Technical Standards for Branches of Salvadoran Insurance Companies Abroad

CNBCR-12/2012 NRP-06 TECHNICAL STANDARDS FOR BRANCHES OF SALVADORAN INSURANCE COMPANIES ABROAD Approval: 27/11/2012 Validity: 02/01/2013 Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador. Tel. (503) 2281-8000 www.bcr.gob.sv Page 1 of 7

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

CONSIDERING: I. That as a result of the liberalization of financial services, a window of opportunities opens for El Salvador to have greater integration into the global economy, through the establishment of insurance branches abroad, which dynamize the impetus of economic activity based on increased growth rates, competitiveness, and investment. II. That Article 3 letter b) of the Law on Supervision and Regulation of the Financial System establishes that it is the responsibility of the Superintendency of the Financial System to authorize the constitution, operation, start of operations, suspension of operations, modification, revocation of authorization, closure, and other acts of the members of the financial system, in this case, authorizing Salvadoran insurance companies to initiate the corresponding procedures for the establishment of branches abroad. III. That Article 7 letter e) of the Law on Supervision and Regulation of the Financial System establishes that it is the responsibility of the Superintendency of the Financial System to supervise the branches of Salvadoran insurance companies abroad. IV. That for the purpose of facilitating and guiding Salvadoran insurance companies interested in establishing branches abroad, it is necessary to issue guidelines on the procedure to be followed.

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

AGREES to issue the following:

TECHNICAL STANDARDS FOR BRANCHES OF SALVADORAN INSURANCE COMPANIES ABROAD

CHAPTER I OBJECT, SUBJECTS, AND DEFINITIONS

Object Art. 1.- These Standards aim to establish the minimum requirements and procedures that insurance companies incorporated in the country must comply with to obtain authorization from the Superintendency of the Financial System to initiate the corresponding procedures for the establishment of branches abroad, as well as those they must comply with once they begin operations abroad.

Subjects Art. 2.- The subjects obliged to comply with the provisions established in these Standards are insurance companies incorporated in the country that are interested in establishing branches abroad. (1)

Definitions Art. 3.- For the purposes of these Standards, the terms indicated below have the following meaning: a) Entity or Entities: Insurance companies incorporated in the country that are interested in establishing branches abroad; b) Country of Origin: El Salvador; c) Host Country: The country where the branch will be established; d) Branch: The office physically separate from the head office or central office, which may carry out those operations permitted and authorized by the host country, whose accounting is part of the consolidated financial statements of the parent company; and e) Superintendency: Superintendency of the Financial System.

CHAPTER II REQUIREMENTS FOR THE AUTHORIZATION PROCESS

Application Art. 4.- The Entity interested in establishing a Branch abroad must present to the Superintendency the application for authorization to initiate the procedures for the establishment of the Branch, signed by its legal representative or authorized attorney for these purposes, and must contain at minimum: a) Host Country where it wishes to establish the Branch; b) Statement of reasons and legal basis on which the application is based; c) Lines and types of insurance contracts it wishes to operate; d) Place and date of application; and e) Signature of legal representative or attorney.

Documents attached to the application Art. 5.- The application for authorization to initiate the procedures for the establishment of the Branch must be accompanied by the following documentation: a) Certification of the agreement of the General Shareholders' Meeting or Board of Directors, according to its bylaws, in which the opening of the Branch abroad was authorized; b) Study describing the financial bases of the insurance operations to be developed, commercial plans, market segment to be served, amount of capital allocation to be invested, coverage of services provided, financial projections for at least two years, projected return on investment, country and transfer risk evaluation; and c) Effect on the minimum net equity of the investment to be made. The application and documentation may be presented through the means made available by the Superintendency, which may be electronic. In any case, the time limit referred to in the first paragraph of Article 7 of these Standards will begin to run from the next business day after the application has been submitted. (1)

Art. 6.- In addition to the documentation detailed above, the Entity must take into account the following: a) The capital or contribution assigned to the Branch, in accordance with the legal requirements established in the Host Country, must be made with funds in excess of the minimum net equity; b) The value of the participation in the capital of the Branch will be deducted from the sum of capital and capital reserve, to determine the net equity of the insurer; and c) Any additional financial resources that the Entity provides to the Branch abroad in any form, as well as related credits, must be deducted from share capital and capital reserves, to determine net equity.

Authorization procedure to establish a branch abroad (1) Art. 7.- Upon receipt of the application for authorization to initiate the procedures for the establishment of the Branch, in accordance with Articles 4 and 5 of these Standards, the Superintendency will proceed to verify compliance with the requirements defined in these Standards, having a maximum period of thirty business days for the authorization or denial of the application. (1) If the application is not accompanied by the complete and proper information detailed in Articles 4 and 5 of these Standards, the Superintendency, due to the lack of necessary requirements, may require the Entity to present the missing documents within a period of ten business days counted from the day following the notification, a period that may be extended at the request of the interested Entity when there are reasons justifying such extension. (1) The Superintendency in the same notice will indicate to the Entity interested in establishing a branch abroad that if it does not complete the information within the aforementioned period, it will proceed without further procedure to archive the application, reserving its right to submit a new application. (1)

CNBCR-12/2012 NRP-06 TECHNICAL STANDARDS FOR BRANCHES OF SALVADORAN INSURANCE COMPANIES ABROAD Approval: 27/11/2012 Validity: 02/01/2013 Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador. Tel. (503) 2281-8000 www.bcr.gob.sv Page 2 of 7

