SEC freezes licenses of 2 pre-need firms

The Securities and Exchange Commission has suspended the licenses of Pension and Retirement Plans Corp. (PRPC) and Celestial Memorial Life Plan Inc. for failure to comply with the minimum paid-up capital requirement of P50 million for pre-need plan firms.

The SEC decided not to renew the dealer’s license of the two pre-need firms for this year to ensure the protection of the general public. This means that these companies can no longer sell new plans and will only be allowed to continue meeting obligations to existing planholders.

Out of the country’s close to 50 pre-need corporations, only PRPC and Celestial failed to put up the P50-million minimum paid-up capital requirement.

Under SEC rules, a pre-need plan firm must have a paid-up capital of at least P50 million to be able to sell at least one type of plan.

Pre-need firms are required to gradually build up their capital to P100 million. To be able to sell two plan types, pre-need firms must have a paid-up capital of P75 million and for three-plan types and those selling traditional education plans, a P100 million paid-up capital must be maintained.

New entrants, on the other hand, are required to have a paid-up capital of P100 million.

The minimum capital requirements are meant to ensure that the companies are able to meet their obligations to planholders.

Before the passage of the new rules on capitalization, only eight companies had met the minimum capital requirement.

To date, 12 pre-need companies have complied with the P100-million paid-up capital requirement, which make them eligible to sell three plan types. Ten firms, on the other hand, have met the P75 million levels and 24 other companies have met the P50 million requirement.

In light of the difficult business environment, pre-need plan firms experiencing tight liquidity problems are being urged to merge with bigger players to stay alive in the highly competitive business.

In addition to the minimum paid-up capital requirements, the new rules also require pre-need companies to deposit a minimum of 51 percent of their collection in a trust fund or such higher amount as may be determined by the actuary.

With the economic environment not expected to recover over the near term, the SEC is further tightening the monitoring of the financial and operational condition of pre-need companies.

The SEC intends to conduct thorough on-sight, unscheduled inspections of pre-need companies at least twice a year.