BSP: Not all banks can issue microinsurance

Business
GMA News TV
Posted March 28, 2011

Not all banks can engage in the business of microinsurance, the Bangko Sentral ng Pilipinas (BSP) said Monday, noting that only "trained and documented" financial institutions should do it.

In a recent advisory to banks, BSP Deputy Gov. Nestor Espenilla Jr. said only authorized banks are allowed to engage in the "presentation, marketing, sale and servicing of microinsurance products."

He said banks can act as microinsurance agents only of insurers authorized by the Insurance Commission. Banks passing a qualifying exam and prescribed training course may act as microinsurance agents, and their articles of incorporation (AOI) should be amended to reflect this fact, Espenilla said.

"In view of the latter requirement, applicant banks shall amend their articles of incorporation by including a secondary purpose of acting as a microinsurance agent, and shall submit simultaneously the amended AOI to the BSP and Insurance Commission," he said.

The central bank will only issue a "No Objection" notice after banks have complied with the requirements, according to the BSP official.

The notice is a requirement by the Insurance Commission before issuing a license to engage in microinsurance, the official said.

The licensed bank shall submit the approved AOI on or before June 30, 2012, otherwise, the license shall no longer be renewed, according to Espenilla.

The "unauthorized conduct of microinsurance as well as other insurance-related activities shall subject a bank and/or the responsible directors and/or officers of the bank to the applicable sanctions and/or penalties under existing banking laws, rules, and regulations," according to the BSP.

Microinsurance is an important advocacy started by former BSP Gov. Rafael Buenaventura that BSP Gov. Amando Tetangco Jr. is now pursuing.

It is a highly regulated business as it impacts on the financial welfare of small borrowers whose trust and confidence in the system forms the bedrock of banking, especially in the countryside, the central bank said.