Atty. Dennis B. Funa

Under Circular Letter 2020-89 (Guidelines in the Treatment of Creditable Withholding Taxes), September 3, 2020, CWT may be considered as admitted assets of insurance companies, subject to conditions and documentation provided therein. Prior to this circular, CWTs were considered as non-admitted assets. It has been observed that several companies have recorded in their books unutilized or excess CWT that have been considered as non-admitted assets. Under Statutory Issue Paper  83 of the US National Association of Insurance Commissioners (NAIC), current income tax recoverables (i.e., CWTs) are considered as admitted assets if they are reasonably expected to be recovered. For insurance companies, this circular finds relevance with collected direct premiums, subject to CWT of 2 percent; collected reinsurance commission income from ceded premiums, subject to CWT of 2 percent; and collected rental income from properties or equipment of insurance companies, subject to CWT of 5 percent.

Brokers are indispensable partners of insurance companies. They bring business in a very competitive market. Brokers do not work for insurance companies (referred to as providers), they represent the insured’s interests. So an insurance broker knocking at an insurer’s door is always heaven sent. The business they bring to an insurance company can be significant. Most particularly for non-life insurers. The rewards of a repeat business can never be underappreciated. In addition to related services such as handling claims for the insured, several brokers also provide other added services such as advisory or consultancy services for its corporate clients.

Irish-domiciled insurance broker Aon Plc will be acquiring an also Irish-domiciled insurance broker Willis Towers Watson Plc. (Willis) in what has been set to become as the world’s biggest insurance merger ever. The merger talks started around January of 2019 and proceeded in an on-and-off tempo. Exploratory talks first started on January 30, 2019. The merger is set to be completed and closed by mid-2021. Aon will be the surviving entity. The $30 billion, all-stock acquisition merges two of the world’s leading brokers. Aon and Willis are the second and third largest insurance brokers in the world. The largest is Marsh and McLennan. This is until the Aon-Willis merger is completed. The merger, creating an $80 billion (equity value) company, will create the largest insurance broker in the world, surpassing Marsh & McLennan. Marsh, in April of 2019, acquired British rival Jardine Lloyd Thompson for $5.7 billion to create what was then the world’s largest insurance broker.

Variable or unit-linked life insurance is subject to risks which the policyholder alone must bear. The performance of the investment funds is not guaranteed. It fluctuates. It may go up or down. It is subject to the volatility of the market. While the policyholder receives all the investment benefits there may be, he also must accept losses from the performance of his investment fund. The value of his insurance policy will fluctuate with the value of his underlying investment funds.

AXA Insurance’s Global Health Access (GHA) is a yearly renewable health product with HMO-like features. It was launched in 2016. Certain features would qualify it as a non-insurance product. It lies in the gray area, where the regulator continues to grapple, between HMO products and health insurance. In any case, it does not directly compete with any HMO product in the market because of its high benefit payout.

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.

GeoRisk Philippines is a government-led multi-agency initiative to serve as the central resource of information on natural hazards and risk assessment. The project is formally known as the “Geospatial Information Management & Analysis Project for Hazards & Risk Assessment in the Philippines.”

When a consumer buys a product, it usually comes with a manufacturer’s or retailer’s warranty which is a written guarantee, issued to the purchaser of an article by its manufacturer, promising to repair or replace it if necessary due to defects in materials or workmanship within a specified period of time. In other words, it is a guarantee that a product will be repaired or replaced if it breaks down. This is mandated by law, specifically by Article 1562 of the New Civil Code and Articles 66 to 73 of the Consumer Act of the Philippines (Republic Act 7394). Warranties are timebound, usually one or two years. Warranties are usual for electronic or mechanical goods such as household appliances (washing machines, dishwashers, microwaves, televisions) and automobiles. The usual indemnity is to cover the cost of repair or replacement if the repair is deemed uneconomical.

Directors and Officers Liability Insurance (D&O) is a liability insurance that covers “individual directors and officers (D&Os), for loss arising from claims against them for which they are not indemnified by the corporate entity” and covers, as well, “the corporate entity, for the amount it pays on behalf of the D&Os to indemnify them for loss they sustain.” The latter is known as the “company reimbursement clause.” It can also cover the company itself in what is known as the “corporate entity clause.” The necessity of a D&O insurance lies in the fact that directors and officers can be held personally liable for corporate acts. Being a liability insurance, it does not cover suits filed by the directors or officers.

