In 1998, Argentina conducted a self-assessment of its observance with the International Association of Insurance Supervision (IAIS) Insurance Supervisory Principles of 1997. The self-assessment is unpublished but available to the public on request to the Superintendence of Insurance (SSN), although it has not been independently verified by the International Monetary Fund. The assessment asserts that a majority of IAIS Insurance Supervisory Principles have been satisfied, either by provision in Argentine law or through resolutions issued, monitored, and enforced by the SSN. However, the Insurance Supervisory Principles of 1997 were superseded by the Insurance Core Principles (ICPs) in 2000, and these were further amended in 2003. Therefore, there is insufficient information publicly available as to Argentina's compliance with the new, more stringent ICPs.

General Overview

A 1999 report issued by the International Monetary Fund (IMF) announced that the Superintendence of Insurance (SSN) had conducted a self-assessment on its compliance with Insurance Supervisory Principles promulgated by the International Association of Insurance Supervisors' (IAIS). According to the self-assessment, most of the Insurance Supervisory Principles of 1997 were satisfied. Supervision of the insurance risk by local insurance companies (which continues to be informal) and on-site supervision (which has limited capacity) are the two main areas where compliance is lacking. However, neither the IMF nor any other source has confirmed this information. The 1999 report observed that the main laws regulating insurance supervision in Argentina are the Insurance Law of 1967, the Insurance Companies and Control Law of 1973, and the Insurance Agents Law of 1981. The SSN is an autonomous entity that operates under the Banking and Insurance Under-Secretariat (now called the Financial Services Under-Secretariat) of the Ministry of Economy and Production (MECON) and is responsible for monitoring company compliance with insurance law and regulations., The SSN is listed as a member on the Association of Latin-American Insurance Supervisors' and the IAIS' websites.

Moody's reported in 2007 that the insurance sector is still relatively underdeveloped, representing only 2%-3% of GDP. Although, these numbers are similar to the region's average, they remain low compared to the 5%-7% registered for developed economies. The main business lines are general insurance, life insurance, and pensions. The total number of insurance companies reported by Moody´s in 2007 was 180.

The Principles

ICP 1 Conditions for effective insurance supervision

II

There is insufficient information publicly available as to Argentina's compliance with the new, more stringent ICPs issued by the IAIS in 2003.

ICP 2 Supervisory objectives

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According to a 2003 SSN report, the main objective of the SSN is to protect policyholders. In order to comply with this goal, Law No. 20.091 grants the SSN the authority to supervise all insurance companies. Nevertheless, there is insufficient information publicly available as to Argentina's compliance with the new, more stringent ICPs issued by the IAIS in 2003.

ICP 3 Supervisory authority

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According to the 1999 IMF report, the SSN is responsible for the supervision of insurance companies. The SNN is an autonomous institution under the Under-secretariat of Financial Services of the MECON. The regulatory framework for insurance companies is based on the Insurance Law No. 17.418, the Insurance Companies and Control Law No. 20.091, and the Insurance Agents Law No. 22.400. The 1999 MECON report identifies the Under-secretariat of Financial Services of the MECON as an active participant in policy decisions and market regulation. According to the same report, this structure allows the system to afford a balance of power and facilitates the implementation of best international practices. The 2003 SSN report lists among its functions: control, market analysis, supervision, penalties application, information gathering, policy-making, establishment of capital adequacy and solvency requirements, implementation of an insurer's evaluation system, and provision of solutions to ensure the quality of insurance services The administrative structure of the SSN is set forth under Decree No. 1587 of 1996. Nevertheless, there is insufficient information publicly available as to Argentina's compliance with the new, more stringent ICPs issued by the IAIS in 2003.

ICP 4 Supervisory process

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There is insufficient information publicly available as to Argentina's compliance with the new, more stringent ICPs issued by the IAIS in 2003.

ICP 5 Supervisory cooperation and information sharing

II

There is insufficient information publicly available as to Argentina's compliance with the new, more stringent ICPs issued by the IAIS in 2003. Based on the 1999 IMF report, the IAIS model of the Memorandum of Understanding on information sharing with foreign supervisory agencies has not been used. However, Argentina has an agreement with Uruguay and promotes information exchange among the members of the South Common Market, also known as MERCOSUR.

ICP 6 Licensing

II

The 1999 IMF report points out that, according to the SSN's self-assessment, Argentina complies with the Principle on Licensing. However, this assessment was done prior to the IAIS's 2003 revision of the Principles. However, there is insufficient information publicly available as to Argentina's compliance with the new, more stringent ICPs. The 2007 Moody's report states that insurance companies can operate in several areas through a unique legal entity. Required reserves are established depending on the volume of premiums/claims of the company and the number of branches it operates.

ICP 7 Suitability of persons

II

There is insufficient information publicly available as to Argentina's compliance with the new, more stringent ICPs issued by the IAIS in 2003. According to the 2005 "Gobierno Corporativo- La Experiencia Argentina" presentation published by the Organization for Economic Co-operation and Development (OECD), the SSN has issued requirements of integrity, competence, experience, and qualification for owners, board members, senior management, auditors, and actuaries of insurance companies.

