The Financial System Stability Assessment update, conducted by the IMF in 2005, reported that, insurance supervisors have improved technical skills and updated procedures consistent with emerging international best practices. However, staff numbers diminished dramatically and have reached the point where constraints on available technical knowledge, experience, and skills are becoming a concern. However, there is no further information publicly available regarding Colombia's adherence to the Insurance Core Principles (ICPs) promulgated by the International Association of Insurance Supervisors (IAIS).

General Overview

Since the 1999 FSAP, insurance supervisors have improved technical skills and updated procedures consistent with emerging international best practices. However, staff numbers diminished dramatically and have reached the point where constraints on available technical knowledge, experience, and skills are becoming a concern. (FSSA Update 2005)

The insurance team has advanced their technical work on internal risk-based financial assessment methods impressively. Movements toward a solvency-monitoring approach have been making steady progress. Some data collection initiatives in the nonlife sector are needed to take the analysis further along with targeted assistance on technical issues. (FSSA Update 2005)

The Superintendency of Banks (Superintendencia Bancaria de Colombia - SBC) supervises credit institutions, financial services companies and other financial companies, including insurance companies, insurance brokers and capitalization companies. As of 2003, 46 insurance companies, 62 insurancce brokers and 5 capitalization companies fell under supervision of SBC. (SBC 2003)

In line with the general reforms in economic policy, the insurance markets too have, since the end of the 90s, been largely deregulated and opened up to foreign insurance companies. The liberalization measures have essentially included (i) abolition of substantive insurance supervision with prior price and product control and state price regulation, (ii) concentration of supervision on solvency monitoring; introduction of solvency regulations (most of which are based on European Union standards); regulations governing technical reserves and investments, (iii) abolition of monopolies in insurance and reinsurance and compulsory cessions to domestic reinsurers, (iv) opening-up of markets to foreign insurers for the establishment of subsidiaries, and lifting of restrictions on shareholdings. (Swiss Re 1997)

Colombia is not a member of the the International Association of Insurance Supervisors. (IAIS website)

The Principles

ICP 1 Conditions for effective insurance supervision

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There is no information publicly available that directly addresses this principle.

ICP 2 Supervisory objectives

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There is no information publicly available that directly addresses this principle.

ICP 3 Supervisory authority

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The Superintendency of Banks (Superintendencia Bancaria de Colombia - SBC) supervises credit institutions, financial services companies and other financial companies, including insurance companies, insurance brokers and capitalization companies. (SBC 2003)

According to the 2005 Update prepared by the IMF, since the 1999 FSAP, insurance supervisors have improved technical skills and updated procedures consistent with emerging international best practices. However, staff numbers diminished dramatically and have reached the point where constraints on available technical knowledge, experience, and skills are becoming a concern. (FSSA Update 2005)

ICP 4 Supervisory process

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There is no information publicly available that directly addresses this principle.

ICP 5 Supervisory cooperation and information sharing

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There is no information publicly available that directly addresses this principle.

According to the 2005 Update prepared by the IMF, there is a need for better coordination of efforts and information among the SBC, the Securities Superintendency (SVC), and the Superintendency of Companies (SSC). Colombia already enjoys a concentration of the supervisory responsibility over banks, insurance and pension funds in the SBC. Rules for cooperation should entail specific requirements for exchange of information, consultation and assistance on policy, monitoring of markets and entities, and conflict resolution processes. The SVC and the SBC should harmonize regulation and supervisory practices for independent brokers and bank-related brokers to assure a level playing field. The agencies should define a "lead supervisor" with clear responsibility and accountability concerning market, credit and liquidity risks, and stress tests. (FSSA Update 2005)

ICP 6 Licensing

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There is no information publicly available that directly addresses this principle.

According to Art. 1349 of the Commerce Code, every insurance company must subscribe to the Banking Superintendence, which in turn will provide a certificate crediting it as insurance broker, allowing the company to perform its activities. (SBC website)

According to Art. 1350 of the Commerce Code, the subscribing insurance company must provide evidence that its founding partners have no legal record and are people who strictly follow the legal guidelines established by the Banking Superintendence. Moreover, in order to obtain a license, the insurance company's partners must declare under oath, that neither the association nor the partners have the inabilities to perform as insurance agents specified in the OSFI. (SBC website)

Minimum capital entrance requirements for insurance companies is $2 mln and for reinsurance companies - $7.8 mln. In the case of insurance companies these amounts must be complemented with the capital requirements specified for each insurance line of business, according to Decree 206 of 1999 issued by the Ministry of Finance. (SBC 2003)

ICP 7 Suitability of persons

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There is no information publicly available that directly addresses this principle.

