IC tightens rules on investments of pre-need firms

MANILA, Philippines — The Insurance Commission (IC) has tightened the rules on the investments of pre-need companies in savings or time deposits and unit investment trust funds (UITFs) to ensure that they are investing in well-managed funds.

Last June 21, Insurance Commissioner Dennis Funa issued IC Circular Letter 2019-29, which clarified the rules on the funds invested by pre-need firms in savings or time deposits and UITFs maintained with and managed by duly authorized banks.

The new guidelines require pre-need companies to secure approval from the Insurance Commission before they can infuse funds in such investment products.

“For this purpose, the pre-need company shall submit a letter request informing the commission of the names of the trustee company and the bank where the trust fund is to be invested and the amount to be deposited,” the circular read.

The IC said the savings or time deposit and UITF should be maintained with and managed by a duly authorized bank with satisfactory examination ratings from the Bangko Sentral ng Pilipinas (BSP), pursuant to Section 34 of Republic Act 9829 or the Pre-Need Code of the Philippines.

This refers to banks with a CAMELS rating of at least three as of the last assessment of the central bank.

CAMELS rating measures the soundness of a bank based on the adequacy and quality of a bank’s capital, assets, management, earnings, liquidity, and sensitivity.

The IC said it may verify the ratings of the bank upon the submission of the certification on their CAMELS rating, and an authorization letter allowing the IC to validate the said certification with the BSP.

Pre-need companies which already have existing investments in savings or time deposits and UITFs prior to the issuance of the circular are required to submit the names of the trustee company and the bank where the fund was invested and the amount involved within 15 days from the effectivity of the circular. 

“In case the CAMELS rating of the bank where the trust fund was invested is below 3, the Commission may require the pre-need company concerned to transfer such trust fund to other banks having a BSP satisfactory examination rating within 30 days from receipt of such notice,” the IC said.

“The pre-need company being directed to comply with the requirements of this section may request an additional period of 30 days with the Insurance Commission which may be granted based on meritorious grounds,” it said.

The IC’s investment division shall be in-charge of the approval of the trust fund, while the pre-need division shall continue to verify the trust fund of pre-need companies.

The supervision and regulation of pre-need companies was transferred to the Insurance Commission from the Securities and Exchange Commission in 2009 upon the enactment of the pre-need code of the Philippines.