ICP 8 Changes in control and portfolio transfers

II

There is insufficient information publicly available as to Argentina's compliance with the new, more stringent ICPs issued by the IAIS in 2003.

ICP 9 Corporate governance

II

According to the OECD's 2005 report, the SSN has issued requirements for board integrity, competence, solvency, and legal origin of shareholder's funds. The SSN has issued a number of changes to these requirements, including increased professional standards required for board membership; annual review of more robust documentation of board-member integrity and capacity; accountability of directors to the SSN; new requirements pertaining to the minutes of board meetings; publication requirements regarding SSN manuals and procedures for submission to the board; and new reporting requirements for the board. Moody's reported in 2007 that other reforms enacted in order to improve governance practices include the establishment of an audit registry office for the SSN to facilitate the decision making process regarding board members and their terms of office. In addition, the SSN has incorporated new rules on internal control and corporate governance in order to improve market transparency. Nevertheless, there is insufficient information publicly available as to Argentina's compliance with the new, more stringent ICPs issued by the IAIS in 2003.

ICP 10 Internal control

II

Resolution No. 31.231, issued by the SSN in 2006, requires insurers to implement the Rules for the Administrative Procedures and Internal Controls. Writing in 2006, Castorina reported that these rules must include the processes to be followed during internal control evaluations The Rules must be consistent with the regulations issued by the SSN and Resolution No. 6 of the Financial Intelligence Unit (UIF) regarding anti-money laundering practices. Insurers must identify the officials responsible for decision-making for each process described by the SSN regulations and UIF resolutions. Insurers must also issue an Annual Plan of Internal Control. The plan shall provide for the monitoring of the execution of the procedures established by the board and for the compliance with the standards and methodologies for internal control evaluations. The plan must provide for the issuing of semester reports for each of the internal control procedures set by the board. These reports must comment on the level of implementation of the procedures. The person responsible for Internal Control will evaluate the risk exposure of the entity. The reports must be taken into consideration by the board and immediate corrective actions must be taken when inconsistencies are found. Nevertheless, there is insufficient information publicly available as to Argentina's compliance with the new, more stringent ICPs issued by the IAIS in 2003.

ICP 11 Market analysis

II

There is insufficient information publicly available as to Argentina's compliance with the new, more stringent ICPs issued by the IAIS in 2003.

ICP 12 Reporting to supervisors and off-site monitoring

II

According to the 1999 IMF report, the SSN self-assessment claims that Argentina complies with IAIS principle on reporting to supervisors and off-site monitoring. However, given the IAIS's revision of the Principles in 2003, there is insufficient information publicly available as to Argentina's compliance with the new, more stringent ICPs. The 2005 OECD report states that the SSN has issued detailed guidelines for the auditor's performance and more rigorous requirements for the preparation of the financial statements. In 1999, Weiss stated that the SSN cannot perform comprehensive audits of insurers´ financial statements and, when it can exercise some form of monitoring, it has no enforcement mechanisms at its disposal.

ICP 13 On-site inspection

II

The 1999 IMF report discloses that the SSN's self-assessment claims partial compliance with the IAIS principle on on-site inspection. The IMF explains that most of the on-site inspections are intended to control assets and liabilities, but the capacity to examine the operations of insurance companies is inadequate. However, the IMF notes that the SSN is taking measures to address these problems. Nevertheless, there is insufficient information publicly available as to Argentina's compliance with the new, more stringent ICPs issued by the IAIS in 2003.

ICP 14 Preventive and corrective measures

II

Weiss reported in 1999 that the SSN had no technological or human resources to be effective. There are no early-warning mechanisms that could indicate future deterioration of an insurer's financial situation and the SSN has no legal power to intervene promptly. Even if the SSN is aware of a specific irregularity, it can not take preventive or corrective actions. The SSN has no faculty to perform effective on-site inspections . However, there is insufficient information publicly available as to Argentina's compliance with the new, more stringent ICPs.

ICP 15 Enforcement or sanctions

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There is insufficient information publicly available as to Argentina's compliance with the new, more stringent ICPs issued by the IAIS in 2003.

ICP 16 Winding-up & exit from the market

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There is insufficient information publicly available as to Argentina's compliance with the new, more stringent ICPs issued by the IAIS in 2003.

ICP 17 Group-wide supervision

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There is insufficient information publicly available as to Argentina's compliance with the new, more stringent ICPs issued by the IAIS in 2003.

ICP 18 Risk assessment and management

II

Moody's 2007 report affirms that, since 2003, risk management is based on reserves for Incurred but Not Reported Incidents (IBNR) principle and shortfall of premium reserves. The 1999 IMF report affirms that the SSN has claimed Argentina's non-compliance with the IAS principle on risk assessment and management. The self-assessment notes that the recognition of the range of risks that insurers face is informal. The SSN is addressing the shortcomings on this regard. Nevertheless, there is insufficient information publicly available as to Argentina's compliance with the new, more stringent ICPs issued by the IAIS in 2003.

