Provident Plans may be placed under conservatorship due to lack of funds
THE INSURANCE Commission (IC) is looking to place the capital-impaired pre-need insurance firm Provident Plans International Corp. under conservatorship to shield its plan-holders from uncertainties in its current financial condition.
Insurance Commissioner Dennis B. Funa said the industry regulator will put the firm under conservatorship if its fails to provide a letter of intent from an investor that it said will cover its capital and trust fund deficiencies.
Provident Plans submitted a manifesto submitted before the Insurance Commission in February and March this year claiming that it has an investor that will buoy its current financial condition.
“Thus, this Commission has ordered Provident Plans to submit a concrete plan and letter of intent from its proposed investor or to cover up its capital impairment and trust fund deficiencies within sixty (60) days from receipt of the directive (dated April 12, 2017) or until June 17, 2017. Otherwise, this Commission will issue a Cease and Desist Order and place the company under conservatorship,” Mr. Funa said in a report to Finance Secretary Carlos G. Dominguez III.
Mr. Funa said the IC has recommended the conservatorship of Provident Plans due to its deficiency’s unrecoverable investment with its previous trustee bank, the Export and Industry Bank (EIB), and the neglect of its new trustee bank, the United Coconut Planters Bank (UCPB), to protect the trust fund.
He added that Provident Plans’ financial woes were “already existing before the enactment of the Pre-Need Code and the transfer of supervision of pre-need companies to the IC”
The IC said it has already given sufficient time and opportunity for the company to infuse cash and/or additional assets to address its financial problems, but the firm has still failed to do.
“The IC needs to protect the interest of Provident Plans’ policyholders as it cannot
allow the company to continue to operate under its present condition,” the regulator said in the report.
Provident Plans was found to be capital impaired after the Insurance Commission examined its books in 2011, where it found a P316.33 million capital impairment, a liquidity reserve deficiency of P78.54 million and a trust fund deficiency of P263.46 million.
Provident Plans — which currently has 38,000 plan- holders — has three product lines focused on life or memorial plans, education plans and pension plans. About 70% of its clientele are life or memorial policyholders.
In 2008, Provident Plans’ Investment Group recommended the withdrawal of the seven-year trust fund deposits made by EIB last 2005 due to the resignation of key officers of EIB’s trust department, and after discovering that EIB incurred P2.7 billion in losses two years prior, which led to the suspension of EIB from stock trading.
The Bangko Sentral ng Pilipinas closed EIB in 2012 after the bank failed to fulfill maturing obligations and due to insufficient realizable assets and its inability to continue business without inflicting losses on its depositors and creditors, according to Mr. Funa.
According to the IC’s Web site, there are 44 insurance companies under conservatorship, receivership and liquidation as of Nov. 8, 2016.