Technical Standards for the Preparation of Financial Statements of Insurance Companies — SSF — SV

THE NORMS COMMITTEE OF THE CENTRAL RESERVE BANK OF EL SALVADOR, CONSIDERING:
I. That Article 10, third paragraph, of the Insurance Companies Law establishes that companies constituted in accordance with the provisions of this article, in which an insurance company holds more than fifty percent of its shares, shall be designated as subsidiaries. Insurance companies that hold shares in subsidiaries must consolidate their financial statements with them and publish them in accordance with the provisions of Articles 85, 86, and 87 of said Law.
II. That Article 85 of the Insurance Companies Law stipulates that the Superintendency shall establish the manner in which the accounting of insurance companies must be kept, as well as the criteria for consolidating their operations and financial statements; a regulatory power that, by virtue of the entry into force of the Law on Supervision and Regulation of the Financial System, was transferred to the Central Reserve Bank, through its Norms Committee.
III. That Article 2, first paragraph, of the Law on Supervision and Regulation of the Financial System establishes that the Financial Supervision and Regulation System aims to preserve the stability of the financial system and ensure its efficiency and transparency, as well as to ensure the safety and solidity of the members of the financial system in accordance with what is established in said Law, other applicable laws, regulations, and technical norms issued for this purpose, all in concordance with international best practices on the matter.
IV. That Article 35, letter f), of the Law on Supervision and Regulation of the Financial System establishes that it is the obligation of the supervised entities to adequately disclose the economic and financial reality, and they must have the backing of their internal and external audits.
V. That Article 99, third paragraph, letter c), of the Law on Supervision and Regulation of the Financial System establishes that it is the responsibility of the Norms Committee of the Central Reserve Bank of El Salvador to approve technical standards for the preparation, approval, presentation, and dissemination of the financial statements and supplementary information of the members of the financial system; for the determination of accounting obligations and the principles in accordance with which they must keep their accounting, and the establishment of criteria for the valuation of assets, liabilities, and the creation of provisions and reserves for risks, all of the foregoing in accordance with what is established in this Law and other applicable laws, with the aim that the real liquidity and solvency situation of said members is reflected.

THEREFORE, 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 PREPARATION OF FINANCIAL STATEMENTS OF INSURANCE COMPANIES

CHAPTER I
OBJECTIVE, SUBJECTS, AND TERMS

Objective
Art. 1.- These Standards aim to establish the minimum content and the procedures that must be followed for the preparation of the individual and consolidated financial statements of insurance companies.

Subjects
Art. 2.- The subjects obligated to comply with the provisions established in these Standards are:
a) Insurance companies constituted in El Salvador; b) Subsidiaries of insurance companies; c) Branches of foreign Insurance Companies established and authorized in the country; and d) Cooperative associations that provide insurance services constituted in the country.

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) Holding Company: Insurance companies that are majority investors in subsidiaries, in accordance with the provisions of Article 10 of the Insurance Companies Law; c) Entity/entities: Subjects referred to in Article 2 of these Standards; d) Subsidiary/ies: Those companies referred to in Article 10, third paragraph, of the Insurance Companies Law;

CHAPTER II
REQUIREMENTS AND CONTENT OF FINANCIAL STATEMENTS

Art. 4.- The most relevant aspects that must be considered in the preparation of financial statements are:
a. Technical standards, fundamental hypotheses, and accounting principles Financial statements must be prepared based on the accounting standards issued by the Norms Committee of the Central Bank and the International Financial Reporting Standards (IFRS), to the extent applicable, with the former prevailing in case of conflict with the latter. When IFRS present different options for accounting for the same event, the most conservative one must be adopted. b. Expression of figures The figures in the financial statements and their notes must be expressed in thousands of United States dollars with one decimal place.
c. Accounting origin of balances
The figures in the financial statements and their notes must originate from the ledger balances as of the corresponding reference date, which must contain definitive figures. Under no circumstances shall financial statements be prepared contemplating adjustments not recorded in the accounting. d. Cleaning of balances The balances in the financial statements must not present assets or liabilities subject to confirmation; nor balances whose clarification, regularization, or definitive recording depends on the insurance company. e. Negative balances When it is necessary to disclose valuation and correction accounts that have a nature different from the accounts in which they underlie, such as Sanitation Reserves and Accumulated Depreciations, these must be presented in parentheses.

