ROXAS LISTS MEASURES TO SAVE PRE-NEED INDUSTRY
RE-CAPITALIZATION, TIGHTER TRUST FUND RULES SOUGHT

Stressing the need to protect the interest of hundreds of thousands of pre-need plan holders, Liberal President Senator Mar Roxas today sought mandatory re-capitalization of pre-need companies and other safeguard measures to prevent the industry's reported "impending collapse."

Roxas made the proposals in light of the on-going Senate investigation in aid of legislation into the financial state of the pre-need industry.

"Mahalaga ang kapakanan ng publikong naglagay ng kanilang pinaghirapang pera sa mga kumpanyang ito (It is important that we protect the interests of that invested their hard-earned money in these companies)," he said.

Roxas said the Securities and Exchange Commission (SEC) must, among others, require the re-capitalization of pre-need companies. The additional funding, he said, shall come from the companies' and its shareholders' own pockets.

Also, he said pre-need firms should increase their deposit contribution to the trust fund for the payment of the policies. He proposed that from the present 5% contribution scheme, this be upped to as much as 70% to ensure that plan holders will still be able to recover their payments even after the companies shut down.

Data from the SEC showed that as of December 2007, pre-need trust funds stood at P107.23 billion, of which three-fourths were invested in government securities, one-fifth in equities, and the rest in real estate, time deposits and other financial instruments. Reports say the industry is suffering from a P46.83 billion in trust fund deficit as of June 2008.

Roxas also said the SEC should prohibit the use of trust funds by trustee banks to extend loans to its directors, officers, stockholders, and other related interests or to invest in the pre-need company itself.

He added no companies should be given new licenses to sell pre-need plans, noting the existence of numerous companies in the country. SEC records show that there are close to four million plan holders today. A total of 92 pre-need firms have been registered for the last 25 years but in 2005, the number of pre-need companies licensed to operate went down to 32.

He also proposed the following:

• Trust fund investment to any single and allowable security must not exceed 25% of the trust fund value;

• Liquidity Reserve Fund must be at least 15% of the trust fund but in no case less than Php15 M;

• Strict reportorial requirements including submission of audited financial statement and trust fund to SEC and publication thereof; and

• Prohibit the distribution of dividends in case there is impairment of the trust fund.

"I strongly urge the SEC to uphold its mandate and undertake the foregoing urgent and necessary measures," the Ilonggo senator stressed, giving government regulators 15 days to submit to the Senate a definitive response and ruling on his proposed measures.