ASEAN CORPORATE GOVERNANCE SCORECARD (ACGS) FOR INSURANCE COMPANIES

ICD’s Courtesy Call with the Insurance Commission and Presentation of 2021 ACGS Results

Last March 28, 2022, the Institute of Corporate Directors Philippines had a courtesy call with the Insurance Commission. ICD’s Atty. Cesar L. Villanueva, FICD, Chairman, Dr. Carlos Jose P. Gatmaitan, FICD, CEO, Cathyrine Perez, Director for Corporate Governance Advocacy, Roberto T. Bascon, Jr., AICD, Director for Faculty, Research and Development, Mariella Racxine Ramintas, Corporate Governance Assessment Lead, and JB Emmanuel De Guzman, Corporate Governance Assessment Lead for Insurance Companies visited the Commission’s office. IC’s Atty. Dennis Funa, FICD, Commissioner, Atty. Albert Lawrence Vinzon, Division Manager, Anti-Money Laundering and Corporate Governance Division, Atty. Randy G. Serrano, Deputy Insurance Commissioner, Legal Services Group, Arturo S. Trinidad II, Officer In-Charge/IC Director II, Technical Services Group, Mr. Ferdinand George A. Florendo, Deputy Insurance Commissioner, Financial Examination Group, Atty. Czarina Pablo- Nepomuceno, Division Manager (Chief-of-Staff), were present during the meeting.

The insurance industry has been subjected to an annual assessment of its covered companies’ corporate governance practices since its adoption of the ASEAN Corporate Governance Scorecard (ACGS) in 2015. Ms. Perez presented to the Commission the 2021 ACGS performance results of the insurance industry.

There were 112 Insurance Companies and MBAs assessed using the ASEAN Corporate Governance Scorecard in 2021. Majority of the assessed companies belongs to the non-life sector with 52 companies, followed by the life sector with 30 companies, and the MBAs with 30 companies. This year’s assessment also included 2 companies whose websites were inaccessible or is under construction on the date of the assessment.

In the last six years, the industry has continuously improved its performance with the average score of 45.9 points in the 2020 assessment. For this year’s assessment, the average score of 112 companies is 51.56 points, a 5.66 increase from last year’s average score.

In general, almost all sections for this year’s assessment improved in their scores, except for the Part C, Roles of Stakeholders. The industry performed well on the Rights of Shareholders, Equitable Treatment of Shareholders, and Responsibilities of the Board. However, the industry still needs to improve in the rest of the sections of the scorecard. Disclosure of corporate governance-related documents should be given special attention.

Due to the lockdowns, quarantines, and new infections everyday caused by the COVID-19 pandemic, the assessment observed many companies have not made available the 2020 Annual Report, Notice and the Minutes of the most recent Annual Stockholders/General Meeting, and their Board Charter or the Manual of Corporate Governance on their websites. These documents are critical to all areas for the ACGS assessment.

Information on the companies’ policies and activities relating to other stakeholders especially those mentioned in the ACGS i.e., customers, suppliers, environment, community, government, creditors, and employees are still lacking for this year. Conducting such activity or event for the companies’ stakeholders’ might be a little risky due to the infectious disease that is spreading in the country.

Disclosure and transparency are two major demands of corporate governance and are deterrents of corporate fraud and malpractice. Many company websites do not have sufficient disclosure on the company’s corporate governance practices. Few companies have published an Annual Report.

For this assessment year, the insurance companies are now required by the Insurance

Commission to disclose and present their Annual Corporate Governance Report or the ACGR. The assessment observed that this presentation of the ACGR helped the whole sector to improve and increase their average score.

ACGS Workshop for Insurance Companies

Considering these results, the Institute of Corporate Directors (ICD), in partnership with the Insurance Commission conducted three sessions of workshop on June 21, 22 and July 29, about the ASEAN Corporate Governance Scorecard (ACGS) items and how to respond to recommendations in the Annual Corporate Governance Report (ACGR) as mandated by the Insurance Commission to be submitted by Insurance Companies on or before May 30 th of each year. This was attended by a total of 128 companies with a total of 145 participants. Atty. Atty. Albert Lawrence A. Vinzon, Division Manager, Anti-Money Laundering and Corporate Governance Division of Insurance Commission gave his opening remarks.

Atty. Juan Sotero Roman of FWD Life Insurance Corporation, Ms. Jennifer O. Redublo of CARD Mutual Benefit Association, Inc., Mr. Raul Tumangday & Ms. Regina Ramos of National Reinsurance Corporation of the Philippines, and Ms. Mary Magdalene Flores of Knights of Columbus Fraternal Association of the Philippines shared their respective corporate governance journeys.

The workshop was hosted by Ms. Cathyrine P. Perez, Director of Corporate Governance Advocacy Department of ICD.

Atty. Albert Lawrence Vinzon started off the event by mentioning that the Insurance Commission aims to have all its regulated entities are committed to good corporate governance and should ensure that the needs and interests of all stakeholders are met in a balanced and transparent manner. He also pointed out that the ACGS and ACGR results are aimed to enhance the competitiveness of the Insurance Industry in the region, improve public perception towards the industry and increase the industry’s penetration rate. Lastly, Atty. Vinzon acknowledged that participating in this workshop is a huge step in or corporate governance principles and practices as well being updated to latest news and regulatory compliance issued by the Insurance Commission.

