GSIS reinsurance monopoly: World’s top brokers linked to overprice

Click here to read Part I

Click here to read Part II

Philippine Center for Investigative Journalism (Third of a series)

In a Jan. 19, 2000 letter, Government Service Insurance System (GSIS) senior vice president Julio Navarette informed Jardines president Gil Cortez that Jardines "shall continue to act as the appointed and sole broker with respect to the reinsurance requirements of GSIS" on the National Power Corp. (Napocor) reinsurance policy.

This was a violation of GSIS business policy and procedural guidelines, which call for an open invitation for brokers to submit their tenders. A technical committee headed by the managers of the Underwriting Department and the Reinsurance Division then evaluate the tenders and recommend the award to Navarette.

Instead, the tenders were all evaluated and the contract was awarded to Jardines by just one official — Navarette. This was corroborated by GSIS manager for underwriting Arnulfo Madriaga in a memorandum dated Jan. 12, 2001 to Navarette.

Madriaga wrote: "As you are aware, this department was not in any manner involved from the very beginning in the negotiation/promulgation of the terms and conditions stipulated on the renewal (of the) policy. We were not even informed of what actually transpired when the agreed terms and conditions were finalized in London by the insured (Napocor), GSIS and the reinsurers."

The memorandum also states that "the manner of conducting, soliciting quotes through the tender exercise" was "not undertaken in this renewal."

In his letter, Navarette justified his decision by passing the blame to Napocor. The company, he said, "had stressed their wish to maintain a more stable relationship with international insurers and reinsurers which is reflected in their decision to avoid the usual annual tender process which they would normally be obliged to undertake and their desire for the continued participation of existing reinsurers."

Navarette’s letter also belied Jardines’ claim that despite the policy renewal during the London negotiations, it still had to go through a tender exercise. The claim was contained in a Sept. 5 letter to Napocor president Jesus Alcordo, in which Jardines’ Cortez wrote: "The renewal terms secured through that negotiation with the London underwriters were subsequently endorsed to GSIS."

He claimed Federico Pascual, then GSIS president, "still required a tender of the renewal to ensure transparency." Cortez added: "As part of the process, we submitted the terms previously negotiated in London as our bid, which were later confirmed to be the best available in the market."

Sources privy to the negotiations said the reinsurance contract to Jardines and the renewal terms were already finalized in Manila by GSIS as early as January, 2000.

Yet the presidents of Napocor and GSIS still went to London in March 2000, one month before the power firm’s insurance was set to expire, to appease London reinsurers who belatedly discovered a substantial claim that had not been included by the GSIS and Napocor in computing the premiums.

(To be continued)