, managers, and other officials holding positions of direction or administration in the members of the financial system must conduct their business, acts, and operations complying with the highest ethical standards of conduct and acting with the due diligence of a good merchant in their own business.
IV. That Article 99, third paragraph, letter d) of the Financial System Supervision and Regulation Law establishes that it corresponds to the Committee of Norms of the Central Reserve Bank of El Salvador the approval of technical norms for the establishment and monitoring of technical and mathematical reserves, investments, and reinsurance of insurance companies.

THEREFORE, by virtue of the regulatory powers conferred by Article 99 of the Financial System Supervision and Regulation Law,

AGREES to issue the following:

TECHNICAL NORMS FOR THE CONTROL OF THE DIVERSIFICATION OF THE INVESTMENTS OF INSURANCE COMPANIES

NRP-57
OF THE INVESTMENTS OF INSURANCE COMPANIES

Approval: 05/06/2024
Validity: 20/06/2024

CHAPTER I
OBJECTIVE, SUBJECTS, AND TERMS

Objective
Art. 1.- These Norms have the objective of regulating the minimum requirements that insurance companies must observe in the submission of information on the diversification of investments to the Financial System Superintendence.

Subjects
Art. 2.- The subjects obliged to comply with the provisions established in these Norms are:
a) Insurance Companies constituted in El Salvador; b) Branches of Foreign Insurance Companies, established and authorized in El Salvador; and c) Cooperative Associations that provide insurance services constituted in El Salvador.

Terms
Art. 3.- For the purposes of these Norms, the terms indicated below have the following meaning:
a) Central Bank: Central Reserve Bank of El Salvador; b) Law: Insurance Companies Law; c) Entity/entities: Subjects obliged as referred to in Article 2 of these Norms; and d) Superintendence: Financial System Superintendence.

CHAPTER II
ON THE CONTROL OF DIVERSIFICATION OF INVESTMENTS

On information regarding investment diversification Art. 4.- Entities must present to the Superintendence the information referred to in Articles 5, 6, 7, and 9 of these Norms, on a monthly basis within the first six business days following the month being reported, with the exception of the month of December, which will be presented within the first twenty business days of January, and June within the first ten business days of July.

Eligible instruments or assets for investment
Art. 5.- Entities must identify their investments in eligible instruments or assets in accordance with what is established in Article 34 of the Law, according to Annex No. 1 of these Norms, considering the following information:

NRP-57
OF THE INVESTMENTS OF INSURANCE COMPANIES

Approval: 05/06/2024
Validity: 20/06/2024

a) Eligible instruments or assets for investment, in which the diversification of eligible investment instruments and assets will be presented; b) Balance according to records of each investment instrument, in accordance with the accounting records of the insurance company; c) Legal limit, in which the application of the percentage of the investment limit for each instrument on the investment base will be presented, the latter according to [reference to previous norms, likely NRP-52], approved by the Central Bank through its Committee of Norms. The result will be the maximum value that the insurance company can maintain invested in each instrument; d) Computable investment, which will be the permissible investment per instrument. The maximum value per instrument to be computed will be that resulting from applying the respective percentage to the investment base; and e) Investment excess, which will be the result of comparing the value per instrument of the balance according to Records with the Legal Limit. The investment excess will not be considered as computable investment.

Investment limits
Art. 6.- Entities must identify the investment limits by investment diversification grouped by eligible instruments or assets in accordance with what is established in paragraphs third to fifth of Article 34 of the Law, according to Annex No. 2 of these Norms, detailing the following information:
a) Investment limits, detailing the groupings of investment instruments established in the Law; b) Balance according to computable investment, which must be the values reported in Annex No. 1 of these Norms. It refers to the permissible investment per instrument, and the maximum value per instrument to be computed will be that resulting from applying the respective percentage to the investment base; c) Legal limit, in which the application of the investment limit percentage of each group to the investment base will be presented. The result will be the maximum value that the insurance company can maintain invested for each group of instruments; d) Computable investment, which will be the permissible investment per each grouping of investment instruments. The maximum value per each grouping of investment instruments will be that resulting from applying the respective percentage to the investment base; and e) Investment excess, which will be the result of comparing the value of each grouping of instruments of the balance according to Records with that of the Legal Limit. The investment excess will not be considered as computable investment.

