Finance Secretary Carlos Dominguez III asked the newly-reorganized board of directors and management of Philippine Crop Insurance Corp. to stop the financial bleeding of the state-run agency which received more than P23 billion in subsidies from the national government over the past two decades.
This followed PCIC’s transfer from the Department of Agriculture to the Department of Finance, under Executive Order 148, “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 prudent measures.”
Dominguez, who now chairs the PCIC board, said the management should present by Oct. 7 the agency’s financial status and contingent liabilities. He said the presentation should include an outline on how the PCIC should be managed and initial ideas about possible reinsurance coverage which PCIC could provide, the expansion of the insurance coverage to include more crops and how PCIC could provide parametric insurance compared to its policies.
Dominguez said during the board’s first meeting held on Sept. 24 that among the immediate tasks of the body was to reorganize the corporation, stop its financial bleeding and determine how it could deliver better insurance coverage to Filipino farmers.
He said PCIC was heavily reliant on substantial subsidies from the national government for the past 20 years. The government extended over P23.3 billion in subsidies through the national budget and pumped in an additional P5.3 billion into the PCIC from the Agri-Agra Fund since 2015. For 2022, the proposed subsidy to the PCIC would reach P4.5 billion.
Dominguez said this “trend is not sustainable” and that the board should find ways to ensure that the PCIC’s primary stakeholders”•the Filipino farmers”•get the most value for their money from the insurance premium subsidy which the PCIC receives from the national government.
He said that for the next board meeting, the PCIC management should “give us a presentation on what is actually the financial status of the corporation” and its “computed contingent liabilities.”
GSIS president-general manager Rolando Macasaet suggested that the PCIC look into the possibility of adopting Philippine Financial Reporting Standards 4 covering insurance contracts so that the firm could properly prepare its financial statements.
The board, in the Sept. 24 meeting, appointed lawyer Joyce Briones of the DOF Legal Affairs Office as the new PCIC corporate secretary.
The new board is composed of Dominguez as chairman, Agriculture Secretary William Dar as vice chairman and PCIC president Jovy Bernabe, Land Bank of the Philippines president-chief executive Cecilia Borromeo and Macasaet as members.
Representatives from the private insurance industry and the subsistence farmers’ sector, preferably representing agrarian reform beneficiaries/cooperatives/associations, remain to be appointed to complete the composition of the seven-person body.
Given the new composition of the PCIC board of directors, the board also reconstituted its committees on governance and on audit and risk management.
For the committee on governance, Dominguez is the chairman, while Macasaet and Dar are vice chairman and member, respectively.
Dominguez underscored the need for the PCIC to adopt a new business model and come up with “the most competent management””•to ensure that its operations remain sustainable, if not totally subsidy-free.
To address the PCIC’s urgent concerns, “the PCIC must be run by insurance industry professionals and guided by the best actuarial advice,” he said.
The PCIC should engage the services of an Insurance Commission-accredited actuary in performing the valuation of its actuarial reserve liabilities, Dominguez said.
Dominguez said PCIC should provide increased insurance coverage to farmers with lower premiums, while determining how much the government is losing because of the lack of adequate insurance coverage in the agricultural sector.
Executive Order 148 issued by President Rodrigo Duterte on Sept. 14 reorganized the board of directors of the PCIC.