IC REQUIREMENTS ON MBAS, MICROINSURANCE BY: ESTER P. ABRAZADO

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1 IC REQUIREMENTS ON MBAS, MICROINSURANCE BY: ESTER P. ABRAZADO

2 Legal Framework : Insurance Code Regulator Mandate : : Insurance Commission (IC) 1. To ensure the solvency of the insurance companies and MBAs so that all legitimate claims of the insuring public are met promptly and equitably. 2. To ensure that adequate insurance protection is available to the public at a fair and reasonable price.

Insurance Commission as the Regulator Provisions of the Amended Insurance Code Circulars issued Sections 187-188 microinsurance Sections 403-423 MBAs Circular Letter No.

3 Insurance Commission as the Regulator Provisions of the Amended Insurance Code Circulars issued Sections microinsurance Sections MBAs Circular Letter No A Circular Letter No Circular Letter Circular Letter Insurance Memorandum Circular Joint Memorandum Circular Joint Memorandum Circular

4 CIRCULAR LETTER NO A Dated March 19, 2015 TO : All Mutual Benefit Associations (MBAs) Authorized to Do Business in the Philippines SUBJECT : Filing of 2014 Annual Statements In connection with the filing of the 2014 Annual Statements, the following guidelines are hereby issued: 1. The yellow Annual Statement (3 sets) the financial condition of MBA as of December 31,2014 shall be signed and sworn to by the president, chief operating officer/general manager, secretary, treasurer, actuary and chief accountant and shall be on legal size bond paper (8112 x 14 inches), using either the Times New Roman font size #12 or Arial font size #10; 2. The Annual Statement should be "Soft Cover Binding", permanent adhesive; 3. Annex "A" is the updated list of the required documents and other schedules which shall form part as attachments in the submission of Annual Statements and must be submitted in a separate folder; 4. The exact formats, columnar headings and footnote instructions found in every page of the blank forms of the prescribed Annual Statement including those required formats attached to Annex "A" shall be strictly observed, 5. Any Annual Statement not in accordance with the required format and with missing data/information and incomplete attachments shall not be accepted. Please file your 2014 Annual Statements on or before April 30, 2015 to avoid penalty.

5 CIRCULAR LETTER NO Dated September 25, 2014 TO : ALL NEW AND EXISTING MUTUAL BENEFITS ASSOCIATIONS (MBAs) DOING BUSINESS ln THE PHILIPPINES SUBJECT : STANDARD CHART OF ACCOUNTS (SCA) FOR MBAs ln line with the requirements of SRC Rule 68, Section 189 of The Amended lnsurance Code, and current accounting standards in the Philippines, a revised SCA for MBAs are hereby issued to be maintained in the MBAs books. The SCA for MBAs will list a uniform system of account numbers categorized based on MBAs' revenue, expenses, assets, liabilities and fund value for similar transactions and events, in compliance with the latest Philippine Accounting Standards (PAS) and Philippine Financial Reporting Standards (PFRS).

6 The SCA for MBAs aims to fulfill the following objectives: 1) To establish uniform, comprehensive, minimum chart of accounts to improve financial data collection, reporting, accuracy and comparability; 2) To meet both the internal and external reporting requirements; 3) To ensure that MBAs comply with the generally accepted accounting principles (PAS/PFRS); 4) To allow for timely and accurate recording of financial transactions; 5) To allow for logical framework that can be used to determine where the funds are allocated and used in compliance with the requirements of The Amended lnsurance Code; and 6) To provide comprehensive, full disclosure of the Financial Position of the MBA to its members and regulators. Account Titles are presented in the SCA for MBAs according to their economic characteristics and elements of financial statements such as assets, liabilities, fund balance, revenues, expenses and other comprehensive revenues. Each element is assigned a unique account number as presented in Annex A. Some of the account classifications are further classified or have sub-classifications. The detailed descriptions of the accounts are discussed in Annex A and a pro-forma Financial Statements in Annex B. The SCA for MBAs will be subjected for review once every three (3) years to assess its compliance with the PAS/PFRS and/or other applicable regulations and standards. This CL No shall take effect immediately and will be used in the financial statement for calendar year Signed this 25 th day of September 2014.

7 Circulars issued on Microinsurance IMC Defines the various regulations for provision of microinsurance products and services. The circular also contains the features of a life and a non-life microinsurance product Joint Memorandum Circulars 1 to 3 Issued jointly by the IC, SEC and CDA Defines government policy on informal insurance activities Provides guidelines on the treatment of funds for informal insurance activities Extends the deadline for the termination of insurance activities from December 31, 2010 to December 31, 2011

8 Circulars issued on Microinsurance Circular Letter Adopts the Performance Standards as the microinsurance industry benchmarks in assessing and evaluating the operations of all microinsurance providers beginning calendar year 2011 Circular Letter Provides the guidelines for the approval of training programs and licensing of microinsurance agents

9 On Informal Insurance (JMC ) WITH REGULATION Contributions/premiums are regularly collected prior to the occurrence of a contingent event; and Guaranteed benefits are provided upon the occurrence of a contingent event. NO REGULATION Individuals voluntarily pledge and contribute a certain amount of money to a fund Benefits are not predetermined but are contingent to the amounts collected.

What should be done by unregulated entities (JMC 1-2010 and JMC 3-2010)

(JMC 3-2010) Formal Arrangements with authorized insurance providers Organize

10 What should be done by unregulated entities (JMC and JMC ) Terminate informal insurance or insurance like activities by December 31, 2011 (JMC ) Formal Arrangements with authorized insurance providers Organize into an insurance provider and seek appropriate authority from the Insurance Commission

11 What should be done by unregulated entities (JMC ) Formal arrangements Partnership with commercial insurance companies Membership in an existing: Mutual Benefit Association Cooperative insurance provider

12 Sanctions and penalties for informal insurance (JMC ) Commencement of revocation proceedings against the primary franchise of the erring entities; or Imposition of other administrative sanctions in accordance with the Corporation Code of the Philippines or the Cooperative Code of the Philippines without prejudice to the filing of criminal charges against the individuals responsible for the violation.

13 Section 408 of the Amended Insurance Code A mutual benefit association shall only maintain free and unassigned surplus of not more than twenty percent (20%) of its total liabilities as verified by the Commissioner. Any amount in excess shall be returned to the members by way of dividends, enhancing the equity value or providing benefits in kind and other relevant services. In addition, subject to the approval of the Commissioner, a mutual benefit association may allocate a portion for capacity building and research and development such as developing new products and services, upgrading and improving operating systems and equipment and continuing member education.

14 Thank you.

NEW STANDARD CHART OF ACCOUNTS KMBA EXPERIENCE

NEW STANDARD CHART OF ACCOUNTS KMBA EXPERIENCE BEFORE NEW SCA NEW STANDARD CHART OF ACCOUNTS FOR MBA Circular Letter 2014-41 This CL No. 2014-41 shall take effect immediately and will be used in the financial