Francisco Colayco chairman of The Professional Group, said the Federation has agreed to shell out 10 percent of its total trust fund for its planholders’ protection fund. As of end-December last year, the industry had a total trust fund of P44 billion.
Colayco said only members of the Federation can tap money from the guaranty fund. The federation currently has 46 members.
The creation of the trust fund is seen to contribute a very positive image for the SEC and the Federation which have been working hard to professionalize the pre-need industry.
The planholders’ protection fund would function like the Philippine Deposit Insurance Corp. where bank depositors can go to when their banks run into trouble. At present, pre-need investors have no one to turn to when their pre-need firms collapse. However, they can file a complaint with the SEC.
Data from the SEC showed that a total of 92,000 planholders with pre-need plans worth P2.7 billion were left holding an empty bag with the closure of 13 pre-need companies either through voluntary dissolution or revocation of franchise.
To provide adequate protection to the public, the SEC said pre-need plan companies should maintain a margin of solvency which will be determined by the regulatory agency in consultation with the industry. The corporate regulator said there should be a minimum standard of valuation for all pre-need companies to determine the financial stability and solvency of each.
The valuation should be undertaken by an accredited actuary in accordance with actuarially sound and accepted principles, the SEC said.
The valuation reports can function as early warning devices to signal the possible failure of specific pre-need companies, allowing the SEC to take any action necessary to safeguard the interest of the firm’s planholders and the buying public.
The actuarial valuation report determines the sufficiency of the trust fund vis-a-vis the reserve requirement or the benefit obligation of the company to the planholder when the plan matures or at the time of need as provided under the plan.
In case of a trust fund deficiency, pre-need firms are required by the SEC to submit a trust fund enhancement program or a funding scheme to be studied and approved by the Commission.
Since it continues to supervise the pre-need industry, the SEC has urged pre-need plan firms to cooperate in order for the sector to succeed and build the confidence of the investing public.