A lawyer has asked the Insurance Commission to look into the allegedly illegal operations of Marsh UK in the Philippines.
Lawyer Jose Bernas, in a letter addressed to Commissioner Dennis Funa and Jose Marie Tolentino, cited the foreign company’s use of “fronting insurers” to bypass Philippine laws, and conduct business in the country without a license.
“While Marsh Philippines is a licensed insurance broker, Marsh UK is not. Marsh UK is a reinsurance broker that may only tender brokerage services to an insurer, and cannot tender insurance brokerage services nor insurance services to an insured or potential insured (client),” the letter stated.
Bernas referred to a particular case in which Marsh UK sent the head of its Singapore office, David Jacob, to meet with the top executives of Cebu Air Inc.
This was the same case where a complaint was filed against Marsh UK before the UK High Court for allegedly disclosing highly confidential and proprietary information. Before a final ruling could be reached, Marsh allegedly chose to settle the matter out of court.
Jacob during a meeting allegedly presented a predetermined reinsurance package to the aviation company, in which Marsh would assume all the insurance risks under a special arrangement with a “fronting insurer.”
In an earlier letter sent to the IC, Marsh UK conceded its intention was to solicit the insurance business of Cebu Air, adding “Marsh was now able to compete” with other local insurance companies and that the purpose of the meeting was to “invite Cebu Air to consider giving Marsh Philippines and Marsh UK an opportunity to tender for the Cebu Air account.”
“I don’t think it gets any clearer than that,” said Bernas. “They practically admitted their violation to the IC, which is to solicit local clients and take full responsibility for their insurance needs. First of all, a reinsurer can’t do that, much less a foreign reinsurer with no license to operate in the country,” he said.
Based on the terms of Marsh UK’s deal with its “fronting insurer,” the latter would only be paid a nominal fee, while Marsh would be paid a fee amounting to five times or more that amount.
“Effectively, Marsh UK pays a local company to use their name, while they handle every aspect of the business—including the primary and legal risk of liability. Apart from being prohibited, that’s a very risky proposition for any local company,” Bernas said.