Thursday, July 1, 2010

NEW INSURANCE RULES DRAFTED

Business World, Finance
Posted on 09:40 PM, June 28, 2010
BY LOUELLA D. DESIDERIO, Reporter


NONGOVERNMENT organizations (NGOs) and cooperatives running informal microin-surance schemes that have been ordered shut down by the government will have to use members’ contributions to pay for the premiums of new insurance plans.

Joint Memorandum Circular No. 2 of the Insurance Commission (IC), Cooperative Development Authority (CDA) and the Securities and Exchange Commission (SEC), which has yet to be released, provides the rules on how funds collected by NGOs and cooperatives must be used once their in-house microinsu-rance schemes are terminated.

Under the joint memorandum circular, funds collected by entities with informal micro-insurance schemes that will formalize their activities -- either by partnering with licensed insurance companies or setting up their own insurance companies -- shall be used to pay for the premiums or fees of insurance or “insurance-like” products.

The funds can also pay for the fees to mutual benefit associations (MBAs) -- set up especially by NGOs to provide microinsurance to members -- where the contributors become members.

For cooperatives, the funds will be used for members’ share capital contributions to a single-purpose or multi-purpose cooperative that would provide their insurance needs. Any excess funds shall be placed in members’ savings accounts in these cooperatives.

In a telephone interview at the weekend, Joselito S. Almario, deputy executive director of the National Credit Council, which implements the national strategy and regulatory framework for microinsurance, said the government came up with rules on the use of funds collected under informal microinsurance schemes in order to protect contributors.

“The circular defines what they (NGOs and cooperatives) will do with the funds collected. If they will formalize, it has to be used for the payment of premiums for the benefit of the people. It is protection for people who paid premiums before,” he explained.

He said that without the rules, some entities may use the funds for their lending operations and may find it difficult to collect the funds when the borrowers are unable to pay.

He said the circular being issued following Joint Memorandum Circular No.1 of the IC, CDA and SEC released earlier this year, which terminated infor-mal microinsurance or insurance-like schemes and ordered organizations that extended these to either partner with commercial insurers or incorporate themselves into an insurance firm, a coope-rative, or MBA.

“If you want to get into the insurance activity, you have to get authorization,” he said.

Failure of entities to formalize their activities will result in the revocation of primary franchise or the filing of criminal charges against concerned individuals.

He said the circular will be released this week after it has been signed by the the heads of the concerned agencies.

He said the joint memorandum circular has been signed by Insurance Commissioner Santiago Javier Ranada and SEC Chairman Fe B. Barin, but still needs to be signed by CDA Chairman Lecira V. Juarez and notated by Finance Secretary Margarito B. Teves.

Mr. Almario said many NGOs and cooperatives will be affected by the new joint order. But Microfinance Council of the Philippines Executive Director Lalaine M. Joyas said in a telephone interview on Sunday the council has yet to determine the number of NGOs that will be affected by the circular.

1 comment:

  1. This is well and good. But the change of administration might delay this new joint circular on microinsurance. From: cooperatives-society.blogspot.com Let's share info on microinsurance.

    ReplyDelete