For the main course of the workshop, Director of ICD's Faculty, Research & Development Department Mr. Roberto T. Bascon, Jr. contributed as the resource speaker tackled about the ACGS and ACGR items, but he initially noted what OECD claimed that the poor corporate governance has been the major culprit for the Asian financial crisis and for the Global financial crisis in 2008. In addition to this, having good corporate governance is for the protection of stakeholder interests and to generate sustainable high-level performance. Mr. Bascon then showcased an ACGS Correlation Study of 2018 having a positive and statistically significant relationship between corporate governance and a couple of variables such as market capitalization, Tobin’s Q Ratio, and profitability as measured by return on equity. Next to this is the Philippine Insurance Industry’s penetration rate compared to other ASEAN countries having 1.67% in 2020 against 1.60% from Indonesia, 5% from Malaysia, and 10.90% from Singapore. Clearly, there is a need to improve and that is through improvement in the perception of the public to insurance companies, as per Mr. Bascon. Corporate Social Responsibility commitments by the companies also adds up to the trust put by the public to them as presented in the workshop. Legal documents were then presented to the audience such as CL No. 31-2005, CL No. 2020-71, and CL No. 2020-72.

Key items of ACGS were highlighted by Mr. Robert Bascon starting off with the introduction of what is a CG Scorecard, which is a developmental tool to measure the observance of Standards of Corporate Governance by the companies and presenting that the ASEAN Corporate Governance Scorecard (ACGS) is based on OECD principles and practices. Key documents were also presented to be noted by the insurance companies prior to the beginning of annual assessment together with the assessment methodology. From thereon, the main purpose of the workshop commenced as Mr. Bascon lectured about the items of ACGS and have a question-and-answer portions as the workshop continues. First to digest in was the Insurance Industry performance and its ACGS results for the past several years. Followed by general findings and observations regarding the improvement in some sectors as well as the reasons for the decrease in scores of other companies. In every end of section in ACGS, there was a summary of items which needs to be addressed in relation to ACGR having the highest number of companies who did not comply for the 2020 operations. Some notable ideas Mr. Bascon shared was in terms of environmental issues wherein humans are now consuming at a rate of 1.8 of the Planet Earth just to provide the resources that we need and to absorb our wastes and by 2030, it will be at a rate of 2x of the Planet Earth as scientists says. And the question is, where can we find the second Planet Earth? And so, the main concern here was to address environmental issues and adopt sustainable development

as what ACGS is assessing in an urgent manner. The next thing pointed out in the workshop was the challenges encountered in the assessment such as unavailability of key documents, company websites’ not working, outdated disclosures, etc.

In relation to ACGS, ACGR was also a key document in assessing CG performance of each Insurance Company, therefore, it was also the main highlight of the workshop on how to properly accomplish the said document and it was then distinguished the difference between ACGS and ACGR. Having said that the ACGS is a developmental tool to measure the CG performance of companies while ACGR is the medium to disclose Insurance Commission Regulated Companies’ (ICRCs) compliance or non-compliance with the recommendations provided under Revised Code of Corporate Governance for ICRCs. General findings and observation were also presented regarding the 2020 ACGR results in

Insurance industry.

The workshop was followed by insightful sharing of some Insurance Companies and Mutual Benefit Associations. Atty. Juan Sotero Roman of FWD Life Insurance Corporation pointed out that the main challenge in complying with the ACGS and ACGR items comes down to the technological matters such as maintenance of company website. The next company to present was one from MBA sector who was CARD Mutual Benefit Association, Inc. represented by Ms. Jennifer Redublo sharing their corporate governance journey as they strive for better performance even having experienced technological challenges as well. Mr. Raul Tumangday & Ms. Regina Ramos of National Reinsurance Corporation of the Philippines showcased their achievements and on how good corporate governance impacted their journey to success and translate it to good business. They were then followed by Ms. Mary Magdalene Flores of Knights of Columbus Fraternal Association of the Philippines showcasing their good performance for the past couple of years and on how they practice good corporate governance.

In closing, Dr. Carlos Jose P. Gatmaitan, FICD, CEO of Institute of Corporate Directors, acknowledged the presence of all insurance companies who attended the workshop and sincerely thanked the speakers especially Mr. Robert Bascon of ICD and the presence of Atty. Albert Lawrence Vinzon of Insurance Commission. Also, he thanked the efforts of insurance companies and MBAs who shared their corporate governance journeys and challenges which gave a more meaningful workshop. He then reiterated that good corporate governance is very highly correlated to sustainability as well as market capitalization, market value, and even income profitability of companies. Dr. Gatmaitan ended with the quote that this workshop is not the end but rather the start and it takes years through consistent participation in sessions for the continuous improvement of company’s [corporate governance] performance in coordination with Insurance Commission and going beyond just being satisfied with compliance but applying the best practices for performance, sustainability, and all.

The Institute of Corporate Directors Philippines and the Insurance Commission are hoping that through this workshop, the companies will be equipped for the next assessment and will see improvements in their corporate governance performance. They are also currently in the process of preparing for the 2021 ACGS Assessment Golden Arrow Recognition to be held on September 23, 2022 to recognize the companies’ efforts in the most recent assessment and to encourage better performance for the insurance companies.

Photos during the event