THE Insurance Commission (IC) has placed Mercantile Careplans, Inc. under conservatorship for failing to comply with the minimum capital requirement for pre-need firms.

In a statement on Monday, the regulator said the pre-need firm was placed under conservatorship as it failed to meet the paid-up capital requirement prescribed under Republic Act (RA) No. 9829 or the Pre-Need Code of the Philippines.

Under RA 9829, pre-need companies selling two types of plans are required to have a minimum unimpaired paid-up capital of P75 million.

“The result of the examination made into the affairs, financial condition, and methods of doing of business of Mercantile Careplans as of end-2018 disclosed that the company failed to comply with the minimum P75-million paid-up capital requirement. Particularly, Mercantile Careplans’ paid-up capital is impaired by P14.23 million,” Insurance Commissioner Dennis B. Funa was quoted as saying in the statement.

As a result of the Conservatorship Order, the management of the company is now under the IC-appointed conservator Marianne P. Lozada-Marquez.

Mr. Funa said the company is required to continue servicing its clients until and unless the IC-appointed conservator recommends otherwise.

“The operations of the company will continue to run under the management of Atty. Lozada. The initial step in the conservatorship process is for the IC-appointed conservator to review the current financial condition of the company and recommend measures to ensure the preservation of the assets of the company for the benefit of its plan holders and other stakeholders.”

As of end-2018, the pre-need firm has 5,622 enforced pension plans and 170 enforced educational plans.

IC said before it issued the order placing the Mercantile Careplans under conservatorship, the firm was required to address its capital impairment.

However, Mercantile Careplans told the regulator it is no longer financially capable of addressing its capital impairment as it has stopped selling plans since 2009 and is “merely servicing its existing and maturing plan holders,” the IC said.

Mr. Funa, however, noted that despite its lacking paid-up capital, Mercantile Careplans’ trust fund contributions are compliant with the requirements of the Pre-Need Code.

Under the law, IC has the ability to suspend or revoke all certificates granted to the company if the paid-up capital stock is impaired or deficient, upon examination or through other evidence.

However, the regulator can lift the order if the company can submit a viable three-year business plan.

The insurance industry, including life and nonlife insurance companies as well as mutual benefit associations, posted a higher net income in the first three months of the year at P11.72 billion, 46% higher than the P8.04 booked in January-March 2018. — B.M. Laforga