The Insurance Commission (IC) has classified salary loans extended to Department of Education (DepEd) teachers as admitted assets of insurance companies to facilitate the establishment of a salary-loan program that will benefit public-school teachers.
Insurance Commissioner Emmanuel F. Dooc has issued Circular Letter 2015-42 classifying as admitted assets of insurance companies and mutual benefit associations (MBAs) the salary loans extended to public-school teachers.
The classification of the loans as admitted assets means that such may be counted as part of the assets of the insurance companies or the MBAs in the computation of their required capitalization.
Only insurance companies, or MBAs with funds representing earned surplus, can extend salary loans to DepEd teachers, and the salary-loan program must be duly approved by the board of directors or trustees of the insurance company or MBA concerned.
The salary-loan program must also be covered by a memorandum of agreement between the insurance company or the MBA concerned and the DepEd, a copy of which must be given to the IC.
The circular also provided other conditions for the classification of such salary loans as admitted assets, such as: the said loans shall be paid in equal installments under the terms and conditions of such loans; and the loans shall not be used as an inducement to solicit other insurance business.
The limit for the funds that can be used in the salary-loan programs for public-school teachers shall not exceed 20 percent of the total assets of life-insurance companies, or 20 percent of the net worth of nonlife insurance companies.
The credit risk of the said loans shall also be computed in accordance with the new risk-based capital framework being used by the IC in computing the required capitalization of a particular insurance company.