Basic Financial Statements
Art. 5.- The financial statements that must be prepared are the Balance Sheet, the Statement of Results, the Statement of Cash Flows, and the Statement of Changes in Equity, according to the models in Annexes No. 1, 2, 3, and 4. Financial Statements must be presented in a comparative manner equal to the previous period. The notes to the financial statements are an integral part of them. Under no circumstances should a note be omitted; if there is no event, transaction, or balance, such a situation must be expressed. Other notes may be included when circumstances so require or by request of external auditors, in which cases they must be interspersed where appropriate. The notes present information regarding the bases for the preparation of the financial statements and on accounting policies, supply narrative descriptions, and are an integral part of them; they contain additional information, in detail, that complements the balances reflected in the financial statements. Below, the models of mandatory notes are described:

Note 1. Operations
The entity will describe as part of its identification the following information (that which corresponds according to the requirements made):
a) Name of the reporting entity; as well as changes relative to such information since the end of the previous reporting period; b) Description of the nature of the financial statements (whether they are of an individual entity or a financial conglomerate); c) Closing date of the period on which information is reported or the period covered by the financial statements; d) Legal form of the entity, country of constitution, address of its registered office (or principal domicile where it develops its activities, if this is different from the registered office); e) Description of the nature of the entity's operations and main activities carried out, the market in which it operates, and the currency in which the financial statements are expressed; and f) Name of the direct holding entity and the ultimate holding company of the financial conglomerate.

Note 2. Main accounting policies

2.1 Technical standards and accounting principles
These financial statements have been prepared by (name of the entity) based on the Technical Standards issued by the Norms Committee of the Central Bank, and the International Financial Reporting Standards (IFRS), with the former prevailing in case of conflict with the latter; consequently, in note No. ……. the accounting differences are explained. In cases where IFRS present different options for accounting for the same event, it will indicate that the most conservative one has been adopted.
2.2 Consolidation
The holding company consolidates its financial statements with those companies in which it is the holder of more than fifty percent of the common shares. These companies are those referred to in Article 10 of the Insurance Companies Law, designating them as subsidiaries.

The following companies of the holding company are part of the consolidation:

Business Line
% of participation of the holding company
Initial Investment
Investment according to books
Results of the Exercise
Description of the company
Date Amount
Company X
Company Y
Total

2.3 Financial Investments
Instruments that are regularly traded in the Salvadoran stock market were valued at market value; securities issued by entities located in the country without quotation on the Salvadoran stock market based on the risk category assigned by a risk rating agency registered in the Superintendency; and securities without quotation on the Salvadoran stock market and without risk classification at their present value. Securities issued or guaranteed by the Central Bank and by other State entities, payable with funds from the National Budget, are presented at acquisition value.

2.4 Provision of interest and suspension of provision
Interest receivable is accounted for in the equity equation based on accrual. The provision of interest on loans is suspended when they have a delinquency of more than ninety days.

Clarification:
In the event that the entity has used another method, it must express it and quantify the difference with respect to the norms issued by the Norms Committee of the Central Bank.
Under no circumstances may the entity adopt a method less conservative than that issued by the Central Bank.

2.5 Fixed assets
A note must be drafted addressing the following aspects:
a) Real estate and furniture are recorded at their acquisition or construction value; b) The value of revaluations is credited to Restricted Equity when constituted and debited when the asset is withdrawn; c) Revaluations are made by an independent expert registered in the Superintendency; it must also be mentioned whether the aforementioned revaluations have been authorized by it; d) The method of calculating depreciations, the values on which they are calculated, and the depreciation rate or useful life by type of goods; and e) Regarding the method of recording repairs, additions, and improvements that increase the value of the asset or prolong its useful life.

2.6 Indemnities and voluntary retirement
The criteria used for the establishment of the provision for labor obligations must be indicated.

2.7 Provisions for risk assets
The constitution of provisions for risk categories is made based on Norms issued by the Central Bank through its Norms Committee; these Norms allow evaluating the risks of each debtor based on the criteria of: business and payment capacity, responsibility, economic situation, and coverage of real guarantees. Increases in these provisions or reserves may occur due to an increase in the risk of each debtor in particular; decreases may be caused by a decrease in risk or by withdrawals of the asset from the balances owed by debtors up to the provisioned value. When the value withdrawn from the asset is higher than the provision corresponding to it, the difference is applied to expenses. Generic reserves are constituted when there are information deficiencies that, in the judgment of the Superintendency, affect the financial statements. Reserves or provisions for risk of debtor classification are constituted when, as a result of a verification made by the Superintendency, it is determined that it is necessary to reclassify to higher risk categories a number of debtors greater than fifteen percent of the examined sample. The amount of these reserves or provisions is increased by the result of the evaluations carried out by the Superintendency and is decreased with the authorization of that Institution when, in its judgment, the entity has improved its debtor classification procedures. Restricted reserves are formed by the reclassification of debtors by guarantee coverage, and by those constituted to equal the amount of sanitation reserves with the portfolio registered accounting-wise as overdue. Sanitation reserves or provisions for potential losses due to uncollectibility are determined based on empirical data of each entity and are calculated by the management of each entity.

Clarification:
The note must include only the statements corresponding to the reserves or provisions constituted.

2.8 Overdue loans
Overdue loans are considered to be the total capital balances of those loans that have capital or interest installments with a delinquency of more than ninety (90) days or when the entity has decided to collect them through the judicial route, even if the aforementioned delinquency does not exist.

