Technical Standards for the Deposit of Insurance Policy Models

NRP-66
TECHNICAL STANDARDS FOR THE DEPOSIT OF INSURANCE POLICY MODELS Approval: 05/06/2024 Validity: 20/06/2024

THE COMMITTEE OF NORMS OF THE CENTRAL RESERVE BANK 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 comes to 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 these 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 on Supervision and Regulation of the Financial System establishes that insurance companies, their branches abroad, and branches of foreign insurance companies established in the country are subject to the provisions of said Law and therefore to the supervision of the Financial System Superintendence.
IV. 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 Committee of Norms, 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 on 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, which were attributed to the Superintendencies or to the Director Boards of the Superintendencies whose organic laws were repealed with this Law, are transferred to the Central Reserve Bank of El Salvador.

THEREFORE,

NRP-66
TECHNICAL STANDARDS FOR THE DEPOSIT OF INSURANCE POLICY MODELS Approval: 05/06/2024 Validity: 20/06/2024

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 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 carry out 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 Reserve Bank 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
TECHNICAL STANDARDS FOR THE DEPOSIT OF INSURANCE POLICY MODELS 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 undertakes, through the payment of a premium, to indemnify the insured or a third party, within the limits and conditions stipulated, in case the event whose risk is the object of coverage occurs. It is integrated by the application, general conditions, particular conditions, special conditions, and free discussion annexes and technical bases; k) Commercial Premium: Includes the pure risk premium, surcharges for administration expenses, production expenses, and redistribution of risks (co-insurance 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 insured persons who integrate a homogeneous community; n) Insurance Application: Document in which the insured's will to contract the insurance is recorded, whose format is prepared by the insurance companies; and o) Superintendence: Financial System Superintendence.

CHAPTER II
ON THE DEPOSIT OF POLICIES

Submission of policy models
Art. 4.- The entities, before offering and subscribing a new insurance product with the public, must present the application for deposit of the Policy Model to the Superintendence, attaching the respective model, which must be in accordance with the formats of Annexes No. 1 and 2 of these Norms, in addition to containing what is stated 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 representative 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 comes to 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 proper 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
TECHNICAL STANDARDS FOR THE DEPOSIT OF INSURANCE POLICY MODELS 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 required by the Superintendence.

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 reasons on which it is based and proposing, if applicable, the pertinent proof.

The extension period may not exceed ten business days and will start 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 carried out.

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 insured.

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 noting 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 is 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 comes to 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.

NRP-66
TECHNICAL STANDARDS FOR THE DEPOSIT OF INSURANCE POLICY MODELS Approval: 05/06/2024 Validity: 20/06/2024

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 with the insured, derived from the coverages contained in the insurance policies issued.

Technical Note
Art. 16.- Entities must support the pure risk premium in a technical note that contains, at 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 Individual, Popular, Flexible, or Universal Life Insurance branch:
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 insured;
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 insured, among others;
v. Factors for terminal reserves, 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 for 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 Collective Life Insurance branch:
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 Accident and Health Insurance branch:
i. For the Medical Insurance Plan, Accidental Death and Morbidity Mortality Tables, and technical interest rate, whenever they are used for the determination of pure premiums;
ii. Premium structure that the Plan initially considers, including deductibles, co-insurances, 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 Property Damage Insurance branch:
i. Premium structure that the plan initially considers, including deductibles, co-insurances, 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 for 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 from 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 insurance 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
TECHNICAL STANDARDS FOR THE DEPOSIT OF INSURANCE POLICY MODELS 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 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 on Supervision and Regulation of the Financial System.

Repeal
Art. 22.-
-12), approved by the Director Board 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 on 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 time these Norms entered into force, will continue and be concluded in accordance with the regulation with which they began.

Unforeseen Aspects
Art. 24.- The aspects not provided for in the matter of regulation in these Norms, will be resolved by the Central Reserve Bank of El Salvador, through its Committee of Norms.

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

NRP-66
TECHNICAL STANDARDS FOR THE DEPOSIT OF INSURANCE POLICY MODELS 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