IT was not a long time ago when the term “life insurance” would be associated with death. The negative connotation made sales of insurance a difficult proposition, and insurance agents were met with hesitancy. Today, life insurance is more strongly associated with wellness. Rightly so, the common objective of the insured and the insurer should be the prolonged life of the insured. Insurance companies selling health and life insurance have integrated wellness programs in their insurance products. This is a bid at product repositioning, that insurance companies would want you to have a long and healthy life. It is a good selling point for an increasingly health conscious population.

A study was published by the University of Cambridge—Institute for Sustainability Leadership (CISL) in June 2019 on the impact of mutual microinsurance on Sustainable Development Goals (SDG) in the backdrop of Super Typhoon Haiyan (Yolanda) which occurred in November 2013. CARD MBA, as the mutual microinsurer, was the central subject of the study by Dr. Ana Gonzales-Pelaez.

IN Circular Letter 2020-70, the Insurance Commission encouraged the use of digital payments in insurance transactions. But how do we distinguish digital currencies, which is legal tender, from virtual currencies which is not endorsed by the Bangko Sentral ng Pilipinas?

The Philippines has undertaken the 2nd National Risk Assessment on Money Laundering and Terrorist Financing (TF) for the period 2015-2016, which it concluded in 2017. In 2016, the country concluded its 1st NRA for the period 2011-2014. In that NRA, ML threats were identified as emanating from predicate offenses such as drug trafficking, investment scam, corruption, among others. It also identified the instrumental sectors such as banks, securities, remittance agencies and foreign exchange dealers. Insurance companies, among others, are considered as “covered persons” for money laundering supervision. The 1st NRA also led to the creation of the Anti-Money Laundering Division in the Insurance Commission in 2015.

The Insurance Commission conducted a survey on health insurers to determine their overall response to the Covid-19 pandemic. The survey was conducted from April 16 to May 8, 2020. Surveyed were life and non-life insurance companies, Mutual Benefits Associations (MBAs) and Health Maintenance Organizations. Owing to the sudden emergence of the pandemic, which was declared by the World Health Organization (WHO) on March 11, 2020, the Commission was blind to the real situation on the ground. Moreover, it was unprecedented in contemporary history. There was a real need to find out what was happening, and a survey was the only way to find out. The life and MBA sectors had 100 percent respondents, the non-life had 96 percent and the HMO sector had 89 percent respondents. Out of those surveyed, 58 percent issued health insurance products, of which 61 percent covered pandemic cases.

The Insurance Commission will soon be issuing a framework for the adoption of regulatory sandbox in the Philippines. A regulatory sandbox is a framework set up by a regulator that allows FinTech start-ups and other innovators, such as insurance companies, to conduct live experiments in a controlled environment under a regulator’s supervision. It is a novel regulatory innovation. It is “designed to incubate innovation in the financial sector in a relaxed, but safeguarded regulatory environment.” The Asian Development Bank also defines regulatory sandbox as “a framework set up by a finance sector regulator to allow small-scale live testing of innovations by private firms in a controlled environment [operating under a special exemption, allowance, or other limited, time-bound exception] under the regulator’s supervision.”

The insurance industry is one of the leading investors in green bonds in the country.

The Bangko Sentral ng Pilipinas (BSP) has recognized digital payments as a policy priority. It has advocated the migration from a cash-based to a digital or a cash-lite economy. It seems though that we have a long way to go because 85 percent of all retail sales in the country are still conducted in cash. Perhaps a culprit is the low-awareness about the different e-payment platforms. With the advent of fintech, our march toward a digital economy could be accelerated.

(Speech delivered by Insurance Commissioner Dennis B. Funa at the Insurance Commission’s 71st anniversary celebrations on January 28, 2020, at the Philippine International Convention Center)

Insurtech (insurance technology) innovation is happening almost imperceptibly in the Philippines, and in numerous steps by different companies. Here below are some of these insurtech innovations.

Variable contracts or investment-linked insurance products is regulated by Sections 238 to 246 of the Amended Insurance Code. Investment-linked insurance have varying labels in different jurisdictions. In the US, it is known as variable life or variable universal life. In the UK, it is known as unit-linked, owing to its roots in unit trusts. In Asia, it is known as investment-linked, or insurance that is “linked” to investments. Others call it equity-linked insurance.