Clarification:
In the case that the entity has used a criterion different from that issued by the Central Bank, to transfer loan balances from the current portfolio to the overdue portfolio, it must indicate it. No other criterion that is less conservative than that issued by the Central Bank will be accepted.

2.9 Extraordinary assets
Goods received as payment for credits are accounted for at cost or market value, whichever is lower. For these purposes, the market value of non-monetary assets is considered to be the expert appraisal of the goods carried out by an expert registered in the Superintendency. For assets that have remained for more than two years and their extensions, a provision is constituted for the value of the asset registered in the accounting, in compliance with Article 95 of the Insurance Companies Law. Profit from the sale of extraordinary assets with financing is recognized only when it has been received.

Clarification:
In the case that the entity has used a criterion different from that issued by the Norms Committee of the Central Bank, to value extraordinary assets or to constitute the provision, it must indicate it. No other criterion that is less conservative than that issued by the Central Bank through its Norms Committee will be accepted.

2.10 Foreign currency transactions
The value of foreign currency transactions is presented in thousands of United States dollars, valued at the prevailing exchange rate.
Adjustments for exchange rate fluctuations are applied to expense or income accounts, as appropriate.

Alameda Juan Pablo II, between 15 and 17 Av. Norte, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv
CNBCR-05/2026
NCF-19
TECHNICAL STANDARDS FOR THE PREPARATION OF FINANCIAL STATEMENTS OF INSURANCE COMPANIES Approval: 30/06/2026 Validity: 15/07/2026
2.11 Reserves for risks in course
Reserves for risks in course are calculated on premiums earned, net of returns, cancellations, and cessions for reinsurance or suretyship, of damage insurance, decreasing debt insurance, personal accidents, health or hospital medical insurance, short-term life insurance, stepped premium life insurance, additional benefits on life insurance, extra-premiums, the deduction of mortality from flexible plans, and sureties. For policies of one or more years, the twenty-fourths method is used; for those of less than one year, the policy-by-policy proration method is used; and for transport insurance contracted based on certificates, fifty percent of the premiums in force as of the calculation date is reserved.

2.12 Mathematical reserves
Mathematical reserves for long-term individual life insurance are calculated based on the mortality table, the technical interest, and the actuarial formulas contained in each class of insurance. For the determination of these reserves, the average reserve and deferred premiums are deducted.

2.13 Interest payable
Interest on loans and other obligations is recognized on an accrual basis.

2.14 Share investments
Investments in shares of companies are recorded using the Equity Method.
When the acquisition value is greater than the book value of the issuing entity, the insurance company transfers the value of the excess to a deferred charges account, which it amortizes annually over a period of up to three years counted from the date of acquisition of the investment.

2.15 Recognition of income
Accrued income is recognized on an accrual basis. When a loan has a delinquency of more than ninety days, the provision of interest is suspended and income is recognized only when paid in cash. Unprovided interest is recorded in control accounts. Commissions on loans and contingent operations with a term greater than one hundred and eighty days are recorded as deferred liabilities and recognized as income systematically throughout the contract. Interest that becomes part of the asset as a consequence of granting a refinancing is recorded as a deferred liability and recognized as income until it is received.

2.16 Salvages and Recoveries
This concept refers to income received from rescues collected from damaged assets, in which the insurance company has paid its clients the corresponding indemnity.
When income derived from such recoveries must be shared in co-insurance, reinsurance, or suretyship, the income account is debited for the ceded portion.

2.17 Recognition of losses in loans
The following cases are recognized as losses in the loan portfolio:
a) Balances with real guarantee that have had more than twenty-four months without reporting capital recoveries, provided they are not in the process of judicial execution; b) Balances without real guarantee that have had more than twelve months without reporting capital recoveries, provided they are not in the process of judicial execution; c) Balances without executive document to initiate recovery through the judicial route; d) Balances after twenty-four months of initiating judicial action, where it has not been possible to attach seizure; e) Cases in which a first-instance judgment has been issued in favor of the debtor; f) When there is no evidence that the debtor acknowledged their debt in the last five years; and g) When, in the judgment of the entity, there is no possibility of recovery.

Note 3. Cash and Banks

This item is composed of available cash both in local currency and in foreign currency amounting to US$_____, of which US$__________ corresponds to deposits in local currency and US$, in deposits in foreign currency equivalent to US$____. The available item is integrated as follows:
a) Cash US$ b) Immediate collection effects c) Local Banks d) Foreign Banks ____________ US$

Of the deposits in Banks, the following are restricted:
Bank Restricted Amount Reason for restriction
US$ US$ ___________________ ______________________ US$____ US$_______ ___________________

Clarification:
Include the restriction in US$, when the restricted balance is in foreign currency.

Note 4. Repurchases and stock market operations

This item represents securities traded on a stock exchange and

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