CDO on insurer still valid

The Insurance Commission (IC) will not lift the cease and desist order (CDO) on Security Pacific Assurance Corp. (SPAC) until it settles all claims.

In an interview, IC officer-in-charge Eduardo T. Malinis said SPAC must settle its P20-million arrears coming from the issuance of several surety bonds to Rambi Development Corp., an oil company that imports finished oil products and sells this either wholesale or retail.

"The best thing for SPAC at this point is to work for a settlement with Rambi if they are unable to pay in full," Malinis said in reaction to a motion for reconsideration on the CDO filed by SPAC. Otherwise, Rambi may be forced to seek further legal action that could result in greater losses for the non-life insurance firm.

It was learned that SPAC earlier mentioned that it had P2 million in its possession, which it could negotiate with Rambi. "They could work out some kind of deal like partial payments. Parang hulugan (payments by installment)," commission officials suggested.

SPAC faces claims reaching P20 million from the issuance of surety bonds for two of its clients, namely, Mega Petroleum Philippines and Parthenon Pty. Development Inc. The two purchased oil products from Rambi but failed to pay the latter.

Since these were covered by the bond, Rambi naturally went after SPAC which normally results in the bond issuer to pay Rambi. In turn, SPAC should then turn around and claim against Mega Petroleum and Panthenon.

But SPAC refused to pay Rambi’s claims explaining a series of events and excuses tantamount to saying it was not legally liable citing several arguments and provisions of the Insurance Code.

But Malinis said that there was a serious flow in SPAC’s underwriting methods as well as internal problems within the insurer’s corporate structure. – TPT