The Foundation of a New Financial Architecture in the Philippines
The Insurance Exchange
Currently there is no working model of an Insurance Exchange anywhere in the world. This is perhaps due to the regulatory framework and historical development of the insurance industry specific to each country.
In the Philippines, there is an overwhelming need to overhaul the insurance industry specially in the pre-needs industry and non-Life insurance. This is due to the fact that pre-need insurers have abused the system wherein the funds derived from the collected premiums are diverted into risky investments and in conflict of interests among the insurance companies. The Insurance Commission has also failed in its role as watchdogs in the insurance industry leaving the consumers at the mercy of the insurance companies.
Due to systemic failures and defaults of the insurance companies, it is therefore necessary to create an Insurance Exchange in order that the performance and obligation of the insurance companies are met. Insurance companies become the Sellers of the policies, and the Insured become the Buyers of the insurance products. A transparent pricing sytem for the insurance policies are generated with the Buyers knowing exactly every details of the issued policy. No hidden cost. No overrides. No fine lines.
Settlement can also be done over the electronic system, and orders transmitted via bank online services. In this way, remote orders from Overseas Foreign Workers to their local dependents are processed via Secured Internet Settlement Protocol System.
The Insurance Exchange shall also have its own rules similar to the Stock Exchange. It shall ensure the delivery and settlement of obligations of each insurers listed as members of the Insurance Exchange. A sinking fund shall be structured whereby an insurance policy is secured by a marginal deposit, comparable to the system established by the Basel II Bank for International Settlements Rules on Capital Adequacy, that in the event of the default of one member, the Exchange shall guarantee its commitment and obligations stipulated in the policy. The advantage of this system is that the beneficiaries of the pre-needs insurance policy are secured by its concomittant obligations of the issuer to fulfill the obligation when the policy matures.
In the Philippines, there is an overwhelming need to overhaul the insurance industry specially in the pre-needs industry and non-Life insurance. This is due to the fact that pre-need insurers have abused the system wherein the funds derived from the collected premiums are diverted into risky investments and in conflict of interests among the insurance companies. The Insurance Commission has also failed in its role as watchdogs in the insurance industry leaving the consumers at the mercy of the insurance companies.
Due to systemic failures and defaults of the insurance companies, it is therefore necessary to create an Insurance Exchange in order that the performance and obligation of the insurance companies are met. Insurance companies become the Sellers of the policies, and the Insured become the Buyers of the insurance products. A transparent pricing sytem for the insurance policies are generated with the Buyers knowing exactly every details of the issued policy. No hidden cost. No overrides. No fine lines.
Settlement can also be done over the electronic system, and orders transmitted via bank online services. In this way, remote orders from Overseas Foreign Workers to their local dependents are processed via Secured Internet Settlement Protocol System.
The Insurance Exchange shall also have its own rules similar to the Stock Exchange. It shall ensure the delivery and settlement of obligations of each insurers listed as members of the Insurance Exchange. A sinking fund shall be structured whereby an insurance policy is secured by a marginal deposit, comparable to the system established by the Basel II Bank for International Settlements Rules on Capital Adequacy, that in the event of the default of one member, the Exchange shall guarantee its commitment and obligations stipulated in the policy. The advantage of this system is that the beneficiaries of the pre-needs insurance policy are secured by its concomittant obligations of the issuer to fulfill the obligation when the policy matures.
