Technical Standards for the Deposit of Insurance Policy Models

NRP-66
INSURANCE
Approval: 05/06/2024
Validity: 20/06/2024

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

CONSIDERING:
I. That Article 47 of the Insurance Companies Law establishes that insurance may only be contracted with policy models previously deposited with the Superintendence.
II. That Article 48 of the Insurance Companies Law establishes that, notwithstanding what is provided in Article 47 of said law, insurance companies may contract with policy models not deposited with the Superintendence, when it concerns insurance for legal entities and in which the amount of the annual premium is greater than five thousand seven hundred fourteen with twenty-nine cents of a United States dollar, or its equivalent in foreign currency, in which cases the respective policy must be signed by both contracting parties, provided that they do not contain clauses that oppose current legislation. In any case, within five days following the contracting of the insurance, the insurance companies must deposit the model of the policy used with the Superintendence.
III. That Article 7 letter e) of the Law of 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 provisions of said Law and therefore to the supervision of the Superintendence of the Financial System.
IV. That Article 99, first paragraph, of the Law of Supervision and Regulation of the Financial System, establishes that the Central Bank of Reserve of El Salvador, through its Committee of Standards, is the institution responsible for the approval of the technical regulatory framework that must be issued in accordance with this Law and other laws that regulate the supervised entities.
V. That in accordance with Article 101, fourth paragraph, of the Law of Supervision and Regulation of the Financial System, the powers to approve, modify, and repeal technical norms that must be complied with by the members of the financial system and other supervised entities, and which were attributed to the Superintendencies or to the Directing Councils of the Superintendencies whose organic laws were repealed with this Law, are transferred to the Central Bank of Reserve of El Salvador.

THEREFORE,

NRP-66
INSURANCE
Approval: 05/06/2024
Validity: 20/06/2024

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

AGREES to issue the following:

TECHNICAL STANDARDS FOR THE DEPOSIT OF INSURANCE POLICY MODELS

CHAPTER I
OBJECT, SUBJECTS, AND TERMS

Object
Art. 1.- These Norms aim to establish the procedure for the deposit of policy models that insurance entities must effect with the 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 the country; and c) Cooperative Associations that provide insurance services constituted in the country.

Terms
Art. 3.- For the purposes of these Norms, the terms indicated below have the following meaning:
a) Free Discussion Annex: Document issued by the insurer to be agreed upon as a freely discussed additional clause with the insured and not as a condition for the celebration of the insurance contract; b) Technical Bases: Actuarial formulas that give rise to the determination of the pure risk premium, terminal reserves, and averages in the case of short and long-term individual life insurance, and the statistics used to justify the rates in general short-term insurance policies, including accident and health insurance; c) Central Bank: Central Bank of Reserve of El Salvador; d) Individual Insurance Certificate: Document issued in the case of group or collective insurance, linked to a specific insurance policy and containing the minimum information on the insurance conditions; e) Special Conditions: Set of stipulations that aim to expand, reduce, clarify, and modify the content or effects of the general or particular conditions;

NRP-66
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Approval: 05/06/2024
Validity: 20/06/2024

f) General Conditions: Set of basic clauses or stipulations established by insurance companies to govern contracts belonging to the same branch or modality of insurance. Their application may be modified by other contractual clauses through free discussion annexes and special conditions; g) Particular Conditions: Understand as those contained in the face of the policies; h) Entity (ies): Subjects obliged to comply with the provisions of these Norms; i) Law: Insurance Companies Law; j) Insurance Policy Model: Agreement of wills by which the insurance company obligates itself, through the payment of a premium, to indemnify the insured or a third party, within the limits and conditions stipulated, in the event that the risk event covered occurs. It is integrated by the application, general conditions, particular conditions, special conditions, free discussion annexes, and technical bases; k) Commercial Premium: Includes the pure risk premium, surcharges for administration expenses, production expenses, and redistribution of risks (coinsurance and reinsurance), as well as the commercial benefit of the insurance companies; l) Pure Risk Premium: Theoretical cost of insurance estimated on actuarial bases, whose objective is to cover the benefits and indemnities offered by the insurance; m) Group or Collective Insurance: A modality of insurance characterized by covering through a single contract multiple insureds who integrate a homogeneous community; n) Insurance Application: Document in which the will of the insured to contract the insurance is recorded, whose format is prepared by the insurance companies; and o) Superintendence: Superintendence of the Financial System.