Every year, around the world, including the Philippines, billions of dollars in life insurance benefits are left unclaimed by beneficiaries. There is no escheatment legislation for unclaimed life insurance benefits in the Philippines. In Singapore, proceeds of over 8,000 policies were left unclaimed as of September 2015. In the US, it is estimated that every year over $1 billion in insurance benefits are unclaimed. It was estimated that the average unclaimed life insurance benefit is $2,000, although it could be as high as $300,000.

FICCO Mutual Benefit Association (MBA) was based in Cagayan de Oro City. It was organized by members of the First Community Cooperative (Ficco) to extend financial assistance to its members, their spouse, children and parents in the form of death benefits, provident savings and loan redemption assistance. The MBA was incorporated on August 23, 2007, and obtained its IC Certificate of Authority on November 8, 2007.

While life insurance usually looks forward to giving insurance benefits to beneficiaries upon the death of the insured, life insurance can also carry certain benefits for the insured to be enjoyed by him while he is still alive. These are called living benefits, as distinguished from death benefits. These living benefits are available only where equity or “cash value” accumulates. This cash value increases as the policy matures. These can be found in whole life insurance, variable unit-linked insurance, and endowments but not in term life insurance.

The salvage business in non-life insurance is what we might call the tail-end of the insurance cycle. Salvage refers to the damaged property an insurer takes over to reduce its loss after paying a claim. Insurers receive salvage right over property on which they have paid claims, such as badly damaged cars. If the insured retains the damaged property, the salvage value or scrap value will be subtracted from any loss settlement. It is the insured’s decision whether or not to surrender the damaged property to the insurance company. The insured may decide to retain the property for sentimental reasons. The insurance company will only take damaged goods for salvage if it will reduce their total loss payout.

There are two types of life insurance in the Philippines: Term life insurance and permanent life insurance. Permanent life insurance may either be whole life or endowment life insurance. A third type may, perhaps, be added in the form of variable unit-linked life insurance (VUL), which some quarters classify as a form of whole life insurance.

Sections 181 and 182 of the Amended Insurance Code provide that contracts of annuities shall be considered a life insurance contract. Articles 2021 to 2027 of the New Civil Code govern life annuities in general. The provisions on life annuities were included in the Spanish Civil Code of 1889 (Chapters II and IV of Title XII of Book IV). Article 2021 gives us a definition of annuity, to wit: “The aleatory contract of life annuity binds the debtor to pay an annual pension or income during the life of one or more determinate persons in consideration of a capital consisting of money or other property, whose ownership is transferred to him at once with the burden of the income.”

A nonlife insurer may either retain the risks that it takes on or cede a portion of such risks by way of reinsurance. The more risks the insurer retains, the riskier it becomes for the insurer. Section 221 of the Insurance Code imposes a limit on the maximum amount of risk (or business) the insurer may retain in its books. Beyond which it must reinsure. This is called the “retention limit.”

According to the Philippine Cancer Society, in 2012, at least 13 out of 100 males and 14 out of 100 females in the Philippines would have some form of cancer if they lived up to age 75. Eleven out of 100 males and seven out of 100 females would die from cancer before the age of 75. One out of two Filipino cancer patients die within a year after diagnosis. According to the Cancer Coalition Philippines (CCP), seven Filipino adults are dying of cancer every hour. According to the World Health Organization, the number of cancer cases in the Philippines for 2018 was 141,021, with 86,337 deaths. Cancer is now the third-leading cause of morbidity and mortality in the Philippines, after communicable diseases and cardiovascular diseases.

Both life and nonlife insurers can issue health insurance policies. Together with the Health Maintenance Organization (HMO) industry, they comprise the providers of private health insurance in the Philippines.

Health expenses continue to grow every year. It is estimated that this expense will grow at an average of 8 percent year-on-year. As of 2017, total health expenditure in the Philippines was estimated at P684 billion with P373 billion of it covered through out-of-pocket, meaning uninsured. It is projected that by 2020, the Philippines will be Southeast Asia’s second-largest pharmaceutical market with revenues estimated at $10.8 billion. In terms of specific illnesses, the treatment costs continue to grow. As of 2018, the cost for cancer treatment could total P5.66 million; for stroke, the cost could be P2.93 million; and for myocardial infarction, it could be P1.92 million.