If after the analysis of the documentation presented in accordance with Articles 4 and 5 of these Standards, the Superintendency has observations or when the documentation or information presented is not sufficient to establish the facts or information intended to be accredited, the Superintendency may notify the Entity to remedy the deficiencies communicated or present additional documentation or information requested. (1) The Entity will have a maximum period of ten business days counted from the day following the notification, to resolve the observations or present the additional information required by the Superintendency. (1) The Superintendency may, through a reasoned resolution, extend by up to another ten business days, the period indicated in the previous paragraph, when the nature of the observations or deficiencies notified so requires. (1)

Extension of time limit (1) Art. 7-A.- The Entity interested in establishing a branch abroad may submit to the Superintendency an application for extension of the time limit indicated in the fifth paragraph of Article 7 of these Standards, before the expiration of said period, stating the reasons on which it is based and proposing, if applicable, the pertinent evidence. (1) The extension period may not exceed ten business days and will begin from the next business day after the expiration date of the original period. (1)

Suspension of time limit (1) Art. 7-B.- The thirty business day period indicated in the first paragraph of Article 7 of these Standards will be suspended for the days that elapse between the notification of the request for information or documentation referred to in the second and fifth paragraphs of said article, until the observations required by the Superintendency are remedied. (1)

Resolution (1) Art. 7-C.- Once the complete and proper documentation has been presented, the Superintendency will respond to the application to establish a branch abroad through a resolution, which it will notify within a maximum period of three business days from the date the resolution is issued. (1)

When the authorization request is denied or conditioned, the Superintendency will provide an explanation of the reasons, so that the Entity interested in establishing a Branch abroad can evaluate whether it can remedy the reasons or desist from the operation.

CNBCR-12/2012 NRP-06 TECHNICAL STANDARDS FOR BRANCHES OF SALVADORAN INSURANCE COMPANIES ABROAD Approval: 27/11/2012 Validity: 02/01/2013 Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador. Tel. (503) 2281-8000 www.bcr.gob.sv Page 3 of 7

Cooperation memorandum Art. 8.- Prior to the authorization to initiate the procedures for the establishment of the Branch abroad, the Superintendency will sign a cooperation memorandum with the supervisory body of the country where the Branch will be established, with the objective of coordinating the exchange of information and the mechanisms that enable consolidated supervision, ensuring the confidentiality of such information.

Art. 9.- The authorization resolution to initiate the procedures for the establishment of the Branch abroad issued by the Superintendency in accordance with Article 7-C of these Standards, may be used as evidence that the home supervisor has no objections to the establishment of the Branch abroad. (1)

Time limit to initiate procedures abroad Art. 10.- The Entity will have a period of six months, counted from the date of notification of the authorization, to initiate the procedures for the establishment of the Branch in the host country, and must present to the Superintendency proof of the initiation of the same in the host country.

Extension of time limit Art. 11.- If thirty days before the expiration of the period indicated in the previous article, the Entity has not initiated the corresponding procedures, the Superintendency may grant, upon request and based on the justifications of the case, an extension of up to one hundred eighty days.

CHAPTER III OPERATIONS AND SUPERVISION

Notice of authorization and start of operations Art. 12.- The Entity must present to the Superintendency a copy of the document showing the authorization to operate as a Branch, issued by the supervisory body of the Host Country, within a period of ten business days counted from the date of notification of said authorization. Likewise, it must inform the Superintendency in writing of the date on which it will begin operations.

Supervision Art. 13.- Branches will be under the supervision of the host jurisdiction; however, the accounting and solvency of these must be calculated based on the provisions applicable in both the home and host jurisdictions.

Submission of information Art. 14.- The Entity must send to the Superintendency, at the times and in the manner indicated by the applicable regulations, the basic financial statements of the Branch, as well as any other information that is relevant or necessary and indicates the performance of the Branch abroad.

Limitation of operations Art. 15.- Branches established abroad may not carry out operations in El Salvador, except for those carried out with their head office.

Regularization measures Art. 16.- When a branch of a Salvadoran insurance company abroad incurs non-compliance with the solvency requirements indicated in the laws or regulations established by the host country, it must be communicated as a relevant event to the Superintendency by the head office, within a period of five business days following the verification of the non-compliance, presenting the action plan for the corresponding measures to resolve it. The Superintendency, in accordance with the Insurance Companies Law and the Law on Supervision and Regulation of the Financial System, may, through a reasoned resolution, instruct the head office on the preventive or corrective measures it deems applicable.

Cessation of operations due to non-compliance Art. 17.- The Superintendency, in coordination with the host supervisory body, may order through a reasoned resolution the closure of operations of those Branches abroad that do not comply with legal provisions or when serious deficiencies are determined in their operational and internal control systems that endanger the interests of the public.

CHAPTER IV OTHER PROVISIONS AND VALIDITY

Sanctions Art. 18.- Non-compliance with the provisions contained in these Standards will be sanctioned in accordance with what is established in the Law on Supervision and Regulation of the Financial System.

Unforeseen aspects Art. 19.- Aspects not provided for in the regulatory matter in these Standards will be resolved by the Committee of Standards of the Central Reserve Bank of El Salvador.

Validity Art. 20.- These Standards will enter into force from the second day of January two thousand thirteen.

CNBCR-12/2012 NRP-06 TECHNICAL STANDARDS FOR BRANCHES OF SALVADORAN INSURANCE COMPANIES ABROAD Approval: 27/11/2012 Validity: 02/01/2013 Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador. Tel. (503) 2281-8000 www.bcr.gob.sv Page 4 of 7

MODIFICATIONS: (1) Modifications in articles 2, 5, and 9, incorporation of articles 7-A, 7-B, and 7-C, and substitution of article 7, approved by the Central Reserve Bank of El Salvador through its Committee of Standards, in Session CN-05/2022, of June 10, two thousand twenty-two, with validity from June 29, two thousand twenty-two.