IC slaps CDO on defiant Security Pacific Assurance

The Insurance Commission (IC) issued a cease-and-desist order (CDO) stopping Security Pacific Assurance Corp. (SPAC) from selling or transacting any other non-life insurance business.

In a resolution dated March 19 this year, the IC said that the SPAC failed to meet all its obligations to several oil companies thus becoming "hazardous" to the welfare of the insuring public.

Eduardo T. Malinis, IC officer-in-charge said in the order that the SPAC could not account for any collateral or explain its lack or absence of reinsurance for additional security, much less pay its obligations to new oil player Rambi Development Corp., the principal complainant.

"This being the case, the commission is given no choice but to consider and apply Section 247. . . the company’s manner of doing business being hazardous to the public. To continue doing business, there will be an erosion of public confidence on the insurance industry," Malinis outlined.

SPAC reportedly issued several surety bonds worth between P10 and P20 million representing purchases of petroleum products through its clients namely Mega Petroleum Philippines and Parthenon Pty Development Inc. These covered the period as far back as late 2001.

The non-life insurers clients (Mega Petroleum and Parthenon Pty) failed to pay their obligations to Rambi thus requiring that SPAC initially cover the financial obligations. In turn, SPAC would seek reimbursements from its clients.

In the earlier hearings at the IC, SPAC swore to pay the claims and initiate legal action versus its clients in the event that they fail to pay their obligations. However, they sought consideration and an extension to cover the surety bonds it issued to Rambi. – Ted Torres