PDIC-type agency for troubled pre-need companies opposed

The proposal to establish a line agency similar to the Philippine Deposit Insurance Corp. (PDIC) for the pre-need industry is not getting the support from the top industry players.

The PDIC is the government agency mandated to take over or act as receiver for closed banking institutions as well as issue deposit insurance up to a maximum P250,000.

But majority of the companies among the top 10 in the local pre-need industry are against the proposal. "Why should the healthy and efficient companies subsidize the failures of the poorly managed and inefficient companies," an industry source said.

Ironically, two troubled pre-need firms – College Assurance Plans (CAP) and Pacific Plans – were among those in the top 10 last year in terms of the number and value of plans sold.

However, the few players in favor of the proposal said that "it could give confidence in the market knowing that there is a PDIC-type government body that can cover their losses."

Major players against the proposed PDIC-type agency said it would be better for the industry to consolidate and allow the efficient players to service the investing public.

"It is better for the regulator to put troubled pre-need companies under receivership for rehabilitation or liquidation, rather than for government to spend money for the sins of others," they said.

As a more immediate solution, government is being urged to provide some liquidity to troubled companies.

"Maybe the government could order the Development Bank of the Philippines (DBP) or the Land Bank of the Philippines (LBP) to set up some kind of window or credit facility as a stop-gap measure," said Equity Managers Asia Inc. chairman Francis G. Estrada.

The proposed PDIC-type agency for the pre-needindustry is supposed to be a collaborative effort between the National Government and the private sector wherein each entity set aside a certain amount to be placed in a fund.

"It is intended to mimic the PDIC. However, it will have a capitalization of only P50 million and a borrowing capacity of P500 million," Estrada said.

There are also suggestions to tap multilateral agencies such as the Asian Development Bank as alternative sources of financing to beef up the proposed fund.