There are now two landmark legislations providing for parameters on insurance for persons living with human immunodeficiency virus (PLHIV) and acquired immune deficiency syndrome. These are Republic Act 8504 (Philippine AIDS Prevention and Control Act of 1998) and RA 11166 (Philippine HIV and AIDS Policy Act), which was approved on December 20, 2018.

A sovereign credit rating is defined as “an independent assessment of the creditworthiness of a country or sovereign entity. Sovereign credit ratings can give investors insight into the level of risk associated with investing in the debt of a particular country, including any political risk.” These sovereign credit ratings are usually essential for countries that want to access funding in international bond markets or want to attract foreign direct investment. Sovereign credit risk looks into the likelihood that a government will be unable or unwilling to meet its debt obligations in the future by examining its debt service ratio, growth in domestic money supply, import ratio, among others.

Every nonlife insurance company and reinsurance company supervised by the Insurance Commission is required to maintain reserves for its written policies, which shall be charged as a liability in any determination of its financial condition, in accordance to Sections 219 and 220 of the Amended Insurance Code, as well as the Valuation Standards for Non-Life Insurance Policy Reserves.

In an Advisory dated May 3, 2013, and Circular Letter (CL) 14-2013 dated July 1, 2013, Insurance Commissioner Emmanuel F. Dooc prescribed the adoption of the Asean Corporate Governance Scorecard by insurance companies and mutual benefit associations (MBAs). The ACGS replaced the Corporate Governance Scorecard (CGS) required under Circular Letter 21-2009, dated August 12, 2009. However, it would be two years later under Circular Letter 2015-23, dated May 8, 2015, when the Guidelines on Compliance with the ACGS would be provided.  The Institute of Corporate Directors (ICD) was accredited to be the assessor.

The International Finance Corp. of the World Bank Group has launched an advocacy program to promote insurance among women. In pursuing this program in the Philippines, the IFC has partnered with Insular Life Assurance Co. (InLife) in 2018 under a program called “Sheroes”. This program was triggered by a 2015 report of the IFC—“She for Shield: Insure Women to Better Protect All”—where it was concluded that the women segment represents an untapped $1.7-trillion market, mostly in the emerging markets.

Asean insurers offering cross-border Marine, Aviation and Goods in Transit (MAT) insurance have been identified as servicing one of the three lines of insurance important to the development of Asean economies under the Asean Insurance Integration Framework (AIIF).

The Office of Technical Assistance (OTA) of the US Department of Treasury, in a project that started in 2017, has granted the Insurance Commission technical assistance for the possible adoption of risk-based supervision in the Philippines. The US resident insurance advisor in the Philippines is Russell Lamb.

One of the leading mutual benefit associations (MBAs) in the country is the Knights of Columbus Fraternal Association of the Philippines Inc. (KCFAPI). As of end 2017, it has total assets of P5.5 billion. It has a number of majority-owned and wholly owned companies that supplement its advocacies for its members. Among these are the Keys Realty and Development Corp., the Kompass Credit and Financing Corp., Holy Trinity Memorial Chapels, and the Mace Insurance Agency Inc. At one point, in 1983, it acquired an insurance company, the Philippine Asia Life Assurance Corp., which it sold in 1998. The total insurance contribution as of end of 2017 was P719.2 million.

According to the American Institute of Certified Public Accountants, “accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events, which are, in part at least, of a financial character and interpreting the result thereof.” Internationally, accounting standards are set by the International Accounting Standards Board. Domestically, accounting standards are set by the Philippine Financial Reporting Standards (PFRS) Council under the oversight of the Board of Accountancy.

A continuing bond, also called continuous bond, is a financial guarantee or a suretyship that renews automatically until it is canceled. Continuing bonds do not expire as long as the client makes the required payment for each renewal. In other words, it has an indefinite term.

The Philippine Financial Reporting Standard 9 (Financial Instruments) is the local adoption of International Financial Reporting Standard 9 issued by the International Accounting Standards Board on July 24, 2014. PFRS 9 replaces International Accounting Standards 39—Financial Instruments: Recognition and Measurement, in three phases. IFRS 9 is primarily concerned with the accounting of financial instruments (debt, derivatives and equity) and seeks to establish a new financial instruments standard. This change was triggered by the financial crisis of 2008 and seeks to address perceived deficiencies in IAS 39.

