PCIC asked to present financial status, contingent liabilities

Finance Secretary Carlos Dominguez III has asked the management of the Philippine Crop Insurance Corp. (PCIC) to present before its newly reorganized board of directors this October 7 the state firm’s financial status and computation of its contingent liabilities.

Dominguez said the presentation should include an outline on how the PCIC should be managed and initial ideas about possible reinsurance coverage, which PCIC can provide; the expansion of the insurance coverage to include more crops; and how PCIC can provide parametric insurance compared to its current policies.

During the first meeting held on Sept. 24 by the reconstituted PCIC board, Dominguez said among the immediate tasks of the body was to reorganize the corporation, stop its financial bleeding and determine how it can deliver better insurance coverage to Filipino farmers.

Dominguez, who now chairs the PCIC board, pointed out that the PCIC has been heavily reliant on substantial subsidies from the national government for the past 20 years.

During this period, the government has 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, Dominguez noted.

For 2022, the proposed subsidy to the PCIC amounts to P4.5 billion.

He 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.

Thus, for the next board meeting, Dominguez asked the PCIC management “to 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 can properly prepare its financial statements.

During the Sept. 24 meeting, the Board appointed lawyer Joyce Briones of the DOF Legal Affairs Office as the new PCIC Corporate Secretary.

The new Board is now composed of Secretary Dominguez as chairperson, Agriculture Secretary William Dar as vice chairperson. PCIC president Jovy Bernabe, Land Bank of the Philippines (LandBank) president-CEO Cecilia Borromeo and Macasaet as members.

One representative each from the private insurance industry, and the subsistence farmers’ sector (preferably representing agrarian reform beneficiaries/cooperatives/associations) have yet 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 chairperson, while Macasaet and Dar are vice chairperson and member, respectively.

This committee will oversee the periodic performance evaluation of the board, its committees and management; and will recommend to the board, among others, the continuing education of directors, and assignments to board committees.

For the Committee on Audit and Risk Management, Borromeo was elected as chairperson, while Dar was named vice chairperson and Macasaet as member.

On top of developing a transparent financial management system for the PCIC and performing oversight risk management functions, this committee is also tasked to oversee, monitor and evaluate the internal control system of the corporation and coordinate with the Commission on Audit (COA); and review and approve the audit scope and frequency, the annual audit plan, financial statements and reports of auditors, and ensure that the management is taking appropriate corrective actions.

During the Sept. 24 meeting, 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,” Dominguez said.

The PCIC should engage the services of an Insurance Commission (IC)-accredited actuary in performing the valuation of its actuarial reserve liabilities, Dominguez said.

Dominguez pointed out that the 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 (EO) No. 148 issued by President Duterte on Sept. 14 reorganized the Board of Directors of the PCIC 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 prudent measures.”