IC to supervise PCIC

Published June 29, 2022, 3:13 PM

by Lee C. Chipongian

The Insurance Commission (IC) now has supervisory powers over the state-controlled Philippine Crop Insurance Corp. (PCIC), according to the Department of Finance (DOF) on Wednesday, June 29.

DOF Secretary Carlos Dominguez III signed Department Order No. 038.2022 on June 28, two days before he leaves DOF, thus placing PCIC under IC after the DOF concluded its examination.

PCIC Chairman Carlos Dominguez III

The IC, an attached agency of the DOF, is “empowered” to “regularly examine the financial affairs, condition, and method of business of the state-run agricultural insurance firm,” said the DOF.

In September 2021, President Duterte issued Executive Order (EO) No. 148 transferring the PCIC from the Department of Agriculture (DA) to the DOF “for policy and program coordination and general supervision.” The PCIC Board was also reorganized under EO 148 with the DOF Secretary as chairperson.

The DOF explained that with the presidential directive and under Section 253 of the Insurance Code, as amended, which mandates the IC to conduct an examination into the affairs, financial condition and method of business of government-owned and -controlled corporations (GOCCs) engaged in social or private insurance, Dominguez placed the PCIC under the regulatory oversight of the IC.

“In view of the foregoing, the PCIC is hereby placed under the supervision of the IC. The IC is hereby directed to conduct an examination into the affairs, financial condition, and method of business of the PCIC every three years, or as often as may be directed by the Insurance Commissioner or the Secretary of Finance. The results of such examination shall be submitted by the IC to the DOF,” Dominguez said in his order which takes affect immediately.

It was a World Bank study which recommended for the PCIC reforms since, according to the DOF, the “state-run firm’s current approach to agricultural insurance neither provides value for money to taxpayers nor adequate protection to farmers.”

The study, conducted by World Bank’s Disaster Risk Financing and Insurance Program (DRFIP), also noted that PCIC is “very exposed to catastrophe losses which are not reinsured.”

“This study, which was presented recently to the PCIC Board, revealed that while premium subsidies given by the government to the PCIC grew rapidly over the years, agricultural insurance has only reached one-third of the country’s farmers and is not well-targeted to ensure that taxpayers are getting value for their money,” said the DOF. It added that PCIC’s premium rating, capital management, financial reporting, and other aspects of its operations “are not in line with international best practices.”

“PCIC’s insurance products are also not suitable for majority of Filipino farmers, especially for small subsistence holders and growers,” said the DOF, citing the World Bank study.