Technical Standards for the Registration of Extraordinary Assets of Insurance Companies

NCF-18
EXTRAORDINARIOS DE LAS SOCIEDADES DE SEGUROS
Aprobación: 30/06/2026
Vigencia: 15/07/2026

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

CONSIDERING:

I. That Article 85 of the Insurance Companies Law stipulates that the Superintendency shall establish the manner in which the accounting of insurance companies shall be kept, as well as the criteria for consolidating the operations and financial statements thereof; 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 Bank of Reserve, through its Committee of Standards.

II. That Article 95, first paragraph, of the Insurance Companies Law, establishes that the extraordinary assets acquired by insurance companies in accordance with the provisions of Article 94 of said Law, must be liquidated within a period of two years counted from the date of their acquisition. In justified cases, this period may be extended by the Superintendency of the Financial System for up to eighty days.

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 has the objective of preserving the stability of the financial system and ensuring its efficiency and transparency, as well as ensuring the safety and solidity of the members of the financial system in accordance with what is established by said Law, other applicable laws, regulations, and technical standards issued for that effect, 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 the adequate accounting disclosure of the economic and financial reality, and they must have the backing of their internal and external audits.

V. That Article 99, third paragraph, letter a), of the Law on Supervision and Regulation of the Financial System establishes that it is the responsibility of the Committee of Standards of the Central Bank of Reserve of El Salvador to approve technical standards, instructions, and provisions that the laws regulating the supervised entities establish must be issued to facilitate their application, especially those relating to solvency requirements, liquidity, provisions, reserves, classification of risky assets, criteria for establishing the need for consolidation, good corporate governance practices, transparency of information, and on any other aspect inherent to risk management by the supervised entities.

VI. That in accordance with Article 101, fourth paragraph, of the Law on Supervion and Regulation of the Financial System, the powers to approve, modify, and repeal technical standards that must be complied with by the members of the financial system and other supervised entities are transferred to the Central Bank of Reserve of El Salvador.

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 REGISTRATION OF EXTRAORDINARY ASSETS OF INSURANCE COMPANIES

CHAPTER I
OBJECT, SUBJECT, AND TERMS

Object
Art. 1.- These standards aim to establish uniform practices for the accounting registration and valuation of extraordinary asset transactions of insurance companies.

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

Terms
Art. 3.- For the purposes of these Standards, the terms indicated below have the following meaning:
a) Extraordinary assets: Those guarantees or movable and immovable property referred to in Article 94 of the Insurance Companies Law; b) Central Bank: Central Bank of Reserve of El Salvador; c) Entity: Subject referred to in Article 2 of these Standards; d) Law: Insurance Companies Law; and e) Superintendency: Superintendency of the Financial System.

CHAPTER II
REGISTRATION OF EXTRAORDINARY ASSETS AND CONSTITUTION OF RESERVES

Case of acquisition of extraordinary assets by foreclosure (dación en pago) Art. 4.- In cases of acquisition by foreclosure, the acquisition value shall be that decided by the contracting parties, which must be established in the corresponding notarial instrument. The value thus determined is the one that will be recorded in account 1905 EXTRAORDINARY ASSETS, and the corresponding obligations against the debtor will be credited.

Art. 5.- When the value determined in the foreclosure deed is greater than the sum of the capital balance, interest recorded in asset accounts, legal costs, taxes, fees, and professional fees necessary to acquire ownership of the property, the difference must be applied to account 4901090 09 Other extraordinary expenses - Others. This accounting entry must be made on the same date that the acquisition value is registered. The balances owed by the debtor shall be established taking into account the reference date of the foreclosure deed. If after the previous accounting application, the recorded value of the property is greater than the market value, it must be adjusted to the latter value; the resulting difference shall be recorded in account 4901090 09 Other extraordinary expenses – Others. This accounting entry must be made on the same date that the acquisition value is registered. The agreement accepting the foreclosure must refer to all balances owed by the debtor, including interest registered in off-balance sheet accounts.

Case of acquisition by judicial allocation
Art. 6.- In cases of judicial allocation, the value of the extraordinary asset shall be the total debt registered in asset accounts, understood as the sum of the capital balance, interest recorded in asset accounts, legal costs, plus taxes, fees, and professional fees necessary to acquire ownership of the property. The value thus determined is the one that will be recorded in account 1905 EXTRAORDINARY ASSETS, separating in a sub-account the allocation value and in another the remaining balance owed by the debtor; and the corresponding obligations against the aforementioned party will be credited. The acquisition value shall be determined taking into account the date of the judicial allocation. Interest maintained in off-balance sheet accounts shall not be counted as part of the value of the property.

Art. 7.- When the value determined according to the first paragraph of the previous article is greater than the market value, the difference must be applied to account 4901090 09 Other extraordinary expenses - Others. This accounting entry must be made on the same date that the acquisition value is registered.

Case of purchase and sale
Art. 8.- The entity, to enforce credits in its favor or to secure its rights as a creditor, may purchase movable and immovable property of any kind.
The acquisition value shall be determined by the sum of the value paid to the seller, plus taxes, fees, and notarial expenses to acquire ownership of the property. The value thus determined is the one that will be recorded in account 1905 EXTRAORDINARY ASSETS.

