Risk and make up

Business entails risks, and everybody in business knows it, including the insurance industry. Okay—particularly the insurance business, which is all about risks!

Apparently, however, a division of the Court of Appeals thinks that it is the job of the judiciary to protect insurance companies (some five of them, anyway) from the very risks that insurance policy is supposed to cover. Like it or not, insurance business is all about risks. It is a big gamble.

Those five companies ran to the CA after the RTC in Batangas ordered them to pay the P41-million claim of a little known company called Steel Corp. of the Philippines or SCP. Or, according to the lower court, they could make up for the cash payment by just replacing the pieces of machinery of SCP that the company claimed were damaged in a fire.

What do you know—seemingly with just the flick of a finger, the CA issued a TRO against the RTC decision, in effect favoring the insurance companies, saying that they did not have to pay the P41 million in the meantime. From what I heard, SCP is calling for the members of the CA division that issued the TRO to inhibit themselves from the case. SCP even termed the TRO issuance as hasty and irregular.

You see, after the TRC ordered the payment of the SCP claim, the insurance companies filed their petition with the CA last June 7. Two days later, SCP received a copy of the petition. The very next day, the CA issued the TRO.

Now, the petition contained all of 79 pages—plus five heavy volumes of annexes. All in one day!

Thus SCP claimed that it was never notified of any “raffle” in the CA for the case filed by the insurance companies and that the CA division issued the TRO without even just a “summary hearing.”

Here is the clincher: According to SCP, the TRO issued by the CA had no definite effective period. Thus, it was more like an “injunction” and not just a TRO. And how did the CA division justify the fast-as-lightning issuance of the TRO? Well, as I said, the CA division thought the insurance companies needed “judicial protection” because the RTC ruling in effect would cause them “grave and irreparable injury.” And even “eventual business closure!”

All that, ladies and gentlemen, for a claim of P41 million! The last time I checked, the country’s nonlife insurance industry posted total premiums of close to P50 billion. And so what kind of insurance companies were they anyway that, with the payment of such a relatively small amount of P41 million, all five of them would go under?

The thing is that, under the Insurance Code, an insurance company must limit any risk that it retains to 20 percent of its net worth, at most. It must spread the risk around through reinsurance. It so happened that the client of those five insurance companies, the very SCP, was in trouble. It was under rehabilitation. It needed the machinery to resume operations. And those insurance companies needed “protection”—and not their client?

By the way, the five insurance companies are Mapfre Insular Insurance Corp.; New India Assurance Co. Ltd.; Philippine Charter Insurance Corp.; Malayan Insurance Co. Inc.; and Asia Insurance Phil. Corp.

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Based on recent news report, publicly listed real estate giant Megaworld is investing P25 billion in another BPO project in Fort Bonifacio. As we all know, Megaworld is now the country’s top developer of office spaces for BPOs, or “business process outsourcing,” the sector creating the highest number of jobs here today—by the tens of thousands, in fact.

Megaworld has about half a million square meters of office rental space in the BPO sector, accounting for roughly 80,000 jobs. We need several more companies like Megaworld, I think! Still, what is another BPO development venture for Megaworld, which is the banner company of Andrew Tan, who was named recently in Forbes magazine as the second richest man in the country?

Really now, for those in the stock market that follow the meteoric rise of this relatively new company (it is not even 20 years old), a P25-billion investment might not have been news at all. To start with, the new project covered seven hectares of underutilized land in the so-called Bonifacio Global City in Taguig City, which is fast becoming another important central business district in the metropolis.

In comparison, the size of the Megaworld project in Quezon City called “Eastwood City” was more than double at about 18 hectares. Megaworld has gone into much bigger projects than the P25-billion BPO venture.

The thing with its new BPO venture, why it made big news, is the creativity behind the whole deal.

You see, Megaworld acquired the land from the BCDA [Bases Conversion Development Authority] and the Napolcom [National Police Commission], which are both government entities. Part of the deal was that Megaworld has to finance the construction of the 30-story building of Napolcom in Quezon City, plus a 500-unit condominium project for Napolcom beneficiaries. On its own, Napolcom could never have the means to pursue those two projects, considering its tight budget, as the national government posted a record deficit last year.

The beauty of it all was that Napolcom did not have to spend a single centavo, which was precisely the idea behind the Aquino (Part II) administration program called PPP, or the “public private partnership,” which is also known as “power point presentation” in business circles.
There—Megaworld already beat everybody to the PPP. We really need several more Megaworlds, I think.