Bolivia is listed as a member on the International Association of Insurance Supervisors (IAIS) website. However, there is insufficient information publicly available regarding the country's compliance with the Insurance Core Principles (ICPs) promulgated by the IAIS. The Inter-American Development Bank partially sponsored a technical assistance project (2000-2005) for Bolivia with the ultimate objective of consolidating insurance market operations in the country by strengthening the legal, regulatory and supervisory framework for insurance activities in line with the 1997 Core Principles of Insurance Supervision for Emerging Markets established by the IAIS. The project aimed at implementing the 1998 Insurance Law of the Republic of Bolivia and formulating its enabling regulation. The goal also included enhancing the supervisory capacity of the insurance supervisor, the Superintendency of Pensions, Securities and Insurance, in terms of its staff resources, its technical infrastructure, computer systems, and the supervisory methodologies it employed. However, as of August 2008, there is insufficient information as to the implementation or achievements of the project that reached completion in 2005.

General Overview

There is insufficient information publicly available regarding Bolivia's compliance with the Insurance Core Principles (ICPs) promulgated by the International Association of Insurance Supervisors (IAIS). Bolivia is listed as a member on the IAIS website. The Inter-American Development Bank (IDB) website mentions an Insurance Industry Reform project in Bolivia sponsored partially by the IDB as a non-reimbursable technical cooperation loan in the amount of US$ 8.4 million. The approval date was April 2000 and the project started in July 2000 and reached completion in January 2005. However, the website has not published a completion report for the project as of August 2008. The main aim of the project, which was jointly sponsored by the Superintendency of Pensions, Securities and Insurance (SPVS), was to "strengthen insurance market operations in Bolivia, by implementing the new insurance law, preparing related rules and regulations, bringing insurance companies in line with the new law, and strengthening the oversight capacity of the Office of Insurance Oversight (IS) [of the SPVS]." The project encompassed - in four subprograms - extensive studies and developments, and modification of insurance sector rules, regulations and guidelines; training of the technical and supervisory professionals of the IS; audits and due diligence of 29 insurance firms; and development of the computer systems, database, early alert system and a risks center to enhance insurance supervision. A supporting document published in 2000 on the IDB website entitled "Institutional Strengthening of the Office of Insurance Oversight" declares that the overarching objective of the project was to "consolidate insurance market operations in Bolivia ... by supplementing the legal, regulatory and supervisory framework for insurance activities pursuant to the Core Principles of Insurance Supervision for Emerging Markets established by the International Insurance Supervisors Association (1997)" (p. 1).

The document provides the background to this project by detailing the legal framework and supervisory capacity of the insurance supervisor, the SPVS prior to the onset of the project. According to the document, the Insurance Law No. 1883 of 1998 and its accompanying regulations in Supreme Decree No. 25201 of 1998 superseded Insurance Law No. 27 of 1904 and its implementing regulation, Decree No. 15516 of 1978. The 1998 law, per the same document, "introduces substantial reforms to the country's insurance sector, which necessarily require the creation of new systems for regulation, oversight and supervision of insurance companies, based on modern principles of transparency, efficiency and creditworthiness of the participating companies" (p. iii).

Providing information on the insurance supervisor, the SPVS, the document states that it was created in 1998 under the Property and Credit Law by the merger of the three superintendencies, supervising the pensions, securities, and insurance sectors, respectively. The SPVS has three functional supervision offices charged with the oversight of the three sectors. The Office of Insurance Oversight has three functions: supervision and oversight, analysis and development, and legal. The SPVS is a "public institution" (p. 4) and is funded by a portion of the premiums collected by general and life insurance, bond insurance, personal accident, health and prepaid insurance, statutory insurance, and social insurance. The document comments that prior to the start of the project, the IS lacked supervisory and inspection methodologies, guidelines or manuals, databases or other pertinent information on insurance sector activities, as also adequate off-site or on-site inspection staff. Further, the regulatory framework was not robust enough to foster effective and transparent insurance activities and increased insurance penetration among different categories of persons and activities in Bolivia.

The 2000 IDB document notes that in 1999, there were 19 insurance companies, 35 insurance brokers, 17 insurance adjustment and settlement agencies, 9 mathematical actuaries, 4 insurance appraisers, and 16 external auditing companies authorized by the IS to audit insurance companies. Further, the insurance sector assets in 1999 approximated US$80 million. They were expected to increase in subsequent years owing to the creation of the Pension Fund Administrators (AFP) under the 1996 Law on Pensions. The AFPs were likely to buy death and disability insurance contracts as well as insurance workers compensation to the tune of US$45 million every year, the document averred. Insurance premiums also showed an upward trend, with an annual growth of 31 percent, though they still remained among the lowest in the Latin American region (US$10 per capita), as cited in the 1999 Association of Superintendents of Insurance of Latin America (ASSAL) annual statistics report mentioned in the document. Other indicators of a weak insurance sector were low capitalization and profitability of the companies, high administrative costs, outdated claims table to enable accurate actuarial calculations, lack of transparency, inadequate professional staff, and reserves excessively concentrated in the real estate sector.

The Principles

ICP 1 Conditions for effective insurance supervision

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

ICP 2 Supervisory objectives

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There is insufficient information publicly available as to Bolivia's compliance with this Principle. As the report prepared jointly by the Center for Latin American Monetary Studies and the World Bank and reprinted in English in 2006 notes, the SPVS "controls, regulates and supervises" (p. 19) the insurance sector. Its role as the supervisor is set out in the Insurance Law. The report details the mission of the SPVS as follows: "to promote the sustained development of the pensions, securities and insurance sectors, in a transparent, organized form and within the framework of prudence that avoids unnecessary risks that guarantee a controlled growth" (p. 19). In pursuance of this mission, the SPVS performs ongoing supervision of the entities through regular and follow up inspections, provides true and timely information to the market participants and the institutions that render insurance services, and educates the general user and public of their rights, obligations and benefits of participating in the sector.

