Finance Undersecretary Antonio Bernardo said the insurance brokers were not able to meet the Terms of Reference (TOR) for the insurance auction.
"The brokers did not pass the 100-percent mandatory requirement," said Bernardo, who is the chairman of the joint bidding committee tasked to handle the auction of the $6.5-billion Industrial All Risk insurance policy.
Under the law, Bernardo said the government may opt to go for a negotiated sale after two failed biddings.
But he said they would also explore another option which is to set up a captive insurance company as proposed by Napocor. He, however, noted that such a proposal would take more time than a negotiated contract.
In case they go for a negotiated contract, Bernardo said they expect to finalize the insurance coverage before the end of the year. "If we will go for a negotiated contract this week, we can choose within two to three weeks time. Definitely, we will finalize a deal before the year ends," he said.
He said they would try to come up with a basic insurance coverage for Napocor if they go for negotiated contract. "Our main objective is to have adequate insurance coverage for Napocor. We will be choosing what areas to be covered by the basic insurance and the add-ons will be optional and could be done later," he said.
But he said they still have to seek the approval of the proper authorities to allow the current joint bidding committee to carry out the talks for a negotiated contract.
"I will write a memorandum to Finance Secretary Jose Isidro Camacho to seek his approval," he said, noting that the joint bidding committee will cease to function since there will be no bidding anymore.
He said the committee will be meeting within this week to thresh out the details. "We will have to know who will handle the negotiated contract," he added.
After the technical evaluation the whole morning yesterday, the committee decided to turn down all the offers made by the bidders.
Unlike the first bidding in which nobody submitted a tender, there were at least four out of six insurance firms shortlisted which joined in the bidding yesterday. These were: Marsh & McLennan, Aon Energy, Arthur Gallagher, and Heath Lambert. Only Alexander Forbes Insurance Brokerage Inc. and Agnew Higgins Pickering did not participate.
The committee relaxed most of the items in the TOR to encourage bidders to participate. However, the efforts of the committee failed to convince the insurance companies to submit tenders.
Under the plan, the reinsurers would be bidding for the 95-percent insurance cover of Napocor while the remaining 95 percent will be left for Government Service Insurance System (GSIS), the mandated insurer of all government assets and properties.
Based on the TOR, the winning bidder will have to submit premium quotations for an initial 30 percent of Napocor’s required cover instead of the original 60 percent.
The winning bidder will also be given ample time or about two weeks to secure insurance cover for the remaining 65 percent of Napocor’s insurable assets.