NRP-57
OF THE INVESTMENTS OF INSURANCE COMPANIES

Approval: 05/06/2024
Validity: 20/06/2024

Diversification by issuer and by issuance
Art. 7.- Entities must identify the limits by diversification by issuer and by issuance, according to Annex No. 3 of these Norms, which must detail the following information:
a) Diversification by issuer and by issuance, detailing the investment instruments, specifying the issuing society and/or debtor. For each instrument, the issuing institutions and/or societies and/or debtors must be specified; b) Balance according to records of each investment instrument, in accordance with the accounting records of the insurance company; c) Legal limit, in which the application of the percentage established to the corresponding calculation base for each investment instrument (investment base, issuer asset, value of the same issuance, etc.) will be presented; d) Computable investment, which will be the permissible investment per issuer and per issuance in accordance with the established percentages. The maximum permissible value will be that resulting from applying the respective percentage to the calculation base of each investment instrument; and e) Investment excess, which will be the result of comparing the value per investment instrument of the balance according to Records with that of the Legal Limit. The investment excess will not be considered as computable investment.

Art. 8.- The investment instruments with their respective permitted percentages in accordance with the diversification by issuer and by issuance established in Article 35 of the Law are presented in Annex No. 4 of these Norms.

Investment summary
Art. 9.- Entities must report a summary of the information on the investments made, in accordance with Annex No. 5 of these Norms, indicating the investment surplus or deficiency, the result of which is obtained in the following manner:
a) To the total of Eligible Instruments or Assets for Investment [present in these Norms], the totals of investment excesses from the Investment Limits and Diversification by Issuer and by Issuance [Annex No. 3 of these Norms] will be deducted; and b) As a result, the Total Computable Investment will be obtained, from which the base for Investment will be subtracted, to determine the investment surplus or deficiency. In the event of an investment deficiency, the regularization process referred to in Articles 53 and 54 letter a) of the Law will be followed.

NRP-57
OF THE INVESTMENTS OF INSURANCE COMPANIES

Approval: 05/06/2024
Validity: 20/06/2024

CHAPTER III
OTHER PROVISIONS AND VALIDITY

Sanctions
Art. 10.- Non-compliance with the provisions contained in these Norms will be sanctioned in accordance with what is established in the Financial System Supervision and Regulation Law.

Repeal
Art. 11.- [Repeals previous norms, likely NRP-52], approved by the Board of Directors of the Financial System Superintendence in Session No. CD-19/1997 of April 23, 1997, whose Organic Law was repealed by Legislative Decree No. 592 which contains the Financial System Supervision and Regulation Law, published in the Official Diary No. 23, Volume No. 390, dated February 2, 2011.

Unforeseen Aspects
Art. 12.- Aspects not provided for in regulatory matters in these Norms will be resolved by the Central Bank through its Committee of Norms.

Validity
Art. 13.- These Norms will enter into force as of the twentieth of June two thousand twenty-four.

NRP-57
OF THE INVESTMENTS OF INSURANCE COMPANIES

Approval: 05/06/2024
Validity: 20/06/2024

ELIGIBLE INSTRUMENTS OR ASSETS FOR INVESTMENT
Annex No. 1

NAME OF THE COMPANY _______________________________________________ INVESTMENTS AS OF ____ OF _________________ OF 20__

Balance on Investment Excess
Records Legal Limit Computable Investment

CONCEPT $ $ % $ % $ %
Eligible Instruments or Assets for Investment
01 Securities issued by the State 30
02 Securities issued by the Central Reserve Bank of El Salvador 30 03 Securities issued or guaranteed by state-owned companies and autonomous official institutions, excepting those of the Development Bank of the Republic of El Salvador and the Social Housing Fund 10 04 Securities issued by the Development Bank of the Republic of El Salvador 30 05 Negotiable obligations with a term of more than one year, issued by Salvadoran joint-stock companies 40 06 Securities issued to finance the acquisition of housing 40
01. Social Housing Fund
02. Other Institutions
07 Shares in Salvadoran companies 20
08 Participation certificates of investment funds 20 09 Foreign Investments 20
01. Securities issued or guaranteed by foreign states and central banks
02. Quotas of foreign investment funds
03. Deposits and securities of first-rank foreign banks 1/
04. Debt securities issued or guaranteed by financial institutions and foreign companies
05. Shares of foreign companies
10 Time deposits, savings accounts, and securities issued or guaranteed by Salvadoran banks, cooperative banks, and savings and credit companies 60 11 Credits and discounts (Loans and Repo Operations) 35 12 Premiums Receivable (Up to the value of Reserves for Risks in Course)
01. Direct Insurance
02. Reinsurance taken by property insurance
13 Claims receivable by cessions to reinsurers (Up to the value of the Claims Reserve) 14 Loans secured by life insurance policies (Up to the Surrender Value) 15 Organization expenses and investments in furniture and equipment 15 16 Non-residential urban real estate 10 17 Other public offering instruments 2/ 10