CHAPTER II
ON THE DEPOSIT OF POLICIES

Submission of policy models
Art. 4.- The entities, before offering and subscribing to the public a new insurance product, must present the application for deposit of the Policy Model to the Superintendence, attaching the respective model, which must be in accordance with what is established in the formats of Annexes No. 1 and 2 of these Norms, in addition to containing what is indicated in articles 1353 and 1459 of the Commercial Code, as applicable.

Upon completion of the review process referred to in Article 6 of these Norms, the entities must send two physical copies to the Superintendence for the corresponding deposit.

Likewise, insurers will send for deposit the modifications that are intended to be made to the already approved models.

It will be the responsibility of the entity to verify that the documents sent are complete, referenced with their respective index, appropriately drafted, without spelling errors, and that they do not oppose the following legislation:
a) Insurance Companies Law; b) Consumer Protection Law; and c) Commercial Code.

The aforementioned verification must be recorded in a sworn declaration signed by both the technical manager and the legal manager of the entity.

The application and documentation may be presented through the means made available by the Superintendence, which may be electronic means. In any case, the deadline referred to in the first paragraph of Article 6 of these Norms will begin to run from the next business day after the application has been presented.

Exceptions
Art. 5.- When it concerns policies that have not been deposited and are contracted with legal entities whose annual premium is equal to or greater than the current updated amount, in accordance with articles 48 and 98 of the Law, the entities must send two physical copies of the policy model to the Superintendence for its deposit, within five days following the contracting. In these cases, the policy number, the contracting date, and the premium amount must be added to the submission note.

Procedure for deposit of policy models
Art. 6.- Upon receipt of the application for deposit of the policy model, in accordance with what is established in articles 4 and 5 of these Norms, the Superintendence will proceed to verify compliance with the requirements defined by the Laws described in the aforementioned articles and in these Norms, having a period of up to thirty days for its review. Once this period has expired and without communicating observations to the requesting entity, the Superintendence will proceed to deposit the policy model.

If the application is not accompanied by the complete and duly formatted information detailed in Article 4 of these Norms, the Superintendence, due to the lack of necessary requirements, may require the entities to present the missing documents within a period of ten business days counted from the next business day following the notification, a period that may be extended at the request of the entities when there are reasons justifying it.

NRP-66
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Approval: 05/06/2024
Validity: 20/06/2024

The Superintendence, in the same warning, will indicate to entities interested in presenting the policy models that if the information is not completed within the aforementioned period, it will proceed without further procedure to archive the application, leaving them free to present a new application.

If after the analysis of the documentation presented in accordance with Article 4 of these Norms, the Superintendence has observations when the policy models contain clauses that oppose the legislation or when the technical bases are not sufficient to cover the risks or the documentation or information presented is not sufficient to establish the facts or information intended to be accredited, the Superintendence will warn the entities to remedy the deficiencies communicated to them or present additional documentation or information requested by them.

The entities will have a maximum period of ten business days counted from the next business day following the 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 warned requires it.

Extension Period
Art. 7.- The entities may present to the Superintendence an application for extension of the period indicated in the fifth paragraph of Article 6 of these Norms, before the expiration of said period, expressing the grounds on which it is based and proposing, if applicable, the pertinent proof.

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 the Period
Art. 8.- The thirty-day period indicated in the first paragraph of Article 6 of these Norms, will be suspended for the days that elapse between the notification of the requirement to complete information or documentation referred to in the second and fifth paragraphs of said article, until the observations required by the Superintendence are remedied.

Resolution Period
Art. 9.- In accordance with what is established in Article 47 of the Law, upon receipt of the corrected models, the Superintendence will have twenty days to issue the resolution on the deposit of the policy model, which it will notify to the requesting entity within a maximum period of three business days, from the date the resolution is issued.

Suspension of Commercialization
Art. 10.- When an entity commercializes an insurance using a policy model that has not been previously approved, the Superintendence may instruct, through a reasoned decision, the suspension of its commercialization until the deposit of the policy is made.

Responsibility of the Entities
Art. 11.- It is the responsibility of the entity to make the necessary changes in the policies contracted prior to the observations made by the Superintendence and to communicate them timely to the insureds.