Section 216 of the Amended Insurance Code (Republic Act 10607) changed the methodology in the valuation of life- insurance reserves (liabilities), from Net Premium Valuation to Gross Premium Valuation. Section 216 now provides that valuation of reserves “shall be made, according to the standard adopted by the company, as prescribed by the Commissioner in accordance with internationally accepted actuarial standards.” Circular Letter 2016-66 was issued on December 28, 2016, to formalize the change from NPV to GPV, which is now the recognized global and international standard. It was implemented on January 1, 2017.

Under Republic Act 10591, otherwise known as the “Comprehensive Firearms and Ammunition Regulation Act”, there are generally two instances when a firearms-
related bond may be required by the Firearms and Explosives Office of the PNP.

Comparing the sales performance of insurers would have been simpler if there were only one premium payment method. Unfortunately, there are two payment methods which make comparison problematic. With these two payment methods, comparison of companies’ new sales is not determined accurately.

The Financial Sector Assessment Program (FSAP) is a joint initiative of the International Monetary Fund (IMF) and the World Bank (WB). This initiative was launched in 1999 on the heels of the 1997 Asian financial crisis. The program’s ultimate objective is to identify financial system vulnerabilities and to develop the appropriate responses. This is done by examining and assessing the countries’ financial sectors, which include the banking, securities and insurance sector.

Jumbo risk is an insurance policy with very high limits of insurance, either a large property line or a high limit of liability. For life insurance in the United States, for example, a jumbo insurance policy would typically have a face value of $1 million to $150 million, taken out by high net-worth individuals. These jumbo risks usually exceed the limits that insurers retain or have set for a life insurance risk.

There are three basic types of marine insurance: a) Hull and Machinery; b) Cargo; and c) Protection and Indemnity (P&I) Insurance. Hull and Machinery (H&M) insurance protects the shipowner’s investment in the ship. It is basically a property insurance which covers the ship itself, the machinery and equipment. The owner will be protected for losses caused by loss of or damage to the ship and its equipment. Cargo insurance covers loss or damage to the goods carried.

The Asean Insurance Council, through its Asean Natural Disaster Research Works and Sharing Committee, established the Catastrophe and Risk Management in Asean, a Web-based media portal for sharing awareness on catastrophe and disaster risk management in Asean. Carma is nonprofit and, therefore, a free web site where users can set up their own account to search for data, post papers and register projects related to catastrophe and disaster risk. It is owned by the AIC. Its main objective is information sharing for the benefit of Asean, especially during natural catastrophes. Andrews was formed in 2007 to have a gathering of academicians specializing in Asian natural disaster research, insurance practitioners and other relevant public and private sector organizations to facilitate dialogue, information exchange and initiate appropriate action.

On May 5, 2017, the Ministry of Economy and Finance of Cambodia, Ministry of Finance of Lao PDR, Ministry of Planning and Finance of Myanmar and Ministry of Finance of Japan signed a memorandum of understanding for the establishment of a country-led regional technical working group on disaster risk finance and insurance. This new working group will work toward developing the Southeast Asia Disaster Risk Insurance Facility, a regional catastrophe risk pool to provide rapid response financing in the immediate aftermath of a disaster. It will be the first of its kind in Asia. The RTWG is supported by the World Bank and the government of Singapore. The Seadrif Program Multi-Donor Trust Fund has been established with the support of the World Bank.

The first cross-country flight in the Philippines was made on February 27, 1911, when Captain Thomas Baldwin flew 10 miles out of Manila on board a “Red Devil” biplane powered by a 60-horsepower Hall-Scott engine. A few years later, the Philippines became the pioneer in commercial aviation in Asia.

Section 189 of the Amended Insurance Code defines Financial Reporting Framework as “a set of accounting and reporting principles, standards, interpretations and pronouncements that must be adopted in the preparation and submission of the statutory financial statements and reports required by the commission”. The framework gives the commissioner the authority to adopt internationally accepted accounting standards in the reporting of the financial condition of insurers. Financial reporting, on the other hand, is defined as the “recording and presentation of financial statements, such as the Annual Statement, by the insurance company. Financial reporting statements are use by the State Insurance Commissioner in regulating the adequacy of company reserves for benefit liabilities, assets availability and worth.”

