Philippine Federation of Pre-need Companies president Juan Miguel Madrigal Vazquez admitted this at a hearing of the House subcommittee on securities and capital markets last week.
He said because of the passage of the Securities Regulation Code, the SEC obtained more funding and resources and consequently was able to create the non-traditional instruments and securities department to monitor and regulate pre-need companies full-time.
It increased the paid-up capital of pre-need companies to P100 million as of April this year, double the amount set by the Insurance Commission, and discarding an earlier requirement of only P50 million by year 2004.
The commission also raised the minimum contribution from premium collections to the trust fund from 40 percent to at least 51 percent and required that the trust fund is independent of the pre-need company, is invested properly, and is used only to pay subscriber benefits.
The SEC also required each pre-need company to appoint compliance officers. It also came up with a uniform chart of accounts that conform with international standards and implemented a Code of Corporate Governance.
"These regulations, all in a span of two years, were fiercely and unforgivingly implemented by the SEC to the pain of our member companies," Vasquez said.
The result, however, has been an industry that is financially healthy.
Vazquez reported that out of 45 pre-need companies, 23 now have a capitalization of at least P100 million. The rest either have P75 million or P50 million.
He added that the industry has trust funds of almost P37 billion, with a liquid portion of at least P4 billion which in itself is sufficient to cover maturing plans for the next three years without having to convert the other assets of the industry.
Only two of the 45 companies have yet to wipe out their trust fund deficiencies, but this problem will be solved shortly again with SEC strictly enforcing the rules, Vasquez said.
He disclosed that an American-Singaporean company will soon invest in Asian Diamond Plans and fill its deficiency. The foreign firm–the sixth multinational company to be involved in the local pre-need industry–will also raise Asian Diamond’s capital to P100 million, making it the 24th with such funding.
In the case of College Assurance Plan, Vazquez said the company has committed to deal with its trust fund deficiency in the next 60 days.
The federation has also asked Congress to further trim a proposed pre-need bill now pending in Congress of details, and instead focus the bill to strengthening the regulator. The current version, he said, is detailed and rigid and would unduly hamper the regulator.
Vazquez said: "A law creates the contextual framework that guides an industry. It stands the test of time. A law is forever relevant to a nation and its people."
He said it would be more ideal for them to leave the details to the regulating agency that would draft the law’s implementing rules and regulations.