The Philippine Machinery Management Services Corp. (PMMSC) or also known as ‘the “MacPool”) is an insurance pool that is dedicated to offering Construction and Engineering Insurance.
This insurance pool was conceptualized in 1955 when four domestic insurers and the German reinsurance company Munich Re got together with an idea to offer engineering insurance collaboratively. The reinsurance treaty that Munich Re offered required the formation of this pool. This idea was concretized in 1961 with the formation of MacPool. The pool was launched with an Erection All Risks (EAR) Policy for the Central Philippines Milling Corporation, its first client. With the construction boom of the 1960s, the pool was an instant success. On February 22, 1995, it was registered with the SEC as a corporation and changed its name from MacPool to the current PMMSC. The corporation is run by a seven-man Board of Directors. The incorporation was triggered by a tax case decided by the Court of Tax Appeals on October 19, 1992 and affirmed by the Court of Appeals on October 11, 1993 which found the “Pool of Machinery Insurers” liable for corporate tax (Afisco Insurance Corp. et al. v. Court of Appeals, et al., GR 112675, January 25, 1999). The pool had originally claimed that it was an organization exempt from income tax since it was merely a “clearing house” and an “informal partnership.” There was no precedent for insurance pools during this time.
Today, this insurance pool is a pillar of the country’s construction and engineering industry. The pool now comprises 41 members, as of December 31, 2019, of which six are inactive cedants. This comprises most of the non-life insurers in the country. Included in the pool is the Government Service Insurance System (GSIS). The pool has been consistently profitable for over 10 years. The latest available published premium income figures show a gross premium income of over P300 million.The insurance combined ratio for 2012 was at 67.71 percent, down compared to 77.47 percent in 2011, reflecting favorable underwriting results.The combined ratio measures whether the insurance company is earning more revenues from its collected premiums relative to the claims it pays out.
It has been said that the rules on pricing engineering insurance products in the Philippines is “vague” due to the lack of tariff. The idea of pooling should remove any large pricing discrepancies in the market.
The pool members retain around 45 percent of the risk internally, cede (reinsure) 2.25 percent to NatRe and the balance of 47.5 percent to MunichRe who remains to this day the pool’s reinsurance partner. It manages its own claims servicing.
Among its insurance products are the Contractors’ All Risks, the EAR, the Machinery Insurance, the Machinery Loss of Profits, the Boiler and Pressure Vessel, the Electronic Equipment Insurance, the Deterioration of Stock and the Civil Engineering Completed Risks. Most premiums are generated from CAR policies.