The Own Risk and Solvency Assessment  is “an annual internal process undertaken by insurers to assess the adequacy of their enterprise risk management (ERM) and solvency positions under both normal and severe stress scenarios. An Orsa represents the insurer’s own assessment of their current and future risks.” Orsa is also defined “as a set of processes constituting a tool for decision-making and strategic analysis. It aims to assess, in a continuous and prospective way, the overall solvency needs related to the specific risk profile of the insurance company.” This risk assessment is then consolidated in an Orsa report using a prescribed format. It is somewhat akin to the Internal Capital Adequacy Assessment Process (ICAAP) in Basel II. Perhaps in its briefest form, it is a tool in decision-making to assess the risk appetite of the company. It is not a capital requirement regulation.

Insurance supervision is “the monitoring of insurance companies’ behavior, and intermediaries to a large extent, including their compliance with insurance rules and regulations, including taking enforcement actions.” Insurance regulation, on the other hand, is “the rule-making, which includes both legislation as well as non-legislative regulation to address the objectives of insurance policy and regulation, in consultation with the supervisor and other stakeholders. In addition, the act of regulation would usually include the process of developing the direction and priorities of the insurance market and developing policy and the blueprint of legislation for that.”

Data is vital for catastrophe modeling, as well as for determining industry exposure and industry loss estimates. The catastrophe insurance market relies on data collected for vital decision-making.

With two existing insurgencies, the Philippines is very much exposed to terrorism risks. Between 2007 and 2017, no less than 200 attacks every year from Sunni-Salafi Jihadis have occurred in the southern Philippines, according to data from Risk Management Solutions (RMS).

IN 1992 Hurricane Andrew struck the United States. AIR, the pioneer in catastrophe modeling, projected an estimate loss exceeding $13 billion. The announcement was met with skepticism. A few months later, the Property Claims Service (PCS) reported an industry loss of $15.5 billion. Eleven insurers became insolvent. Interest in catastrophe modeling grew “almost overnight”.

AN insurance company is classified as either a life insurance company or a nonlife insurance company. Some jurisdictions, including the Philippines, allow an insurance company to conduct both life and nonlife insurance businesses concurrently or one that is called a “composite” insurance company. Interestingly, the words “composite”, “composite insurers” or “composite insurance company” are not used at all in the Insurance Code. Nonetheless, Section 193 of the Amended Insurance Code speaks of insurance companies that may be authorized to transact the business of life and nonlife insurance concurrently.

While the Compulsory Third-Party Liability motor insurance is the basic and prerequisite insurance before a motor vehicle may be registered, the so-called comprehensive motor insurance is voluntary and optional on the part of the motor vehicle owner who seeks added protection from risks. It is sold separately. It covers risks that the CTPL does not.

Regulatory relief are measures effected by regulators to achieve administrative simplification or deregulation to reduce the burden of regulation due to some compelling reasons. Regulatory relief can take different forms for different regulatory activities, and for different objectives.

The 2017 global agricultural insurance premiums total about $30 billion to $35 billion. Around 45 percent of this or $15 billion is from North America; 38 percent or around $12 billion is from the Asia-Pacific region; 10 percent or $3 billion is from Europe; 7 percent or $2 billion from South America; and less than 1 percent or about $200 million from Africa. Roughly two-thirds of the global premium can be traced to only three countries: the United States with 35 percent or $11.7 billion; China with 20 percent or $6.7 billion; India with 12 percent or $3.8 billion.

The 2017 Financial Inclusion Survey is a national survey conducted by the Bangko Sentral ng Pilipinas (BSP) every two years to collect financial inclusion data. It is now on its second run with the baseline conducted in 2015. Its general objective is to measure financial inclusion in the Philippines.

Section 202 (j) of the Amended Insurance Code recognizes investments in salary loans as allowable and admitted assets for insurance companies and mutual benefit associations (MBAs). This is reflected in Circular Letter (CL) 2016-65 (Adoption of New Financial Reporting Framework), 2014-17 (List of Admitted Assets under the Amended Insurance Code) and 2015-42 (Salary Loans Extended to Department of Education Teachers). Four or five insurance companies have exposures in salary loans extended to public-school teachers.

