By David Cagahastian
The Insurance Commission (IC) has endorsed a proposal for a mandatory national catastrophe-insurance pool that will protect Filipinos against natural disasters and other causes of property losses, as part of the President’s “legacy” when he leaves office in 2016.
Insurance Commissioner Emmanuel F. Dooc said the draft executive order (EO) of the so-called cat-pool, or catastrophe pool, is already under consideration by Finance Secretary Cesar V. Purisima for his endorsement to President Aquino.
“We have reached that point when the issue is legacy matters. I think the cat-pool is a major achievement the President can bequeath to the Filipino people, because we really need one. I’m confident that the President will study it and push it the same way that he’s pushing for the BBL [Bangsamoro basic law],” Dooc said.
The cat-pool will make mandatory the insurance cover for private dwellings and of small- and medium-sized enterprises to protect against loss of property brought about by natural disasters and other catastrophic events.
Philippine Insurers and Reinsurers Association (Pira) Chairman Michael Rellosa said the cat-pool is required to be mandatory because of the big risks such an undertaking would bring upon those companies who will join as insurers.
“We need the bulk, because we need the amount to sustain it. We need the premiums to be able to pay the claims,” Rellosa said.
He explained that the risks would probably be spread among the various insurers who will join the cat-pool, depending on their capitalization and appetite for risk.
“Perhaps, the risks will be based on the amount of subscription that a particular insurer will have in the cat-pool. So the risks that they will take will depend on their capitalization and their appetite for risks. Then the rest will be undertaken by reinsurers abroad,” Rellosa said.
The proposed catastrophe pool has the support of the World Bank and its private-sector arm, the International Finance Corp.
Pira explained that making property insurance more accessible to everybody should be a key activity of the government in anticipation of a big earthquake seen happening along the Marikina Valley fault line, as warned by government scientists.
Pira noted that in the reconstruction efforts after Supertyphoon Yolanda (international code name Haiyan), which hit the Philippines in late 2013, the total estimated economic loss was at P571 billion, while insurance payouts were only at P66 billion because many of the victims did not have property insurance.
To make property insurance more accessible, Pira is also lobbying in Congress for the lowering of taxes imposed on the nonlife-insurance industry, which is taxed at 24.5 percent to 26.5 percent, currently the highest in the Association of Southeast Asian Nations (Asean).
Nonlife-insurance companies are slapped with a 12-percent value-added tax (VAT) on top of a 12.5-percent documentary stamp
tax (DST), while fire-insurance policies are levied an additional 2-percent fire service tax. On top of these, local governments also impose 0.15 percent to 0.17 percent in municipal tax for property insurance covers.
Singapore only imposes a tax of 7 percent on nonlife-insurance policies, while Thailand imposes only 11.3 percent.
Dooc also supported the call for lower taxes and has pushed for the passage of the bill in Congress to help prepare the nonlife-insurance industry for more stringent competition when the economic integration within the Asean starts in 2016.
“It is truly unfair and unjust for our nonlife-insurance industry to continuously shoulder these onerous taxes, the highest anywhere in the world, at 24.5 percent to 26.5 percent,” the IC chief said.