SC, IC join forces vs delinquent insurers

The Supreme Court and the Insurance Commission (IC) has joined forces in clamping down on delinquent non-life insurance companies issuing judicial bonds.

Judicial bonds are basically bail bonds issued for the temporary release of an accused. An insurance company will issue the bail bonds and thus guarantees that the accused would appear when summoned by the court.

The insurer, otherwise known in this case as the surety firm, assumes the risk of underwriting bonds for a premium. In the event that the accused fails to appear, the courts confiscate the bonds.

However, there are insurers who fail to post the correct bond or insist on paying only partial bonds resulting in huge claims or unpaid bonds with the courts.

In 2000 alone, 25 non-life insurance or surety companies have a backlog of at least P28.241 million due on various courts. This has caused the Supreme Court to issue a warning to the firms that they would not be recognized until they pay their arrears.

The high tribunal likewise forwarded the list to the IC suggesting that disciplinary action be taken against the erring firms.

IC Commissioner Eduardo T. Malinis said that they have sent the SC notice that the courts should not recognize or do business with insurance companies that do not have a certificate of authority (CA) to operate covering the period of July 2002 to June 2003.

Malinis added that they are now reviewing all the complaints forwarded by the high tribunal, and that "appropriate action" will be taken. That means either recalling the CA already issued, or withholding the same.

The firm with the biggest arrears with the courts is by Wellington Insurance Co. with P8.23 million. These was followed by Development Insurance and Surety Corp. with debts reaching P4.824 million and Mega Pacific Insurance Corp. with back payments totaling P1.344 million.

It turns out that Mega Pacific Insurance and the Development Insurance and Surety Corp. are two of 16 non-life insurance companies that have failed so far to reach the P50 million minimum capitalization requirement by the Department of Finance (DOF).

The deadline was set on July 1 although it was extended by to the end of the month.

Also in the list of delinquent insurers are the First Quezon City Insurance Co. Inc. and the Pacific Union Insurance Co. Both have also fallen short of the P50 million minimum capital requirement.

Other surety firms with more than a million pesos in delinquencies with the courts are the Manila Insurance Co., and Zenith Insurance Corp.– TPT