Pre-need trust funds now at P44-B

The Securities and Exchange Commission has placed the trust funds of the pre-need industry at P44 billion, up by P7 billion since six months ago, and declared all 46 pre-need companies solvent.

Citing its latest available data, the SEC said it looked at the 2001 financial statements of all pre-need companies and found each one to have more assets than liabilities, a measure of solvency.

The commission also released the latest trust fund balance of the industry after getting reports from trustee banks which invest the funds independently of the pre-need companies.

"We expect the industry to further strengthen as we further tighten our rules and especially once we get a pre-need law in place," said SEC chairman Lilia Bautista.

In the past two years-and-a-half, the SEC, following some legislated changes in its functions, imposed strict rules to force pre-need companies to shape up for the protection of planholders.

The sharp rise in trust funds in the past six months, for instance, was a result of tighter SEC rules requiring pre-need companies to fill their deficiencies within a shorter time frame. It also raised substantially the portion of collections that go into trust funds and set caps on how much a trustee bank can put in every pre-determined investment area.

It also scrapped a previous minimum capitalization of P50 million per company to be met by 2005 yet and required at least P100 million by April this year instead. Those that cannot meet this minimum are barred from selling one, two or all of their products to the public until they have complied.

"The bottom line is, to protect the public, the industry must be financially stronger and must have sufficient funds to meet its maturing plans at any given day in any given year," Bautista said.

To ensure this, she said the SEC will institute more reforms tighten further some rules, including screening the people in management to make sure only those who are fit, proper, and competent run the show, a rule that is applied on banks worldwide.

She said banks and pre-need companies are public-trust businesses. "Hard-earned money is being put in the hands of strangers and we, as regulators, must make sure they are the right people."