Section 202 of the Amended Insurance Code enumerates the assets that may be allowed and admitted for insurance companies. The provision does not include Premiums Receivable as among those admitted assets. Nonetheless, Section 202 (k) recognizes that the insurance commissioner may classify “other assets” as admitted assets provided they are “readily realizable and available for the payment of losses and claims at values to be determined by him” and are “not inconsistent with the provisions of paragraph (a) to (j)” of Section 202.

Among the mutual benefit associations (MBAs) regulated by the Insurance Commission is the Bureau of Jail Management and Penology Mutual Benefit Association Inc. (BJMP MBAI), which was founded on September 28, 2001. It was first issued a license by the Insurance Commission on December 16, 2002. It is an MBA for BJMP personnel.

Derivatives are one of the three main classes of financial instruments or securities, together with stocks (or equities) and debt (bonds and mortgages). However, it was only in 2015, through Circular Letter 2015-56, when it was recognized as an investment product for insurers by the Insurance Commission.

In 2015 the Insurance Commission recognized derivatives as an investment vehicle to promote investment diversification. This recognition is consistent with Section 202 (k) of the Amended Insurance Code as “other assets” “deemed by the Commissioner to be readily realizable and available for the payment of losses and claims.” But under Circular Letter 2015-56, the derivatives were limited only to forwards and swaps. As a form of precaution, the aggregate placements in derivatives shall not exceed 10 percent of the total admitted assets of life companies or 20 percent of the net worth of a nonlife company. A derivative is a “financial instrument that derives its value from the movement in commodity price, foreign exchange rate and interest rate of an underlying asset or financial instrument.”

The National Strategy for Financial Inclusion (NSFI) was constituted on February 26, 2014, through a consultative process and serves as a guidepost for public and private-sector stakeholders to accelerate financial inclusion in the Philippines. It was launched in July 2015 during the visit of the United Nations Secretary-General’s Special Advocate for Inclusive Finance and Development, Queen Maxima of the Netherlands. It was also during this launch when 12 government agencies and the Bangko Sentral ng Pilipinas signed a memorandum of understanding to signify their commitment to the NSFI.

The Foreign Account Tax Compliance Act (Fatca) is a US legislation that is part of the 2010 Hiring Incentives to Restore Employment (HIRE) Act, and forming part of four new sections incorporated into the US Internal Revenue Code. It is a law designed to improve offshore US tax collection by eliminating tax avoidance and evasion.

Life insurance policy reserves are the money an insurance company must set aside today to pay expected future life insurance claims. This (statutory) reserve is not a separate fund that must be set up but rather a mere “recognition” in the books of the company.

One of the international participations of the Insurance Commission is the Global Forum on Transparency and Exchange of Information for Tax Purposes, under the auspices of the Department of Finance. The Global Forum is a multilateral framework and an initiative to address tax-related transparency and information exchange among the different tax jurisdictions.

The primary goal of any insurance solvency regime is “to secure the interests of policyholders. One of the key elements to this end is the requirement for insurers to hold capital in order to be able to honor all future payouts to policyholders.”

Premium rates for motor and fire insurance are regulated or tariffied in several countries. In a tariffied regime, premium rates are controlled, usually for reasons of public policy.

The possible breach of data privacy and cyber security poses real risks for insurers and their policyholders. Looking out for data-privacy infringement and cyber attacks should both be part of a company’s risk management. The threats of privacy breach and cyber attacks are all too real. While data-privacy breaches need not be done through the Internet or through information-technology infrastructures, more often, data breaches are done electronically or through cyber attacks.

Another technological development happening in the insurance industry is the manner by which insurance agents or financial advisors engage the client in the sales process. Pioneering in this innovation is Philam Life through the introduction of its Interactive Point of Sales (iPoS) system using a tablet, or in their case, the iPad. It is the first of its kind in the Philippines, though not in the world.

Corporate governance has been defined as “the system of rules, practices and processes by which a company is directed and controlled. Corporate governance essentially involves balancing the interests of a company’s many stakeholders, such as shareholders, management, customers, suppliers, financiers, government and the community. Since corporate governance also provides the framework for attaining a company’s objectives, it encompasses practically every sphere of management, from action plans and internal controls to performance measurement and corporate disclosure.”