ICP 3 Supervisory authority

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There is insufficient information publicly available as to Bolivia's compliance with this Principle. Providing information on the insurance supervisor, the SPVS, the 2000 IDB document states that it was created in 1998 under the Property and Credit Law by the merger of the three superintendencies, supervising the pensions, securities, and insurance sectors, respectively. The SPVS has three functional supervision offices charged with the oversight of the three sectors. The Office of Insurance Oversight has three functions: supervision and oversight, analysis and development, and legal. The SPVS is a "public institution" (p. 4) and is funded by a portion of the premiums collected by general and life insurance, bond insurance, personal accident, health and prepaid insurance, statutory insurance, and social insurance. The document comments that prior to the start of the Insurance Sector Reform project (2000-2005), the IS within the SPVS lacked supervisory and inspection methodologies, guidelines or manuals, databases or other pertinent information on insurance sector activities, as also adequate off-site or on-site inspection staff. Further, the document adds, the regulatory framework was not robust enough to foster effective and transparent insurance activities and increased insurance penetration among different categories of persons and activities in Bolivia. The project strove to, inter alia, strengthen the supervisory capacity of the IS in terms of its staff, computer systems and supervisory methodologies.

ICP 4 Supervisory process

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

ICP 5 Supervisory cooperation and information sharing

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There is insufficient information publicly available as to Bolivia's compliance with this Principle. The 2007 Article IV consultation report by the International Monetary Fund, however, notes that the (unpublished) 2003 Financial Sector Assessment Program (FSAP) recommendation to Bolivia to achieve consolidated supervision in the financial sector through greater coordination among the domestic financial regulators has not been implemented.

ICP 6 Licensing

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

ICP 7 Suitability of persons

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

ICP 8 Changes in control and portfolio transfers

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

ICP 9 Corporate governance

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

ICP 10 Internal control

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

ICP 11 Market analysis

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

ICP 12 Reporting to supervisors and off-site monitoring

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There is insufficient information publicly available as to Bolivia's compliance with this Principle. The IDB website notes that Bolivia's national accounting standards issued in 2006 are not consistent with International Financial Reporting Standards (IFRSs). Moreover, the domestic accounting framework is incomplete since Bolivia has 14 accounting standards as compared to more than forty IFRSs. In March 2006, the IDB approved the funding of a project to aid the adoption of IFRSs and International Standards on Auditing in Bolivia. The main objective of the project, per the IDB website, is to ensure that business financial reporting in Bolivia is "technically reliable" and transparent. The 36-month long project is expected to harmonize Bolivian standards with international standards and provide access to the harmonized standards to Bolivian accounting professionals.

ICP 13 On-site inspection

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

ICP 14 Preventive and corrective measures

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

ICP 15 Enforcement or sanctions

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

ICP 16 Winding-up & exit from the market

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

ICP 17 Group-wide supervision

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

ICP 18 Risk assessment and management

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

ICP 19 Insurance activity

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

ICP 20 Liabilities

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

ICP 21 Investments

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

ICP 22 Derivatives and similar commitments

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

ICP 23 Capital adequacy and solvency

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

ICP 24 Intermediaries

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

ICP 25 Consumer protection

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

ICP 26 Information, disclosure & transparency towards the market

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

ICP 27 Fraud

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There is insufficient information publicly available as to Bolivia's compliance with this Principle.

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

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There is insufficient information publicly available as to Bolivia's compliance with this Principle. The 2003 International Monetary Fund's (IMF) Report on the Observance of Standards and Codes on the Financial Action Task Force (FATF) Recommendations for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) revealed that "Bolivia's system to prevent and suppress money laundering fulfills most of the FATF 40 recommendations and applies to the insurance, stock market, and financial sectors" (p. 2). However, the assessment was conducted in 2002 on the basis of the 40+8 FATF Recommendations and did not incorporate the changes in principles and methodology introduced in 2003. As the 2007 IMF report notes, the 2003 FSAP recommendations to Bolivia to amend its AML legislation and strengthen its Financial Intelligence Unit (UIF) has not yet been implemented. The 2008 U.S. Department of State (DoS) report notes that Law No. 1768 of 1997 criminalizes money laundering in Bolivia and created the country's UIF within the SBEF. Further, Supreme Decree No. 24771 of 1997 stipulates the powers and functions of the UIF. Under Decree No. 24771, banks and other financial institutions are required to identify their customers, retain transaction records for at least ten years, and report to the UIF all unusual and suspicious transactions. However, entities are not required to report cash transactions above a designated threshold. The UIF may, nonetheless, request additional information from reporting entities to aid investigations. The UIF is also empowered to request the SBEF to sanction its supervised entities if they are non-compliant with their reporting obligations. To add, the UIF can conduct on-site inspections to assess the reporting entities' compliance with their suspicious transaction reporting (STR) obligations. The U.S. DoS report observes that obliged entities' compliance with their reporting requirements is low.

As for terrorist financing, Bolivia does not criminalize it, the U.S. DoS report finds. However, the UIF does distribute the terrorist lists of the United Nations and the United States to reporting entities, receive and maintain information on terrorist activities, and freeze suspicious assets for up to 48 hours under its own discretion. However, a draft terrorist financing law submitted by the UIF to the SBEF has not been tabled in the Bolivian Congress.