Modifications of Policies
Art. 12.- Modifications to the deposited policy models will follow the same procedure established for the deposit of policies for the first time. The entities must send to the Superintendence two new copies of the conditions that have been modified and all those referred to in said changes, clearly indicating the variation introduced and leaving a record that the product has not been subject to additional modifications other than those stated.

CHAPTER III
TECHNICAL PROVISIONS ON INSURANCE POLICY MODELS

Coverage Clauses
Art. 13.- Policy models must contain clauses that clearly determine the coverage or purpose of the contract. If it concerns life insurance policies, the coverage clause must be drafted stipulating that it is survival insurance, death insurance, or insurance that, in addition to the previous coverages, guarantees financial and/or discretionary returns.

Financial Content
Art. 14.- When it concerns life insurance with financial content, the guaranteed rate must be clearly stipulated and if the insurance contracts obligate to cover the participation of profits in the returns of the mutual fund, it must also be clearly established the form of distribution that the insurance company will adopt.

Actuarial and Statistical Bases
Art. 15.- Entities must support the pure risk premiums on actuarial and statistical bases by branch, as described in Annex No. 1 of these Norms and also based on short or long-term contracting, in such a way as to guarantee the technical and financial balance of the benefit system and the compliance with obligations to the insureds, derived from the coverages contained in the insurance policies issued.

NRP-66
INSURANCE
Approval: 05/06/2024
Validity: 20/06/2024

Technical Note
Art. 16.- Entities must support the pure risk premium in a technical note that contains, as a minimum, according to the branch or modality of insurance corresponding, the following:
a) For all branches of Insurance:
i. Name of the product;
ii. Detailed description of basic and additional coverages; and
iii. Full name, position, and signature of the technical official responsible for the content of the technical note or the technical support.
b) For the branch of Individual, Popular, Flexible, or Universal Life Insurance:
i. Applied demographic assumptions (mortality tables) and technical interest rates, in accordance with current norms;
ii. Plans called Flexible or Universal with guaranteed rates, the methodology used for the calculation of the available fund in favor of the insureds;
iii. Actuarial formulas for terminal and balance reserves, and the methodology for their calculation;
iv. Methodology for calculating surrender values, extended insurance, paid-up insurance, dividends or profits in favor of the insureds, among others;
v. Terminal reserve factors, averages, and guaranteed values of individual life policies; and
vi. In private annuity insurance with guaranteed payments that do not derive from the Pension Savings System, the financial formula and the connotation of the contingent annuity will be discriminated, clearly defining the period from which guaranteed payments end; in addition, the formula of the reserve that will be constituted until the end of guaranteed payments and that which will govern from the expiration of said payments will be included.
c) For the branch of Collective Life Insurance:
i. Applied demographic assumptions (mortality tables) and technical interest rates, in accordance with current norms;
ii. Actuarial formulas used for the determination of net or risk premiums and balance reserves; and
iii. Indication of the technical reserves that correspond to constitute.
d) For the branch of Accident and Health Insurance:
i. For the Medical Insurance Plan, Tables of Mortality of Accidental Death and Morbidity, and technical interest rate, whenever they are used for the determination of pure premiums;
ii. Premium structure that the Plan initially considers, including deductibles, coinsurances, and calculation methodology;
iii. Information on reinsurance contracts that will initially cover the insurance Plan intended to be commercialized; and
iv. Indication of the technical reserves that correspond to constitute.
e) For the Branch of Damage Insurance:
i. Premium structure that the plan initially considers, including deductibles, coinsurances, and calculation methodology;
ii. Information on reinsurance contracts that will initially cover the insurance plan intended to be commercialized; and
iii. Indication of the technical reserves that correspond to constitute.

Statistical Sampling
Art. 17.- For the determination of the pure risk premiums of insurance belonging to general insurance branches, own or market statistical sampling must be used, established in a homogeneous and representative manner of the risks assumed, considering figures corresponding to years prior to the study performed, with projections of the following years.

Own Statistical Bases
Art. 18.- In those cases where there is no market experience regarding the administration of certain risks, the reinsurance company's premium rate and/or statistical bases of other countries for similar risks may be considered as a reference. However, once the insurance company has five or more years of experience in the market of the administration of the aforementioned risks, it must support the premium rates, claims, frequency or average claims, and insured sums applicable to insurance products with own or market statistical bases. The aforementioned experience must be supported by accounting statistical data that allow the verification of the years considered in the study, which must be sent to the Superintendence for the corresponding review.

