PCIC was requested to disclose its financial situation and potential liabilities
Finance Secretary Carlos Dominguez III has ordered the management of the Philippine Crop Insurance Corp. (PCIC) to submit the state firm’s financial condition and calculation of its contingent liabilities to its newly restructured board of directors last October 7.
According to a statement issued by Dominguez on Sunday, October 3, 2021, the presentation should include an outline of how the PCIC should be managed, as well as preliminary ideas about possible reinsurance coverage that PCIC could provide; the expansion of insurance coverage to include more crops; and how PCIC can provide parametric insurance in comparison to its current policies.
During the reconstituted PCIC board’s first meeting last month, Dominguez said that one of the board’s urgent responsibilities was to restructure the company, halt its financial bleeding, and figure out how to provide better insurance coverage to Filipino farmers.
For the last 20 years, the PCIC has been largely dependent on hefty subsidies from the national government, according to Dominguez, who currently heads the PCIC board.
Since 2015, the government has provided approximately PHP23.3 billion in subsidies via the national budget and an extra PHP5.3 billion through the Agri-Agra Fund to the PCIC, he said.
The PCIC is set to receive PHP4.5 billion in subsidies in 2022.
According to him, this “trend is not sustainable,” and the board should find methods to guarantee that the PCIC’s main stakeholders, Filipino farmers, get the greatest value for their money from the national government’s insurance premium subsidies.
As a result, Dominguez requested that PCIC management “provide us a presentation on what is really the financial condition of the Corporation” and its “computed contingent liabilities” at the next board meeting.
Rolando Macasaet, president-general manager of GSIS, recommended that the PCIC investigate the potential of adopting Philippine Financial Reporting Standards 4 for insurance contracts in order for the company to properly produce its financial statements.
Joyce Briones of the DOF Legal Affairs Office has been named the new PCIC Corporate Secretary by the Board.
Dominguez currently serves as chairman, with Agriculture Secretary William Dar serving as vice chairperson.
Members include PCIC president Jovy Bernabe, Land Bank of the Philippines president-CEO Cecilia Borromeo, and Macasaet.
To complete the makeup of the seven-person body, one representative from the private insurance business and one from the subsistence farmers’ sector, ideally representing agrarian reform beneficiaries/cooperatives/associations, have still to be chosen.
The PCIC Board of Directors reorganized its Governance and Audit and Risk Management Committees in light of the new board composition.
Dominguez is the chairman of the Committee on Governance, with Macasaet and Dar serving as vice chairperson and member, respectively.
This committee will be in charge of overseeing the board’s, committees’, and management’s periodic performance evaluations, as well as making recommendations to the board on topics such as continuing education for directors and board committee assignments.
Borromeo was chosen chairman of the Committee on Audit and Risk Management, with Dar as vice chairperson and Macasaet as a member.
In addition to developing a transparent financial management system for the PCIC and performing oversight risk management functions, this committee is also responsible for overseeing, monitoring, and evaluating the corporation’s internal control system and coordinating with the Commission on Audit (COA); reviewing and approving the audit scope and frequency, annual audit plan, financial statements, and auditor reports, and ensuring that management is taking appropriate corrective action.
Dominguez also stressed the need of the PCIC adopting a new business model and hiring “the most qualified management” in order for its operations to be viable, if not entirely subsidy-free.
“The PCIC must be managed by insurance industry experts and led by the finest actuarial advice,” Dominguez added, in order to solve the PCIC’s pressing concerns.
He recommended that the PCIC hire an IC-accredited actuary to undertake the appraisal of its actuarial reserve liabilities.
According to Dominguez, the PCIC should offer greater insurance coverage to farmers at reduced rates while also assessing how much money the government loses due to a lack of appropriate insurance coverage in the agricultural sector.
President Duterte’s Executive Order (EO) No. 148, signed on September 14, reorganized the PCIC’s Board of Directors and transferred its attachment from the Department of Agriculture (DA) to the Department of Finance (DOF) “to ensure that its operations are rationalized and monitored centrally in order that government assets and resources are used effectively, and the government’s exposure to all forms of liabilities, including subsidies, is warranted and incurred through the PCIC.”