BSP revises cross-selling rules

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) will allow banks to sell investment-linked or variable unit-linked (VUL) insurance products of its partner life insurance companies.

BSP will also allow the sale of insurance products, including VULs, through all commercial, thrift and rural banks, as long as the insurance products have passed close scrutiny by the Insurance Commission (IC).

A VUL is a life insurance that is laced with an investment product, usually through mutual funds. The insurance premium is invested in funds, which in turn, are invested in the equity or fixed income market.

The value of the premium is the basis of an insurance policy coverage, which is often the value of the premium, or up to 125 percent of premiums paid.

“That will come via a new circular which should be released before the end of the month,” said sources within the BSP involved in the formulation of the new ruling. The new circular, they said, is a product of the draft regulation that had been circulating among the affected financial institutions.

Monetary authorities relaxed the cross-selling (also known as bancassurance) for the sale or marketing of products by firms allied with the bank. In this case, a life insurance company can sell its products through the partner bank’s branch network and other bank clients.

It will likewise lift the ruling that the bank should have a five-percent equity control of the partner insurer prior to practicing cross-selling. Theoretically, that means any insurer can sell their products through any bank.

However, the same sources said the ruling stating that the insurer and the bank must be part of a financial conglomerate had not been settled as of presstime.

The Philippine Life Insurance Association (PLIA) had sought a clarification, among others, of the definition of a “financial conglomerate.” PLIA argued that if it means being part of a conglomerate,  then it still limits the prospects for independent insurers or those not allied to any conglomerate.

The same sources said that the request for a transitory ruling for a status quo environment prior to the release of the new cross-selling regulation was “unnecessary.”

The regulators said that all existing arrangements and products sold through banks were unaffected. “We likewise understand that new products are still in the IC for approval, and the new circular will be out anytime soon.”

The rule stating that a bank must reflect a CAMELS rating of three before practicing cross-selling may remain.

CAMELS stand for capital adequacy, asset quality, management, earnings and liquidity rating system.

It is a way of measuring the financial health of a bank following the issuance of Basel capital risk-weighting framework by the Bank of International Settlement (BIS), which is often referred to as the central bank of all central banks.

Insurers argued that the CAMELS ratings were acceptable for all banks, since it ensures financial viability and protection.

The healthiest banks generally get a CAMELS 4 rating although no local bank has received the highest CAMELS 5 rating.