Totals

1/ Registered in the Registry kept by the Superintendence 2/ Those instruments not described in the previous subdivisions will be considered, for example: Securitizations, etc.

RRC : Reserves for Risks in Course
RS : Claims Reserve
VR : Surrender Value

NRP-57
OF THE INVESTMENTS OF INSURANCE COMPANIES

Approval: 05/06/2024
Validity: 20/06/2024

Annex No. 2
INVESTMENT LIMITS

NAME OF THE COMPANY_______________________________________________ INVESTMENTS AS OF ____ OF _________________ OF _____

Balances on Investment
Computable, established in
Annex No. 1
Legal Limit Investment computable
Excess of
Investment

CONCEPT $ $ % $ % $ %
Investment Limits
01 The investments indicated in numerals 1, 2, 3, and 4 must not exceed together 60% of the Net Technical Reserves and the Minimum Net Equity:
01. Securities issued by the State
02. Securities issued by the Central Reserve Bank of El Salvador
03. Securities issued or guaranteed by state-owned companies and autonomous official institutions, excepting those of the Development Bank of
the Republic of El Salvador and the Social Housing Fund
04. Securities issued by the Development Bank of the Republic of El Salvador
02 The investments indicated in numerals 5, 7, 8, 9, and 16 must not exceed together 60% of the Technical Reserves and the Minimum Net Equity:
01. Negotiable obligations with a term of more than one year, issued by Salvadoran joint-stock companies
02. Shares in Salvadoran companies
03. Participation certificates of investment funds
04. Foreign Investments
i. Securities issued or guaranteed by foreign states and central banks
ii. Quotas of foreign investment funds
iii. Deposits and securities of first-rank foreign banks
iv. Debt securities issued or guaranteed
by financial institutions and foreign companies
v. Shares of foreign companies
05. Non-residential urban real estate
03 The investments indicated in numerals 4, 6 (less Social Housing Fund), and 10 must not exceed together 60% of the Net Technical Reserves and the Minimum Net Equity:
01. Securities issued by the Development Bank of the Republic of El Salvador
02. Securities issued to finance the acquisition of housing
i. Other institutions
03. Deposits and securities issued or guaranteed by Banks, Cooperative Banks, and Savings and Credit Companies

Totals

NRP-57
OF THE INVESTMENTS OF INSURANCE COMPANIES

Approval: 05/06/2024
Validity: 20/06/2024

DIVERSIFICATION BY ISSUER AND BY ISSUANCE

NAME OF THE COMPANY _________________________________ INVESTMENTS AS OF ____ OF _________________ OF 20__ Annex No. 3

Balance on Investment Excess
Records Legal Limit Computable Investment

CONCEPT $ $ % $ % $ %
Diversification by Issuer and by Issuance
01 Securities issued or guaranteed by autonomous official institutions (Art. 34, letter c of the Law):
A- Name of Institution _______________________________ i - Investment Base 5 ii - Issuer Asset 10 iii - Value per Issuance 20 B - Name of Institution _______________________________ i - Investment Base 5 ii - Issuer Asset 10 iii - Value per Issuance 20 02 Negotiable obligations with a term of more than one year, issued by Salvadoran joint-stock companies (Art.34, letter of the Law):
A - Name of Company ____________________________ i - Investment Base 5 ii - Issuer Asset 10 iii - Business Group Asset 10 iv - Value per Issuance 20 B - Name of Company ____________________________ i - Investment Base 5 ii - Issuer Asset 10 iii - Business Group Asset 10 iv - Value per Issuance 20 03 Securities issued to finance the acquisition of housing - Other Institutions (Art. 34, letter f) of the Law):
A - Name of Institution ____________________________ i - Investment Base 5 ii - Issuer Asset 10 iii - Business Group Asset 10 iv - Value per Issuance 20 B - Name of Institution ____________________________ i - Investment Base 5 ii - Issuer Asset 10 iii - Business Group Asset 10 iv - Value per Issuance 20