ICP 19 Insurance activity

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There is insufficient information publicly available as to Argentina's compliance with the new, more stringent ICPs issued by the IAIS in 2003. The 1999 MECON report indicates shortcomings in performance of external financial analysis, valuation of companies and early warning indicators. Pricing and premium policies have no restriction but they have to be approved by the SSN. The authorization process consists of an actuarial base exam.

ICP 20 Liabilities

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The 1999 IMF report notes that the SSN claims Argentina's compliance with the IAIS principle on Liabilities. However, given the IAIS's revision of the Principles in 2003, there is insufficient information publicly available as to Argentina's compliance with the new, more stringent ICPs. According to Weiss's 1999 report, there are specific problems with the valuation of liabilities. For instance, the inflationary adjustments required for some liabilities do not necessary apply to assets.

ICP 21 Investments

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The 1999 IMF report asserts that the SSN claims Argentina's compliance with the IAIS principle on investments. However, given the IAIS's revision of the Principles in 2003, there is insufficient information publicly available as to Argentina's compliance with the new, more stringent ICPs. As stated in the 2005 OECD report, insurance entities must prepare an investment plan with the approval of the board. The plan must be evaluated periodically on board's meetings and be reviewed every year. Also, insurance companies must appoint a person to be accountable for the plan to the SSN.

ICP 22 Derivatives and similar commitments

II

The 1999 IMF report notes that the SSN claims Argentina as non-compliance with the IAIS principle on derivatives and similar commitments. However, in Argentina there are no serious concerns about this weakness because these instruments are not developed nor frequently used by insurance entities. Nevertheless, there is insufficient information publicly available as to Argentina's compliance with the new, more stringent ICPs issued by the IAIS in 2003.

ICP 23 Capital adequacy and solvency

II

Moody's 2007 report observes that the SSN has been active in the issuance of reserve requirements and solvency standards. In 2006, the SSN set more strict capital requirements based on a new calculation of the IBNR and it has introduced new rules on corporate governance - measures that strengthened the solvency regime. According to Resolution No. 31.134 of 2006, new minimum capital requirements have been adopted. Nevertheless, there is insufficient information publicly available as to Argentina's compliance with the new, more stringent ICPs issued by the IAIS in 2003.

ICP 24 Intermediaries

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Weiss reported in 1999 that the SSN has limited powers to supervise intermediaries. For instance, in the U.S. an intermediary must hold an insurance policy which covers the entity for the damages caused by its own fault or by random situations affecting a policy holder. Since this is not the practice in Argentina, policy holders are exposed to higher levels of risk. However, there is insufficient information publicly available as to Argentina's compliance with the new, more stringent ICPs issued by the IAIS in 2003.

ICP 25 Consumer protection

II

Weiss in 1999 found that the SSN has limited powers to supervise intermediaries. For instance, in the U.S. an intermediary must hold an insurance policy which covers the entity for the damages caused by its own fault or by random situations affecting a policy holder. Since this is not the practice in Argentina, policy holders are exposed to higher levels of risk. However, there is insufficient information publicly available as to Argentina's compliance with the new, more stringent ICPs issued by the IAIS in 2003.

ICP 26 Information, disclosure & transparency towards the market

II

There is insufficient information publicly available as to Argentina's compliance with the new, more stringent ICPs issued by the IAIS in 2003.

ICP 27 Fraud

II

There is insufficient information publicly available as to Argentina's compliance with the new, more stringent ICPs issued by the IAIS in 2003.

ICP 28 Anti-money laundering/ Combating the Financing of Terrorism

II

The IMF's 2004 FATF report states that "it seems that insurance agents are not subject to the Anti-Money laundering (AML) measures" (p. 6). The same report asserts that the insurance sector lacks effective supervision and therefore has problems complying with the Know-Your-Costumer rules set by the UIF. However, the report indicates that the requirements of the UIF might be too strict. In order to address these deficiencies Resolution No. 6 was passed in 2005. It is based on Law No. 25.246 (section 21, paragraphs a and b) that requires insurers to pursue anti-money laundering policies, especially due diligence on customers. Resolution No. 6 also takes into consideration the mutual evaluation report on Argentina made by the Financial Action Task Force (FATF) and the South American Financial Action Task Force (GAFISUD) in October 2003. The report asserts that it could be more profitable for the insurance sector to focus supervisory efforts at the time of paying a claim rather than at the time of creating business relationships with the customers. Furthermore, it acknowledges that the UIF has taken into account the FATF's 40 new recommendations on money laundering, 8 special recommendations on financing of terrorism, and the 25 criteria requirements that define the non-cooperative countries status. According to the U.S. DoS 2007 report, Law No. 26.087 of 2006 prohibits insurance companies to deny the UIF access to insurers' information. Nevertheless, there is insufficient information publicly available as to Argentina's compliance with the new, more stringent ICPs issued by the IAIS in 2003.