MANILA, Philippines — The Department of Finance (DOF) has revived plans to convert state-run Philippine Crop Insurance Corp. (PCIC) into a reinsurer to improve its financial health and operations, providing more insurance for farmers and their crops.
Instead of just absorbing all the risks, Finance Secretary and PCIC board chairman Carlos Dominguez said PCIC could cover more people if they do reinsurance with an annual budget of P4.5 billion.
“The other thing is they are absorbing all the risks. In insurance, you never do that and you always share the risks. You know, it’s not good practice to totally insure,” Dominguez said.
Dominguez earlier asked the PCIC to identify where it uses the subsidies it gets from the state in order to make sure that the taxpayer is getting value for his money.
While Dominguez said the government would continue subsidizing the PCIC to help in its mandate to provide insurance to farmers and their crops against disaster losses, the agency needs to report its expenditures and compare it with firms engaged in similar trade.
Dominguez earlier said subsidies extended to the PCIC in the past two decades reached P28.8 billion, the bulk of which, at P23.3 billion, came from the national budget, while the other P5.3 billion originated from loan penalties collected from banks.
Further, Dominguez directed the PCIC to act on the proposal filed by the Insurance Commission (IC) to review its assumption on risk premium rate in pricing its products and services.
The IC reported that the bulk of the PCIC’s assets, at about 40 percent, revolve on cash in banks and time deposits, exposing the crop insurer to financial imbalance on lack of investment income to bankroll its operations.
As such, the IC warned that taxpayers would end up paying for additional costs the PCIC may incur in the event calamities strike its clients and claim their insurance.
“They were not doing the accounting correctly. Their contingent liabilities were understated and we really have to fix it,” Dominguez said.
Aside from enhancing accounting practices, Dominguez told the PCIC to find out whether its Southeast Asian counterparts cover damage from diseases and pests, or if they only insure losses to natural causes like typhoons.
Meanwhile, the Department of Agriculture was tasked to facilitate the nomination and selection of a farmer representative in the PCIC board. Agricultural groups may submit their nominees to a screening committee from which the PCIC board will draw four names to be submitted to President Duterte.
PCIC president Jovy Bernabe, for his part, committed to report the PCIC’s contracts in the latest Philippine Financial Reporting Standards moving forward. He said the agency would retrieve its financial reports for 2019 and 2020 and adopt these into the new format.