NRP-57
OF THE INVESTMENTS OF INSURANCE COMPANIES

Approval: 05/06/2024
Validity: 20/06/2024

DIVERSIFICATION BY ISSUER AND BY ISSUANCE

NAME OF THE COMPANY __________________________________ INVESTMENTS AS OF ____ OF _________________ OF 20__ Annex No. 3

Balance on Investment Excess
Records Legal Limit Computable Investment

CONCEPT $ $ % $ % $ %
Diversification by Issuer and by Issuance
04 Shares in Salvadoran Companies (Art.34, letter g) of the Law):
A - Name of Company ____________________________ i - Investment Base 5 ii - Issuer Asset 10 iii - Business Group Asset 10 iv - Value per Issuance 20 v - Capital of the Issuer 5 B - Name of Company ____________________________ i - Investment Base 5 ii - Issuer Asset 10 iii - Business Group Asset 10 iv - Value per Issuance 20 v - Capital of the Issuer 5 05 Participation certificates of investment funds (Art.34, letter h) of the Law):
A - Name of Institution ____________________________ i - Investment Base 5 ii - Issuer Asset 10 iii - Business Group Asset 10 iv - Value per Issuance 20 v - Value of the same fund 5 B - Name of Institution ____________________________ i - Investment Base 5 ii - Issuer Asset 10 iii - Business Group Asset 10 iv - Value per Issuance 20 v - Value of the same fund 5 06 Foreign Investments (Art.34, letter i) of the Law):
A - Name of Institution ____________________________ i - Investment Base 2 B - Name of Institution ____________________________ i - Investment Base 2

NRP-57
OF THE INVESTMENTS OF INSURANCE COMPANIES

Approval: 05/06/2024
Validity: 20/06/2024

DIVERSIFICATION BY ISSUER AND BY ISSUANCE

NAME OF THE COMPANY __________________________________ INVESTMENTS AS OF ____ OF _________________ OF 20__

CONCEPT Balance on
Records
Legal Limit Computable Investment Excess of Investment $ $ % $ % $ % Diversification by Issuer and by Issuance 07 Time deposits, savings accounts, and securities issued or guaranteed by Salvadoran banks, cooperative banks, and savings and credit companies (Art.34, letter j) of the Law):
A - Name of Institution ____________________________ i - Investment Base - 5 % - 10 % (The 10 % only if they do not possess investments in other companies of the business group) 10 ii - Issuer Asset 10 iii - Business Group Asset 10 iv - Value per Issuance 20 B - Name of Institution ____________________________ i - Investment Base - 5 % - 10 % (The 10 % only if they do not possess investments in other companies of the business group) 10 ii - Issuer Asset 10 iii - Business Group Asset 10 iv - Value per Issuance 20 08 Credits and discounts (Loans and Repo Operations) (Art.34, letter k) of the Law): 1/ A - Name of Company ____________________________ i - Investment Base 5 ii - Issuer Asset 10 iii - Business Group Asset 10 B - Name of Company ____________________________ i - Investment Base 5 ii - Issuer Asset 10 iii - Business Group Asset 10 09 Premiums Receivable (Up to the value of the Reserves for Risks in Course) (Art.34, letter l) of the Law): 2/ A - Name of Company ____________________________ i - Investment Base 5 ii - Issuer Asset 10 iii - Business Group Asset 10 B - Name of Company ____________________________ i - Investment Base 5 ii - Issuer Asset 10 iii - Business Group Asset 10

DIVERSIFICATION BY ISSUER AND BY ISSUANCE

NRP-57
OF THE INVESTMENTS OF INSURANCE COMPANIES

Approval: 05/06/2024
Validity: 20/06/2024

NAME OF THE COMPANY _______________________________________________ Annex No. 3 INVESTMENTS AS OF ____ OF _________________ OF 20__

