Opinion, Business Mirror
05 Aug 2014
Written by Bernandino B. Camba
NOT too many people know that the mutual-benefit association (MBA) industry has always been under the regulatory supervision of the Insurance Commission (IC). What the savings-and-loans company is to the Bangko Sentral ng Pilipinas, the MBA is to the IC.
As a key stakeholder in the country’s national strategy for the development of microinsurance, MBAs are key in providing every Filipino with equal access to insurance. In contrast to regular insurance companies, MBAs are nonstock and nonprofit organizations that offer social, economic and/or educational programs for their members (and their families) to ensure the protection and development of the same. Accordingly, the IC recognizes the role that MBAs have in the government’s program for inclusive growth and development and, thus, provides the necessary regulation to help them grow and stay stable.
In 2006 the IC issued IC Circular Letter 33-2006, which revised the old Standard Chart of Accounts (SCA) for life-insurance companies, and introduced a Uniform Chart of Accounts for both life-insurance companies and MBAs. This circular lists the uniform account titles to be used by an MBA in recording similar transactions. Each account’s nature described adopted the latest International Financial Reporting Standards (IFRS)/Philippine Financial Reporting Standards (PFRS) rulings and issuances.
The issuance of the circular formalized the accounting review processes for MBAs. This reduced queries and complaints from MBAs during the audit period and standardized account-reporting.
However, with the updates and changes in the IFRS and PFRS in the last eight years, it is again necessary to review and revise the SCA, align it with the latest IFRS rules, and differentiate the account titles for for-profit and not-for-profit organizations. The proposed issuance of the IC circular for the new SCA is one way to ensure that the differences between regular insurance companies and nonprofit organizations are recognized.
There are three major changes:
1) Accounting for fund balances is now unique for an insurance company and an MBA. For example, before, “retained earnings” were used to describe accumulated earnings for MBAs. Now the term “fund balance” is used.
2) “Legal policy reserves” required for insurance companies are now classified into two accounts for MBAs: “Liability on individual equity value,” which represents the total amount of obligations set up by the MBA on membership certificates pertaining to the 50-percent equity value; and “Basic contingent benefit reserves,” which represents the total actuarial reserves set up by the MBA pertaining to the basic life benefit that is in force at the end of the accounting period.
3) In the Assets Section for MBAs, several accounts were also added. These include the Unremitted Member’s Contributions, Dues and Fees account for the unremitted collections on membership fees at the end of the period, and the Unremitted Premiums account for the unremitted collections on all optional policies at the end of the period.
The IC, with the help of the Department of Finance, the MBAs and funding from the Asian Development Bank, has already finished its consultations with various industry stakeholders and, as of last week, conducted its seminar for IC examiners and other employees. The next step is to organize seminars in Luzon, the Visayas and Mindanao for the MBAs to be familiar with the proposed new SCA for MBAs in time for the IC circular’s official publication.
With the completion of the nationwide seminars for MBAs, the IC expects that it will improve financial-data collection, reporting, accuracy and comparability across the industry, and will also provide full disclosure of its financial standing and position to its members and other regulators.
*****
Bernardino B. Camba is a member of the Financial Examination Group of the Insurance Commission.
05 Aug 2014
Written by Bernandino B. Camba
NOT too many people know that the mutual-benefit association (MBA) industry has always been under the regulatory supervision of the Insurance Commission (IC). What the savings-and-loans company is to the Bangko Sentral ng Pilipinas, the MBA is to the IC.
As a key stakeholder in the country’s national strategy for the development of microinsurance, MBAs are key in providing every Filipino with equal access to insurance. In contrast to regular insurance companies, MBAs are nonstock and nonprofit organizations that offer social, economic and/or educational programs for their members (and their families) to ensure the protection and development of the same. Accordingly, the IC recognizes the role that MBAs have in the government’s program for inclusive growth and development and, thus, provides the necessary regulation to help them grow and stay stable.
In 2006 the IC issued IC Circular Letter 33-2006, which revised the old Standard Chart of Accounts (SCA) for life-insurance companies, and introduced a Uniform Chart of Accounts for both life-insurance companies and MBAs. This circular lists the uniform account titles to be used by an MBA in recording similar transactions. Each account’s nature described adopted the latest International Financial Reporting Standards (IFRS)/Philippine Financial Reporting Standards (PFRS) rulings and issuances.
The issuance of the circular formalized the accounting review processes for MBAs. This reduced queries and complaints from MBAs during the audit period and standardized account-reporting.
However, with the updates and changes in the IFRS and PFRS in the last eight years, it is again necessary to review and revise the SCA, align it with the latest IFRS rules, and differentiate the account titles for for-profit and not-for-profit organizations. The proposed issuance of the IC circular for the new SCA is one way to ensure that the differences between regular insurance companies and nonprofit organizations are recognized.
There are three major changes:
1) Accounting for fund balances is now unique for an insurance company and an MBA. For example, before, “retained earnings” were used to describe accumulated earnings for MBAs. Now the term “fund balance” is used.
2) “Legal policy reserves” required for insurance companies are now classified into two accounts for MBAs: “Liability on individual equity value,” which represents the total amount of obligations set up by the MBA on membership certificates pertaining to the 50-percent equity value; and “Basic contingent benefit reserves,” which represents the total actuarial reserves set up by the MBA pertaining to the basic life benefit that is in force at the end of the accounting period.
3) In the Assets Section for MBAs, several accounts were also added. These include the Unremitted Member’s Contributions, Dues and Fees account for the unremitted collections on membership fees at the end of the period, and the Unremitted Premiums account for the unremitted collections on all optional policies at the end of the period.
The IC, with the help of the Department of Finance, the MBAs and funding from the Asian Development Bank, has already finished its consultations with various industry stakeholders and, as of last week, conducted its seminar for IC examiners and other employees. The next step is to organize seminars in Luzon, the Visayas and Mindanao for the MBAs to be familiar with the proposed new SCA for MBAs in time for the IC circular’s official publication.
With the completion of the nationwide seminars for MBAs, the IC expects that it will improve financial-data collection, reporting, accuracy and comparability across the industry, and will also provide full disclosure of its financial standing and position to its members and other regulators.
*****
Bernardino B. Camba is a member of the Financial Examination Group of the Insurance Commission.
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