ICP 8 Changes in control and portfolio transfers

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There is no information publicly available that directly addresses this principle.

ICP 9 Corporate governance

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There is no information publicly available that directly addresses this principle.

As established by the Organic Statute of Financial Institutions (OSFI) and by the Commerce Code of Colombia, as soon as an insurance company is granted a license to run an insurance business in Colombia, the regulatory authorities start to monitor the company's corporate affairs. The authority, namely the Banking Superintendence, conducts periodic on-site examination of the insurance companies' financial condition. The Colombian Commerce Code comprehends several norms related to corporate governance and establishes that regulators must review the internal control structure of each insurance company under the Superintendence supervision, as part of the financial solvency assessment. (SBC website)

ICP 10 Internal control

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There is no information publicly available that directly addresses this principle.

The Colombian Commerce Code comprehends several norms related to corporate governance and establishes that regulators must review the internal control structure of each insurance company under the Superintendence supervision, as part of the financial solvency assessment. (SBC website)

ICP 11 Market analysis

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There is no information publicly available that directly addresses this principle.

ICP 12 Reporting to supervisors and off-site monitoring

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There is no information publicly available that directly addresses this principle.

In a 2005 Update, the IMF recommended that the SBC issue norms concerning the role, duties, and responsibilities of external auditors (revisores fiscales). In particular, the lack of audit standards and the lack of alignment with International Accounting Standards represented a serious departure from international best practices for financial reporting and transparency. (FSSA Update 2005)

ICP 13 On-site inspection

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There is no information publicly available that directly addresses this principle.

The authority, namely the Banking Superintendence, conducts periodic on-site examination of the insurance companies' financial condition. (SBC website)

ICP 14 Preventive and corrective measures

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There is no information publicly available that directly addresses this principle.

ICP 15 Enforcement or sanctions

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There is no information publicly available that directly addresses this principle.

ICP 16 Winding-up & exit from the market

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There is no information publicly available that directly addresses this principle.

ICP 17 Group-wide supervision

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There is no information publicly available that directly addresses this principle.

ICP 18 Risk assessment and management

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There is no information publicly available that directly addresses this principle.

ICP 19 Insurance activity

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There is no information publicly available that directly addresses this principle.

ICP 20 Liabilities

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There is no information publicly available that directly addresses this principle.

Insurance and reinsurance companies established in Colombia must build the corresponding reserves to cover casualty payments. The following reserves are considered: (1) reserves for unearned premium; (2) reserves for reported claims; (3) reserves for unreported claims; (4) reserves for catastrophic events; (5) a mathematical reserve in life insurance and complementary products; (6) reserves from Deviation of Casualties when dealing with Earthquakes and sickness resulting from professional hazards. Technical reserves must be invested in a portfolio that is regulated in order to guarantee certain minimum safety and liquidity standards. (SBC 2003)

ICP 21 Investments

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There is no information publicly available that directly addresses this principle.

ICP 22 Derivatives and similar commitments

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There is no information publicly available that directly addresses this principle.

ICP 23 Capital adequacy and solvency

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There is no information publicly available that directly addresses this principle.

Once in operation, insurance and reinsurance companies must comply with minimum capital requirements. The amount required is calculated as a percentage of the levels of its premiums or its casualties in addition to a percentage of the mathematical reserve in the case of life insurance companies), choosing the greatest of the two results. These requirements are similar to international standards. (SBC 2003)

ICP 24 Intermediaries

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There is no information publicly available that directly addresses this principle.

ICP 25 Consumer protection

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There is no information publicly available that directly addresses this principle.

ICP 26 Information, disclosure & transparency towards the market

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There is no information publicly available that directly addresses this principle.

ICP 27 Fraud

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There is no information publicly available that directly addresses this principle.

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

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There is no information publicly available that directly addresses this principle.