The face of insurance marketing is being redrawn by digital technology. Mobile phone-based insurance, or simply mobile insurance, which is the sale of insurance products using mobile phones, is an emerging distribution channel for microinsurance.

IN the United States the Surety Association of America was formed on November 12, 1908, with the view that the absence of adequate rate-making for bonds could spell disaster for sureties across America. Previous to this, rate-making was a matter of guesswork. On October 1, 1909, the Towner Rating Bureau was organized and began to promulgate rates for all Surety Association companies based upon the aggregate experience and the composite underwriting judgment of such companies.

Under Section 169 of the Insurance Code, the term “fire insurance” shall include insurance against loss by fire, lightning, windstorm, tornado or earthquake and other allied risks, when such risks are covered by extension to fire insurance policies or under separate policies.

The Washington, D.C.-based World Bank (WB) has extended to the Philippines a $500-million Disaster Risk Management Development Policy Loan with a Catastrophe-Deferred Drawdown Option (CAT-DDO2) as part of a larger disaster risk financing and Insurance (DRFI) strategy for the Philippines. The CAT-DDO is a contingent credit line aimed at providing immediate liquidity in the aftermath of a natural

It is estimated that the country experiences a total of $3.5 billion in damages yearly due to typhoons and earthquakes. Around 20 typhoons make landfall in the Philippines every year. The financial cost of these natural disasters is simply astounding. In addressing the issue of disaster risk financing, insurance for government properties is recognized as one of the critical components.

“The investment of its funds is an integral part of the life insurance business and of equal importance with the issuance of life insurance policies,” thus held in Prudential v. Richman in 1937.

IN the United States insurance companies have become active lenders in the financing of commercial real estate. For example, MetLife and Pacific Life Insurance Co. provided a 12-year, $500-million mortgage to a joint venture of SL Green and the New York State Teachers Retirement System (NYSTRS) for the 1.4-million-square-foot, Class A office tower at 919 Third Avenue, New York City. MetLife also provided a 10-year, $372-million, fixed-rate loan for the 1.8-million-square-foot office building at 1285 Avenue of the Americas, also in New York City, commonly known as the UBS Building.

JLT Re is the fourth-largest reinsurance broker in the world. It provides consultancy services, as well. It is a wholly owned subsidiary of the JLT Group (Jardine Lloyd Thompson Group) with 30 locations worldwide. It was formally established in January 2006 in the UK. Its line of expertise includes a) property, energy and engineering; b) aviation; c) casualty; d) terrorism and political violence; e) general and products liability; f) environmental; g) marine; h) mortgagee’s interest facility; i) specie and fine art facilities; and j) life, accident and health.

The motor car insurance fraud to be tackled here refers to those committed against insurance companies. Although there are issues that have been raised alleging fraud on the part of insurers, such will be tackled separately.

Let us take a look at the life-insurance tax regime in all the 10 Association of Southeast Asian Nations members: Brunei Darussalam, Cambodia, Vietnam, Thailand, Indonesia, Malaysia, Myanmar, Lao PDR, Singapore and the Philippines.

The Microinsurance MBA Association of the Philippines Inc. (MiMAP), also known as Rimansi Organization for Asia and the Pacific, is a formal association of Mutual Benefit Associations (MBAs) engaged in microinsurance. Its underlying advocacy is financial inclusion. In this regard, the Insurance Commission has found a natural partner in its own advocacy of financial literacy, microinsurance and promotion of insurance in general.

The Philippine insurance regulator is the only regulator within the Association of Southeast Asian Nations that carries the official title of “insurance commissioner.”

American International Group Inc. (AIG) is a leading global insurance company with more than 88 million customers in over 100 countries around the globe. It is also a holding company with various subsidiaries engaged in insurance and insurance-related businesses. In terms of net worth, it ranked sixth out of 70 licensed nonlife insurance companies in the Philippines with P1.8 billion.

The International Cooperative and Mutual Insurance Federation (ICMIF) is the only international association dedicated to cooperative and mutual insurance. It is headquartered in Cheshire (near Manchester), United Kingdom. It has its regional offices in Washington, D.C., USA; Tokyo, Japan; and Brussels, Belgium.

A marine surveyor is “a person who conducts inspections, surveys or examinations of marine vessels to assess, monitor and report on their condition and the products on them, as well as inspects damage caused to both vessels and cargoes.”