SEC to further tighten pre-need rules

The Securities and Exchange Commission is seeking stricter rules to ensure that actuaries provide the public accurate information about the financial health of their pre-need companies.

In her latest move to keep the pre-need industry in good financial shape, SEC Chairperson Lilia Bautista said the commission is closely supervising actuaries and their projections of actuarial reserve liabilities (ARL), a key guide in how much pre-need companies will pay planholders in the coming years.

"The ARL is at the heart of a pre-need’s financial health and we want to make sure the computations are correct because this in the end is the best protection for planholders," she said.

SEC, in the past two years and a half, has forced the industry to shape up and invest more capital. This year alone, by strictly enforcing its rules, the SEC made pre-need companies raise their trust funds by P7 billion to P44 billion.

Actuaries are professionals who calculate insurance risks and premiums, taking into account the probability of the occurrence of various contingencies of human life, such as birth, marriage, sickness, unemployment accidents, retirements and death.

They also evaluate the hazards of property damage or loss and the legal liability for the safety and well-being of others.

Bautista said her proposed rule would protect planholders since it would force actuaries to report exactly how much a pre-need company is supposed to pay planholders in the future.

This would then guide the SEC and the management to make sure its trust fund is enough to meet maturing plans. A trust fund is held by a trustee bank that can freely decide when and where to invest the money in bankable areas and within ceilings pre-determined by the SEC.

Actuarial projections also help determine the amount that pre-need companies need to deposit in a trust fund. In no case, however, must the amount be less than 45 percent of collections for life plans and 51 percent for education and pension plans.

"We are meticulously monitoring the compliance of pre-need companies to protect the public. This is a fast-growing and innovative industry imbue with public trust. We must make sure every company has sufficient funds to meet maturing plans at any given day in any given year," she said.