Technical Standards for the Authorization of Incorporation and Commencement of Operations of Insurance Companies in El Salvador

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CNBCR-03/2024
NRP-56
TECHNICAL STANDARDS FOR THE AUTHORIZATION OF INCORPORATION AND COMMENCEMENT OF OPERATIONS OF INSURANCE COMPANIES IN EL SALVADOR Approval: 02/29/2024 Validity: 03/15/2024 Alameda Juan Pablo II, between 15th and 17th Avenue North, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv

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

CONSIDERING:
I. That Article 4 of the Insurance Companies Law establishes that insurance companies incorporated in El Salvador must be organized and operate as indefinite-term anonymous companies, with fixed capital divided into registered shares, and may adopt any denomination they deem appropriate, which must be distinct from that of any other existing company. They may operate as general insurance companies, life insurance companies, or specialized exclusively in sureties.
II. That Article 5 of the Insurance Companies Law establishes that interested parties wishing to form an insurance company must request authorization from the Superintendence of the Financial System to incorporate the company.
III. That Article 9 of the Insurance Companies Law establishes that, having met the requirements established in this law, having verified its internal controls and procedures, and having registered the public deed in the Commercial Registry, the Superintendence of the Financial System will certify that the insurance company in question may commence its operations.
IV. That Article 3, letter b), of the Law on Supervision and Regulation of the Financial System establishes that it is the competence of the Superintendence of the Financial System to authorize the incorporation, functioning, commencement of operations, suspension of operations, modification, revocation of authorization, closure, and other acts of the members of the financial system, in accordance with the legal, regulatory, or technical standards established regarding the matter.
V. That Article 7, letter e), of the Law on Supervision and Regulation of the Financial System establishes that insurance companies, their branches abroad, and the branches of foreign insurance companies established in the country are subject to the supervision of the Superintendence of the Financial System.
VI. That Article 99, first paragraph, of the Law on Supervision and Regulation of the Financial System establishes that the Central Reserve Bank of El Salvador, through its Standards Committee, is the institution responsible for approving the technical regulatory framework that must be issued in accordance with this Law and other laws regulating supervised entities.

THEREFORE,

CNBCR-03/2024
NRP-56
TECHNICAL STANDARDS FOR THE AUTHORIZATION OF INCORPORATION AND COMMENCEMENT OF OPERATIONS OF INSURANCE COMPANIES IN EL SALVADOR Approval: 02/29/2024 Validity: 03/15/2024 Alameda Juan Pablo II, between 15th and 17th Avenue North, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv

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

AGREES to issue the following:

TECHNICAL STANDARDS FOR THE AUTHORIZATION OF INCORPORATION AND COMMENCEMENT OF OPERATIONS OF INSURANCE COMPANIES IN EL SALVADOR

CHAPTER I
OBJECT, SUBJECTS, AND TERMS

Object
Art. 1.- These Standards aim to establish the requirements and the process that interested parties must fulfill to receive authorization for the incorporation and commencement of operations of Insurance Companies in El Salvador.

Subjects
Art. 2.- The subjects obligated to comply with the provisions established in these Standards are the persons interested in incorporating Insurance Companies in El Salvador, in accordance with the Insurance Companies Law.

Terms
Art. 3.- For the purposes of these Standards, the terms indicated below have the following meaning:
a) Central Bank: Central Reserve Bank of El Salvador; b) Law: Insurance Companies Law; c) Company(ies): Insurance Company(ies); and d) Superintendence: Superintendence of the Financial System.

CHAPTER II
INCORPORATION, ORGANIZATION, AND SOCIAL CAPITAL

On Incorporation and Organization
Art. 4.- The incorporation and organization of companies shall be governed by the provisions contained in Chapter I of Title Two of the Law and by these Standards; in their absence, the provisions of the Commercial Code shall apply.

On Minimum Capital
Art. 5.- The minimum paid-in social capital to incorporate a company must be in accordance with what is established in Article 14 of the Law.
Art. 6.- The capital contribution for incorporation must be evidenced by a deposit in the Central Bank, in the name of the company being incorporated, the return of which must be made upon request of the Central Bank after the deed of incorporation has been registered in the Commercial Registry, funds that must be used to cover organization expenses and other operations authorized by the Superintendence.

