DOF holds pre-bid conference on $6.5-B Napocor insurance policy

The inter-agency committee led by the Department of Finance (DOF) conducted yesterday the pre-bid conference on the $6.5 billion industrial all-risks insurance policy of the state-owned National Power Corp. (Napocor).

As of press time, the results of the pre-bid conference still had to be disclosed by the committee.

The Government Service Insurance System (GSIS) had assumed 70 percent of the reinsurance contract in April 2003, following two failed bids to procure the services of a broker to reinsure Napocor’s assets.

Foreign insurers, as well as brokers with foreign lead reinsurers must have a credit rating of at least "A" from Standard & Poors to qualify for the bidding. These prospective bidders must also certify that they will provide a lead line of at least 20 percent of the reinsured risk.

Domestic lead reinsurers, on the other hand, must have a net worth of at least P2 billion as of December 2002 to be able to join the bidding.

The industrial all-risk insurance policy (IAR) will cover the reinsurance of Napocor assets for 2004 and 2005. Earlier, Napocor said there are about 14 reinsurers that had signified interest to join the bid but only three to four have been pre-qualified.

In 2002, the state-owned power firm was able to get an insurance premium of $14.4 million. "Napocor is exerting efforts to lower the insurance premium. It hopes to get a lower premium this year," sources said. Of this premium, about 70 percent was covered by GSIS, 25 percent by Malayan Reinsurance Corp. and five percent by National Reinsurance of the Philippines.

The sources said it was not certain if these reinsurance firms will still be joining the bidding or if the GSIS will still be able to get the same percentage of the reinsurance premium.

The IAR reinsurance of Napocor became controversial when the power firm questioned the authority of GSIS to insure the assets of the power firm.

Napocor had argued that it should be given a say in the bidding procedures. To settle the issue, Malacanang created a joint bidding committee.

After the September 11 terrorist attacks on the US, Napocor has not been able to get a long-term re-insurer thus it was left without cover for a few months.

Before 9/11, Napocor’s insurance policy cost about $18 million and the bidding and award of the contract were made solely by the Napocor’s primary insurer, GSIS.