Finance Secretary Carlos Dominguez 3rd revealed the plans for the reorganization of the government-owned Philippine Crop Insurance Corp. (PCIC), following its transfer to his department.
According to the Department of Finance (DoF), the members of the reconstituted PCIC Board formalized the election of Dominguez as chairman and Agriculture Secretary William Dar as vice chairman during their first organizational meeting on Friday.
The Finance chief said in his opening remarks that President Rodrigo Duterte's Executive Order 148 reorganized the board of directors of the PCIC and transferred its agency attachment from the Department of Agriculture to the DoF 'to ensure that its operations are rationalized and monitored centrally in order that government assets and resources are used effectively, and the government's exposure to all forms of liabilities, including subsidies is warranted and incurred through prudent measures.'
He stressed that the board's first priority is to reorganize the PCIC, stop its financial hemorrhage, and provide greater insurance coverage to Filipino farmers. It is also necessary to increase the assets and crops covered by the PCIC, as well as to develop the agency into a credible tool for risk mitigation and resilience.
Over the last two decades, the PCIC has not been performing at its best. Dominguez added that the state-run firm's activities have been reliant on considerable government subsidies.
The national government has provided about P23.3 billion in subsidies through the national budget during the last 20 years. Since 2015, the Agri-Agra Fund has provided an additional 5.3 billion to the agency, he said.
'For next year, the proposed subsidy amounts to P4.5 billion. This trend is not sustainable,' the Cabinet official noted.
Simultaneously, he said that the PCIC's activities must be self-sustaining, if not entirely subsidy-free. This necessitates a new business strategy as well as the most capable service management.
To maximize value for Filipino farmers, insurance coverage should be expanded to encompass more crops, so that more farmers are covered from financial losses caused by bad weather, droughts, floods and other calamities, Dominguez continued.
For some reason, he said PCIC has not engaged in reinsurance activities, which would have dispersed the risks and mitigated the losses. All of these aspects must be examined more closely by the new board.
'The PCIC must also encourage more private firms to offer agriculture insurance products. Our farmers stand to benefit from the efficiency in services offered by the private sector,' the Finance secretary emphasized.
He added that PCIC should also take into account various types of insurance schemes used in other countries, such as index-based or parametric insurance, he pointed out.
'Unless we are able to scale up our crop protection insurance, we cannot substantially mitigate economic losses due to calamities further intensified by climate change,' Dominguez added.
Dominguez believes that the PCIC should give higher insurance coverage to farmers at reduced costs in order to maximize value for the national government and taxpayers. It's also important to figure out how much money the government is losing as a result of the agricultural sector's lack of proper insurance coverage.
'To address all these issues I have laid out, the PCIC must be run by insurance industry professionals and guided by the best actuarial advice,' he said. It must hire an actuary who has been accredited by the Insurance Commission to value its actuarial reserve liabilities.
'Immediately, we must formulate the PCIC's insurance blueprint for the next three years with clear monitoring and evaluation methods,' Dominguez highlighted.
The Finance department said the PCIC board also named lawyer Joyce Briones of the DoF Legal Affairs Office as the new corporate secretary of the PCIC. The new board of directors includes PCIC President Jovy Bernabe, Land Bank of the Philippines President and Chief Executive Officer Cecilia Borromeo, and Government Service Insurance System President and General Manager Rolando Macasaet.