Art. 9.- When the market value results lower than the value paid for the acquisition, the property must be accounted for at the market value; the resulting difference shall be recorded in account 4901090 09 Other extraordinary expenses – Others. This accounting entry must be made on the same date that the acquisition value is registered.

Prohibition of Accounting for Profits
Art. 10.- In the different cases of acquisition of extraordinary assets, when a value lower than market value results, no profit shall be registered for the acquisition.

Market Value
Art. 11.- For the purposes of these standards, the market value mentioned in the previous articles shall be considered the expert appraisal of the property, when pertinent, performed by an expert duly registered with the Superintendency.

Treatment of Reserves
Art. 12.- As a consequence of receiving an extraordinary asset, the specific cleanup reserves corresponding to the owed value may be released by applying to the income account 5802010 Provisions for loans.
In the case where an extraordinary asset has remained in such quality for a period longer than that established in Article 95 of the Law, the entity in question is obligated to establish a provision charged to expenses.

CHAPTER III
REMOVAL OF EXTRAORDINARY ASSETS

Art. 13.- Extraordinary assets may lose this quality for the following causes:
a) By sale; b) By transfer to fixed assets; or c) By destruction.

Sale for cash or with financing
Art. 14.- The removal of an extraordinary asset due to sale will cause an increase in liquidity or in the loan portfolio, as applicable, and a decrease in account 1905 EXTRAORDINARY ASSETS, by the corresponding book value.
If the sale is for cash and its value is greater than the gross book value of the asset, the resulting difference must be recorded in account 5901020 Gains on sale of extraordinary assets.
If the sale is with financing and its value is greater than the gross book value of the asset, the difference must be recorded in account 290109 Various. In each case, the balance of this account shall be amortized in proportion to the recovered loaned capital, which will cause a charge in that account and a credit to account 5901020 Gains on sale of extraordinary assets. Conversely, if the sale value were lower than the gross book value of the property, the difference must be recorded in account 4901020 Losses on sale of goods. In the case where the extraordinary asset had a provision established, it must be liquidated as income from reserve release, in the Various Provisions account.

Acquisition by the entity
Art. 15.- When an extraordinary asset is acquired by the entity, based on what is established in Article 95, last paragraph, of the Law, it shall be transferred to the corresponding account by the gross book value at the date of transfer. The provision established for such asset must be liquidated as income from reserve release, in account 5802090 Various Provisions.

Destruction of the Extraordinary Asset
Art. 16.- When the property is destroyed for any cause, the net value of insurance recoveries must be liquidated against the provision if one had been established; otherwise, the loss must be recognized.

CHAPTER IV
OTHER PROVISIONS AND EFFECTIVE DATE

Art. 17.- The values and accounting practices established in these standards do not affect the legal relationship between debtors and creditors; therefore, the entity's right to pursue its debtors until recovering their credits is not modified. In the case of judicial allocations, the entity must maintain control in off-balance sheet accounts of the balances owed by debtors.

Art. 18.- Entities must maintain auxiliary records, according to the model of Annex No. 1 of these Standards, duly updated.

Art. 19.- When groups of extraordinary assets are acquired, the value thereof and the corresponding reserves must be individualized.

Sanctions
Art. 20.- Non-compliance with the provisions contained in these Standards shall be sanctioned in accordance with what is established in the Law on Supervision and Regulation of the Financial System.

Repeal
Art. 21.- These Standards repeal the “Standards for the Accounting of Extraordinary Assets of Insurance Companies” (NCS -010), approved by the Board of Directors of the Superintendency of the Financial System in Session No. CD17/1999, of February 25, 1999, whose Organic Law was repealed by Legislative Decree No. 592 containing the Law on Supervision and Regulation of the Financial System, published in the Official Gazette No. 23, Volume No. 390, of February 2, 2011.

Unforeseen Aspects
Art. 22.- Aspects not provided for in the regulation in these Standards shall be resolved by the Central Bank through its Committee of Standards.

Effective Date
Art. 23.- These Standards shall enter into force as of July 15, two thousand twenty-six.

Annex No. 1
ENTITY: __________________________________________ Balances in thousands of United States dollars

Date

Transaction Description

Approval

Location or Address

Acquisition
Reserve
Constituted

Extension
Management
Commercialization

Removal
Form

Value

Note
SSF
Maturity

Auction

Cause

Price

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)

Instructions
(1) Date of the transaction
(2) Description of the transaction, identifying the references of the former debtor (3) Number and date of the agreement of the JD or Committee that approved the acquisition, sale, conservation, or removal by destruction (4) The sufficient data to locate it (5) Purchase, foreclosure, allocation, or cancellation of Financial Leasing contract (6) Acquisition value plus additions (7) The reserve registered in account 1999020 Extraordinary assets (8) Number and date of the note containing the extension, if any (9) Expiration of the extension (10) Date and base price of the last auction (11) Actions taken to sell it (12) State the cause of removal, which can be sale, conservation, or destruction (13) Price of the sale of the extraordinary asset