Development and Implementation of a Sound Risk and Insurance Management Program

February 23, 1978

LETTER OF INSTRUCTIONS NO. 673

WHEREAS, it is necessary to protect the properties of the National Government against accidental loss which may significantly affect the ability of Departments and Agencies in fulfilling their assigned functions; casia

WHEREAS, cost reduction in government property insurance premiums can be attained with improved risk management;

WHEREAS, the development and implementation of a sound risk and insurance management program will contribute to the conservation of the National Government's resources from the effects of accidental loss or destruction by natural perils and hazards, at minimum expense;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, do hereby issue the following instructions:

1. The Commissioner of the Budget, in collaboration with the National Treasurer and the General Manager of the Government Service Insurance System, shall conduct a study of every Department and Agency of the National Government for purposes of developing and implementing a sound risk and insurance management program, covering the following specific tasks:

a. Inventory the resources and assets of every department and agency and exposures to accidental loss;

b. Analyze and measure the financial risk inherent to each exposure such as fire, earthquake, typhoon and other extraneous perils in terms of probably frequency and severity of loss and to set up effective methods in avoiding and controlling all exposure;

c. Evaluate the insurance policies covering the resources and assets of the Departments or Agencies, in terms of scope of coverage, premium rates, adequacy of the sums insured and policy conditions; cd

d. Study the advisability of establishing a sinking fund (as an immediate charge against reserves, profit or surplus), to assume losses resulting from risk which are not considered significant and will not unduly affect the financial stability of the Department or Agencies concerned;

e. Establish the basis of valuation of resources and assets in terms of book value, sound value or replacement value which should be related to the sums insured, of every insurance policy covering such assets and resources;

f. Recommend policies on risk and insurance management for the guidance of the personnel to be entrusted with this responsibility.

2. The Heads of all Departments and Agencies shall extend full cooperation in providing the necessary data, materials and assistance in order to facilitate the completion of this study.

3. The Commissioner of the Budget is hereby authorized to contract the services of reputable professional risk management consulting firms to carry out the objectives of these Instructions.

DONE in the City of Manila, this 23rd day of February, in the year of Our Lord, Nineteen Hundred and Seventy-Eight.