CHAPTER IV
OTHER PROVISIONS AND VALIDITY

Deposit Stamp
Art. 19.- Policy models previously approved by the Superintendence should not be presented again for deposit, except if they have been modified after their approval. These policy models must have the DEPOSITED stamp of the Superintendence stamped on them.

NRP-66
INSURANCE
Approval: 05/06/2024
Validity: 20/06/2024

Other Documents
Art. 20.- Entities must send together with the policy models other documents that clarify the interpretation of the insurance contracts.

To standardize the policy models commercialized by insurers, the models of annexes and endorsements that modify the general conditions of the policies will be identified henceforth as special conditions.

Sanctions
Art. 21.- Non-compliance with the provisions contained in these Norms will be sanctioned in accordance with what is established in the Law of Supervision and Regulation of the Financial System.

Repeal
Art. 22.-
-12), approved by the Directing Council of the Superintendence in Session No. CD-11/2011 of March 25, 2011, whose Organic Law was repealed in accordance with Legislative Decree number 592 containing the Law of Supervision and Regulation of the Financial System, published in the Official Journal No. 23, Volume No. 390, of February 2, 2011.

Transitory
Art. 23.-
-12) and that were in process at the moment these Norms enter into force, will continue and conclude in accordance with the regulations with which they began.

Unforeseen Aspects
Art. 24.- Aspects not provided for in regulatory matters in these Norms will be resolved by the Central Bank of Reserve of El Salvador, through its Committee of Standards.

Validity
Art. 25.- These Norms will enter into force from the twentieth of June of two thousand twenty-four.

NRP-66
INSURANCE
Approval: 05/06/2024
Validity: 20/06/2024

Annex No. 1
FORMATS AND DOCUMENTS THAT MUST BE PRESENTED FOR THE DEPOSIT OF INSURANCE POLICIES

I. LIFE INSURANCE

1. Individual and Popular Life Insurance
   1.1. Texts:
   1.1.1. Insurance Application.
   1.1.2. Particular Conditions (policy face).
   1.1.3. General Conditions of the policy.
   1.1.4. Special Conditions.
   1.1.5. Free Discussion Annexes.
   1.2. Technical Bases:
   1.2.1. Mortality Table.
   1.2.2. Table of Commutation Values.
   1.2.3. Formulas for the calculation of net, commercial, and valuation premiums, reserves, and guaranteed values, indicating the method of reserve modification.
   1.2.4. Tables of net and commercial premium values and calculation methodology.
   1.2.5. Tables of average, terminal, and guaranteed reserve values and calculation methodology.

2. Flexible or Universal Insurance
   2.1. Texts:
   2.1.1. Insurance Application.
   2.1.2. Particular Conditions (policy face).
   2.1.3. General Conditions of the policy.
   2.1.4. Special Conditions.
   2.1.5. Free Discussion Annexes.
   2.2. Technical Bases:
   2.2.1. Mortality Table.
   2.2.2. Formulas for the calculation of minimum, programmed premiums, and mathematical reserves and calculation methodology.
   2.2.3. Guaranteed minimum interest.

3. Collective Life Insurance
   3.1. Texts:
   3.1.1. Insurance Application.
   3.1.2. Particular Conditions (policy face).
   3.1.3. General Conditions of the policy.
   3.1.4. Special Conditions.
   3.1.5. Individual Insurance Certificate.
   3.1.6. Free Discussion Annexes.

NRP-66
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Approval: 05/06/2024
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Annex No. 1

3.2. Technical Bases:
3.2.1. Mortality Table.
3.2.2. Table of Commutation Values.
3.2.3. Formulas for the calculation of net and commercial premiums.
3.2.4. Table of net and commercial premiums and calculation methodology.

II. ACCIDENT AND DISEASE INSURANCE

1. Hospital Medical Insurance Plan
   1.1. Texts:
   1.1.1. Insurance application.
   1.1.2. Particular conditions (policy face).
   1.1.3. General policy conditions.
   1.1.4. Special conditions.
   1.1.5. Individual certificate of hospital medical insurance (for group insurance).
   1.1.6. Free discussion annexes.
   1.2. Technical Bases:
   1.2.1. Technical study performed.
   1.2.2. Tariff structure (risk premiums, commercial premiums, and surcharges).
   1.2.3. Statistics.
   The premium structure of the plan will include deductibles, co-insurances, surcharges for fractional payments, and the type of reinsurance contract to be used to back the plan.

