Read the latest edition of AIR and MEIR as an Interactive e-book

Apr 2024

Phillppines: Some insurers exposed to public school loans

Source: Asia Insurance Review | Sep 2018

Philippines Liability

Salary loans to public school teachers has become a social issue, and four or five insurance companies have exposures in such loans, according to the insurance commissioner, Mr Dennis Funa.
In an article in the Business Mirror, he noted that estimates are that 562,090 out of the 689,365 (or 81%) of public school teachers have secured loans from various lending institutions. Total teachers’ loans have reached around PHP300bn ($5.6bn), including from the Government Service Insurance System (GSIS). The default rate on GSIS salary loans is a high 40%. The GSIS has threatened to sue for the unpaid loans.
Some sectors have identified the root of the problem as ‘overborrowing’ on the part of the teachers. According to a study by the Philippine Institute for Developmental Studies, public school teachers borrow 50% more compared to other employees of the government. Hence, a proposal has been made to promote financial literacy among teachers.
Mr Funa said that the insurance law recognises investments in salary loans as allowable and admitted assets for insurance companies and mutual benefit associations (MBAs). 
Regulations limit the aggregate amount of loans to 20% of the total assets of life companies and MBAs or 20% of the net worth of nonlife companies. Moreover, the salary loan programme must be covered by a memorandum of agreement between the insurance company or MBA and the Department of Education. A 
| Print
Enter the code shown above in the box below.

Note that your comment may be edited or removed in the future, and that your comment may appear alongside the original article on websites other than this one.


Recent Comments

There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.