CHAPTER III
REQUIREMENTS FOR INCORPORATION

On the Application for Incorporation Authorization Art. 7.- Persons interested in forming a company must present to the Superintendence the application for authorization to incorporate the company, accompanying the following information:
a) Draft social deed incorporating the bylaws. This draft must contain the requirements indicated in Articles 22 and 194 of the Commercial Code, those mentioned in the Notary Law and the Insurance Companies Law; b) Business plan including the following:
i. Organization and administration scheme of the company;
ii. Financial projections for two years indicating expected profitability, detailing the premises used;
iii. Description of the plans the applicant proposes to develop in the short, medium, and long term, indicating viability and feasibility, both economic and financial. Developing at minimum the commercial, financial, and investment plans;
iv. Social capital;
v. Shareholding participation regarding subsidiaries;
vi. Internal policies that the company will implement;
vii. Financial statements and their projections for two years, detailing the premises used; and
viii. Projected Minimum Net Equity for two years and in accordance with what is required in Article 30 of the Law.
c) Regarding the natural persons who make up the list of future shareholders, the information described in Annex No. 1 of these Standards must be presented; d) Regarding the legal persons that make up the list of future shareholders, the information described in Annex No. 2 of these Standards must be presented; e) Regarding future directors, the following information must be presented:
i. Sworn declaration of not having the disqualifications indicated in Article 12 of the Law, according to the model in Annex No. 3 of these Standards;
ii. Current certificate of criminal records, issued by the General Directorate of Penal Centers; and
iii. Curriculum vitae, including specific details of general information.

The content of items i) and ii) shall apply to spouses and relatives within the first degree of consanguinity. f) Name or corporate name of the auditor or firm that will conduct the external audit of the company, duly registered in the Register of External Auditors maintained by the Superintendence and having been authorized to offer external audit services to insurance companies; and g) In the case that future shareholders are insurance companies, Central American reinsurers, or other foreign entities, they must additionally present the following requirements:
i. International classification of the applicant entity, issued by an internationally recognized rating agency; and
ii. Certification issued by the competent authority stating that the applicant entity operates in accordance with the prudential regulation and supervision of its country of origin and is complying with the provisions applicable to it.

Documentation presented originating from abroad, both copies and signatures appearing therein, must be authenticated or certified by a notary or foreign official, as appropriate, and the respective procedure for legalization of signatures or apostille must be followed.
In the case that documents are not in the Spanish language, they must be translated in accordance with what is provided in the Law on the Practice of Notarial Jurisdiction of the Voluntary Jurisdiction and Other Proceedings.
The application and documentation may be presented through the means made available by the Superintendence, which may be electronic. In any case, the period referred to in Article 8 of these Standards shall begin to run from the next business day after the application has been presented.

CHAPTER IV
PROCESSING OF THE APPLICATION

Authorization Process for the Incorporation Application Art. 8.- Upon receipt of the application to incorporate the company, in accordance with what is established in Chapter III of these Standards, the Superintendence will proceed to verify compliance with the requirements defined in the Law and in these Standards, having a period of up to thirty days for its review. If the application is not accompanied by complete and properly formatted information, as detailed in Chapter III of these Standards, the Superintendence, due to the lack of necessary requirements, may require applicants to present the missing documents within a period of ten business days counted from the day following notification, a period that may be extended at the request of the interested parties when there are reasons justifying such extension. The Superintendence in the same notice will indicate to applicants that if they do not complete the information within the aforementioned period, it will proceed without further procedure to archive the application, reserving their right to present a new application. If after analyzing the documentation presented in accordance with Chapter III of these Standards, the Superintendence has observations or when the documentation or information presented is not sufficient to establish the facts or information intended to be evidenced, the Superintendence will notify applicants to remedy the deficiencies communicated to them or to present additional documentation or information requested. Applicants will have a maximum period of ten business days counted from the next business day following notification, to resolve the observations or present the additional information required by the Superintendence. The Superintendence 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.

Extension Period
Art. 9.- Interested applicants wishing to incorporate the company may present to the Superintendence a request for extension of the period indicated in the fifth paragraph of Article 8 of these Standards, before the expiration of said period, must express the grounds on which it is based and propose, if applicable, the pertinent evidence. The extension period may not exceed ten business days and will begin from the next business day following the expiration date of the original period.

Suspension of Period
Art. 10.- The period of up to thirty days indicated in the first paragraph of Article 8 of these Standards, shall 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 Superintendence are remedied.

On the Resolution
Art. 11.- Once the complete and properly formatted documentation has been presented, the Superintendence will publish, in two printed media of national circulation or another digital publication platform with greater or equal coverage or on its website, in accordance with what is established in the current legal framework, for a single time, and at the expense of the interested parties, the following:
a) List of shareholders who will acquire one percent or more of the capital.

In the event that shareholders are companies, the list of shareholders of this company that control more than five percent of the social capital will also be published; and b) List of the initial directors of the company to be formed.
In the case of objections by any person regarding the quality of the shareholders and directors who will make up the company, these must be presented in writing to the Superintendence, within a period not exceeding fifteen days after the aforementioned publication, attaching pertinent evidence. The objections presented will be of a confidential nature.

Art. 12.- Having met the requirements established in Articles 7 and 8 of these Standards, the Superintendence will have a maximum period of ninety days to issue the relevant resolution, counted from the date on which the petitioners have completed the information requested of them.
The Superintendence will proceed to notify the applicants of the resolution, within a maximum period of three business days, from the date it was issued.

Art. 13.- If the resolution is favorable, the petitioners will have a maximum period of six months, counted from the notification, to incorporate the company.