Balance on Investment Excess
Records Legal Limit Computable Investment

CONCEPT $ $ % $ % $ %
Diversification by Issuer and by Issuance
10 Claims receivable by cessions to reinsurers (Up to the value of the Claims Reserve) (Art.34, letter m of the Law):
A - Name of Company ____________________________ i - Investment Base 5 ii - Issuer Asset 10 B - Name of Company ____________________________ i - Investment Base 5 ii - Issuer Asset 10 11 Loans secured by life insurance policies (up to the Reserve Value) (Art.34, letter n of the Law):
A - Name of Company ____________________________ i - Investment Base 5 ii - Issuer Asset 10 iii - Business Group Asset 10 B - Name of Company ____________________________ i - Investment Base 5 ii - Issuer Asset 10 iii - Business Group Asset 10 12 Other public offering instruments (Art.34, letter q of the Law): 3/ A - Name of Institution ____________________________ i - Investment Base 5 ii - Issuer Asset 10 iii - Business Group Asset 10 iv - Value per Issuance 20 B - Name of Institution ____________________________ i - Investment Base 5 ii - Issuer Asset 10 iii - Business Group Asset 10 iv - Value per Issuance 20

Totals

NRP-57
OF THE INVESTMENTS OF INSURANCE COMPANIES

Approval: 05/06/2024
Validity: 20/06/2024

1/ In the case of Repo operations, do not include the balances of securities issued or guaranteed by the State, Central Reserve Bank of El Salvador, Development Bank of the Republic of El Salvador, and the Social Housing Fund 2/ In the case of surpluses arising from premiums from State entities that are payable with funds from the National Budget, they will not be subtracted from the computable investment 3/ In the case of securitizations, report the Securitization Company as the issuer

NRP-57
OF THE INVESTMENTS OF INSURANCE COMPANIES

Approval: 05/06/2024
Validity: 20/06/2024

Investment instruments with their respective permitted percentages in accordance with the diversification by issuer and by issuance

NAME OF THE COMPANY _______________________________________________

---

Annex No. 4
INVESTMENTS AS OF ____ OF _________________ OF 20__ Asset Base Group Values Same Values Same Fund Capital CONCEPT Investment Issuer Corporate Issuance Issuer Diversification by Issuer and by Issuance 1 Values issued or guaranteed by official autonomous institutions (Art.34, literal c of the Law) 5 % 10 % 20 % 2 Negotiable obligations with a term of more than one year, issued by Salvadoran anonymous societies (Art.34, literal e of the Law) 5 % 10 % 10 % 20 % 3 Values issued to finance the acquisition of housing
01. Other Institutions (Art.34, literal f of the Law) 5 % 10 % 10 % 20 %
4 Shares in Salvadoran societies (Art.34, literal g of the Law) 5 % 10 % 10 % 20 % 5 % 5 Participation certificates of investment funds (Art.34, literal h of the Law) 5 % 10 % 10 % 20 % 5 % 6 Foreign Investments (Art.34, literal i of the Law) 2 %
01. Values issued or guaranteed by foreign states and central banks
02. Shares of foreign investment funds
03. Deposits and values of first-rank foreign banks
04. Values representing debt issued or guaranteed by
foreign financial institutions and societies
05. Shares of foreign societies
7 Deposits and values issued or guaranteed by Salvadoran banks and financial institutions (Art.34, literal j of the Law) 5% - 10% 10 % 10 % 20 % 8 Credits and discounts (Loans) (Art.34, literal k of the Law) 5% 10 % 10 % 9 Premiums Receivable (Up to the value of Reserves for Risks in Force) (Art.34 literal l of the Law) 5%
01. Direct Insurance
02. Reinsurance taken for property insurance
10 Claims Receivable from Cessions to Reinsurers (Up to the value of the Claims Reserve) (Art.34, literal m of the Law) 5 % 10 % 11 Loans secured by life insurance policies (Up to the Surrender Value) (Art.34, literal n of the Law) 5 % 10 % 10 % 12 Other public offering instruments (Art.34, literal q of the Law) 5 % 10 % 10 % 20 %

NRP-57
OF INSURANCE COMPANIES' INVESTMENTS

Approval: 05/06/2024
Validity: 20/06/2024
SUMMARY TABLE OF INVESTMENT
Annex No.5
NAME OF THE COMPANY _______________________________________________ INVESTMENTS AS OF ____ OF _________________ OF 20__ Balance s/ Investment Computable Records CONCEPT $ $ % Investment Summary I - Eligible Instruments or Assets for Investment II - Investment Limits III - Diversification by Issuer and by Issuance IV - Total Computable Investment ( I - II - III ) V - Base for Investment VI - Surplus (Deficiency) of Investment ( IV - V )