2. Individual Personal Accident Insurance
   2.1. Texts:
   2.1.1. Insurance application.
   2.1.2. Particular conditions (policy face).
   2.1.3. General policy conditions.
   2.1.4. Special conditions.
   2.1.5. Free discussion annexes.
   2.2. Justification of Tariffs:
   2.2.1. Technical study performed.
   2.2.2. Tariff structure (risk premiums, commercial premiums, and surcharges).
   2.2.3. Statistics and additional information necessary for the tariff study.

3. Collective Personal Accident Insurance
   3.1. Texts:
   3.1.1. Insurance application.
   3.1.2. Particular conditions (policy face).
   3.1.3. General policy conditions.

NRP-66
INSURANCE
Approval: 05/06/2024
Validity: 20/06/2024
Annex No. 1

3.1.4. Special conditions.
3.1.5. Individual insurance certificate.
3.1.6 Free discussion annexes.
3.2. Justification of Tariffs:
3.2.1. Technical study performed.
3.2.2. Tariff structure (risk premiums, commercial premiums, and surcharges).
3.2.3. Statistics and additional information necessary for the tariff study.

III. PROPERTY DAMAGE INSURANCE

1. Texts:
   1.1. Insurance application.
   1.2. Particular conditions (policy face).
   1.3. General policy conditions.
   1.4. Special conditions.
   1.5. Free discussion annexes.

2. Justification of Tariffs:
   2.1. Technical study performed.
   2.2. Tariff structure (risk premiums, commercial premiums, and surcharges).
   2.3. Statistics and additional information necessary for the tariff study.

IV. GENERAL ASPECTS

1. To justify tariffs, entities may present the cost rates of reinsurers and applicable expenses in excess of the same, clarifying that they will be variables due to the fluctuation experienced when reinsurance coverage is renewed annually. For policies in force prior to the issuance of the modifications of this regulation; entities may deposit the tariffs they commercialize expressing that these are products that have not presented insufficiency in them.

2. In Collective Life or Property Damage Insurance, the individual insurance certificate must contain the following stipulations:
   a. Coverages and excluded risks; b. Procedure to make the payment effective;
   c. Premiums; and
   d. Any other relevant data.

NRP-66
INSURANCE
Approval: 05/06/2024
Validity: 20/06/2024
Annex No. 2

CLASSIFICATION OF INFORMATION BY EACH LINE

To carry out adequate control of the policies that are deposited, insurance companies must send the information classified by each of the main lines, as follows:

I. Personal Insurance

1. Life Insurance
   1.1. Individual and Popular.
   1.2. Flexible or Universal.
   1.3. Collective.
2. Accident and Disease Insurance
   2.1. Hospital Medical.
   2.2. Personal Accident (Individual).
   2.3. Personal Accident (Collective).

II. General Insurance

1. Property Damage Insurance
   1.1. Fire and Allied Lines.
   1.2. Motor Vehicles.
   1.3. Transportation.
   1.4. Other Lines.

Within the aforementioned short-term property damage insurance, insurance plans must be considered as:
1) Fire and Allied Lines.
2) Earthquake.
3) Motor Vehicles - own damage.
4) Motor Vehicles - civil liability.
5) Motor Vehicles - additional coverages.
6) Motor Vehicles - allied lines.
7) Maritime transportation.
8) Land transportation.
9) Air transportation.
10) Maritime hull.
11) Aviation.
12) All risk contractors.
13) All risk - installation.
14) All risk electronic equipment.
15) Machinery breakdown.
16) Outdoor machinery.
17) Civil liability.
18) Professional risks.
19) Theft and burglary.
20) Home insurance.
21) Glass breakage.
22) Credit.
23) Agricultural.
24) Livestock.
25) Fidelity.
26) Fidelity comprehensive.
27) Bank insurance.
28) Engineering insurance.
29) Boiler explosion.
30. Catastrophic risks.
31. Electronic equipment.
32. Money in transit.
33. Money and securities in transit.
34. Lost profits - machinery breakdown.
35. Lost profits - business interruption.
36. Loss of rent insurance.