Early bird: PhilPlans implements 6% discount rate for reserves ahead of schedule
It was a bold move that did not go unnoticed.
PhilPlans, Inc. earned even more respect from the Insurance Commission (IC) after it decided to adopt the lowest discount rate required by the regulator two months ahead of its full implementation.
In a statement, Insurance Commissioner Dennis Funa commended PhilPlans for the early implementation of the 6% rate in computing the pre-need reserves required among insurance providers.
Pre-need reserves are computed to assure investors that there will be adequate funds to pay for all future maturities and benefits. Under IC rules, companies can use a 7.25% rate for this year, 6.5% in 2018, and 6% from 2019 onwards. PhilPlans, however, decided to do a one-time big-time adjustment.
“Adopting a lower discount rate would mean that a pre-need company is required to set aside a higher amount of reserves. While the early adoption of this conservative approach to valuation has reduced the surplus assets of PhilPlans, according to the company, their assets continue to be healthy and the surplus now stands at Php 4.4 billion at a discount interest rate of 6%,” Funa said as he lauded the insurance firm’s healthy cash position.