IC imposes 5-day ultimatum on NLIC

MANILA, Philippines - The National Life Insurance Co. (NLIC) has to comply with the Insurance Commission (IC) orders this week, or government will “proceed with the next appropriate step in accordance with the pertinent provisions of the Insurance Code.”

In an official letter dated Nov. 6, IC Commissioner Emmanuel F. Dooc also demanded that the NLIC board of directors, led by its president Benjamin L. de Leon, infuse P100 million “which you have committed under the original rehabilitation plan which was found inadequate in light of our subsequent findings of a much higher deficiency.”

The letter was reportedly received by the NLIC last Friday, Nov. 16, thus the life insurer has to comply by Nov. 23.

Following the provisions of the Insurance Code, the IC must place the beleaguered insurance company under a conservator if the insurer was found to have a margin of solvency deficiency.

It is then placed under rehabilitation if it fails to cover its deficiency.

Continued failure to rehabilitate or to find an appropriate investor or buyer, the insurer is then placed under receivership and after 30 days allowance for a final push to save the company, it is declared in a state of liquidation.

A similar process was applied to troubled pre-need Prudential Plans Inc. (PPI), which is now in the process of liquidation.

Dooc likewise said that the request of De Leon for another 90-day extension, to produce an investor or buyer, to make the second of a four stage capital infusion of P404 million, and to show proof of a workable rehabilitation plan, was dependent on the conditions outline in his Nov. 6 letter.

The IC Commissioner reasoned that the denial for an extension was to make sure that “there is a concrete negotiation with a prospective investor with strong financial resources who offers a viable rehabilitation plan.”

He added: “This is to avoid the same failures, lack of transparency and delays in the earlier proposals which attended the previous negotiation process in the past. Hence, please submit the details of the said ongoing talks and involve us already in the meetings and discussion with them.”

The IC also denied De Leon’s request to replace lawyer Senen Y. Glinoga, who is the conservator appointed by the IC and agreed upon by the NLIC board.

Glinoga is, in fact, the fourth government-appointed conservator.

The NLIC was supposed to infuse over P404 million over a four-year period. It was able to place P104 million last October 2011, and to be followed by another P100 million last October but failed to do so.

In the next two years, it was to infuse another P200 million to at least comply with minimum paid-up capital required by government from all insurers.

NLIC reflected deficiencies in its margin of solvency as early as 2002. It recovered until 2006 when the insurer incurred losses from huge withdrawals of its premium deposit funds (PDF), which forced the insurer to sell properties as well as secure huge bank loans.

It has a P2.1-billion deficiency in its margin of solvency.

Among the liabilities are debts amounting to P800-million to BDO Unibank Inc. (BDO), the Philippine Business Bank (PBB), and three non-bank business entities.

In an earlier interview, Dooc said that after several meetings with De Leon, it was agreed that they would infuse fresh capital to meet the deficiencies in its margin of solvency as well as bring in an investor or buyer.

“Now I want them to fulfill their promise. I want to see them infuse fresh capital, and I want them to give the Commission and the DOF specific information in writing on how they will rehabilitate the company and name the alleged new investor,” Dooc said.

If the NLIC is liquidated, it would be the first life insurer in recent memory to be shuttered.

Several non-life insurers have shut down while a few have started the process of consolidation in order to meet the capital requirements for the insurance industry.