Art. 14.- Prior to the presentation of the copy of the deed of incorporation in the Commercial Registry, it must be presented to the Superintendence to qualify whether the terms stipulated in the social agreement conform to the projects that were previously authorized and to verify that the incorporation capital has been paid.

Art. 15.- Having complied with the above, the Superintendence will proceed to issue a certificate containing the favorable qualification so that it may be presented in the Commercial Registry for the corresponding registration.

Art. 16.- The Superintendence will proceed to notify the applicants of the certificate containing the favorable qualification, within a maximum period of three business days, from the date it was issued.

CHAPTER V
COMMENCEMENT OF OPERATIONS

On the Commencement of Operations
Art. 17.- Within a period of six months counted from the date of the resolution containing the authorization for the incorporation of the company, the legal representative must present the application for authorization of the commencement of operations with the manuals of functions and operational procedures with the requirements contained in Annex No. 4 of these Standards, description of furniture, equipment, and software to be used, and of the insurance policies to be contracted.

Authorization Process for the Application for Commencement of Operations Art. 18.- Upon receipt of the application for authorization of the commencement of operations in accordance with what is established in the previous article, the Superintendence will proceed to verify compliance with the requirements defined in the Law and in these Standards, having up to twenty business days for the authorization or denial of the commencement of operations. If the application is not accompanied by complete and properly formatted information, as detailed in Article 17 of these Standards, the Superintendence, due to the lack of necessary requirements, may require applicants to present the missing documents within a period of ten business days counted from the day following notification, a period that may be extended at the request of the interested parties, when there are reasons justifying such extension. The Superintendence in the same notice will indicate to applicants that if they do not complete the information within the aforementioned period, it will proceed without further procedure to archive the application, reserving their right to present a new application. If after analyzing the documentation presented in accordance with Article 17 of these Standards, the Superintendence has observations or when the documentation or information presented is not sufficient to establish the facts or information intended to be evidenced, the Superintendence will notify applicants to remedy the deficiencies communicated to them or to present additional documentation or information requested. Applicants will have a maximum period of ten business days counted from the next business day following notification, to resolve the observations or present the information required by the Superintendence. The Superintendence 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.

Extension Period
Art. 19.- Applicants may present to the Superintendence a request for extension of the period indicated in the fifth paragraph of Article 18 of these Standards, before the expiration of said period, must express the grounds on which it is based and propose, if applicable, the pertinent evidence. The extension period may not exceed ten business days and will begin from the next business day following the expiration date of the original period.

Suspension of Period
Art. 20.- The period of twenty business days indicated in the first paragraph of Article 18 of these Standards, shall be suspended for the days that elapse between the notification of the request to complete information or documentation referred to in the second and fifth paragraphs of said article, until the interested parties remedy the observations required by the Superintendence.

On the Resolution of Commencement of Operations Art. 21.- Having complied with what is established in Articles 17 and 18 of these Standards, having verified its internal controls and procedures, having registered the social deed in the Commercial Registry, and having registered the shares in a stock exchange established in the country, the Superintendence will certify that the insurance company may commence its operations, which it will notify within a maximum period of three business days from the date the certification of authorization for commencement of operations is issued. This certification will be valid for a period of one year, counted from its notification.

On Publication
Art. 22.- The Superintendence's certification, indicating the name of the company, the data related to the granting and registration of its social deed, the amount of paid capital, as well as the names of its directors and administrators, will be made known through publications that will be made at the expense of the respective company, for a single time, in two printed media of national circulation or another digital publication platform with greater or equal coverage or on its website, in accordance with what is established in the current legal framework.

Extension of Commencement of Operations
Art. 23.- If the period indicated in Article 21 of these Standards has elapsed and the company has not commenced its operations, the Superintendence may grant, upon request and based on the justifications of the case, an extension of up to six months.
This must be presented at least one month in advance of the expiration of the original period.

Art. 24.- Prior to the commencement of its operations and with a minimum of one month's advance notice, the company must inform the Superintendence of the following:
a) The day on which it will commence its operations with the public; b) Public service hours; and c) List of executive personnel and register of authorized signatures.

Revocation of Authorization, Dissolution, and Liquidation Art. 25.- If upon the expiration of the original period or the extension, if applicable, to commence operations, the company does not do so, it will be considered that there is an impossibility on its part to achieve its main purpose; therefore, being one of the causes of dissolution mentioned in Article 187 of the Commercial Code, the Superintendence will proceed to revoke the authorization to operate and will remit to the Attorney General's Office the necessary documentation so that the procedure for dissolution and liquidation may begin.

Modifications to Accounting or Information Systems Art. 26.- Once the accounting systems and information systems are authorized, any structural modifications that a company wishes to make to them must be previously notified to the Superintendence. When a company wishes to make changes to databases, systems, or computer programs related to insurance or surety products and services, reinsurance, claims, technical and mathematical reserves, loans, and investments, and accounting, it must inform the Superintendence prior to implementation.

CHAPTER VI
OTHER PROVISIONS AND VALIDITY

Sanctions
Art. 27.- Non-compliance with the provisi...