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1.0 Rationale

Republic Act (RA) No. 656, otherwise known as the Property Insurance Law, as amended by Presidential Decree (PD) No. 245, requires all government agencies (except municipal governments below first class category) to insure against any insurable risk their properties, assets, and interests with the General Insurance Fund (GIF), as administered by the Government Service Insurance System (GSIS).

It has come to the attention of this Commission that there are still properties owned by government agencies and their subsidiaries which are not insured with the GIF; or which are insured with private insurance companies or which, while covered by the GIF, are not insured adequately.

The non-compliance with the requirement denies the government adequate and reliable protection against any damage to or loss of its properties or assets and interests due to fire, earthquake, storm, or other fortuitous events/casualty. It also deprives the GSIS of substantial premium income that should have formed part of the GIF.

To enable the GIF to deliver the mandated services, it is necessary for the GSIS to obtain complete information on the inventory of assets and properties of all  government  agencies,  including  the  latest  appraised/market  values determined by a third party or in-house appraiser in compliance with the accounting and other valuation standards adopted by the concerned agency.
 
2.0 Purpose

This Circular is being issued to assist in the implementation of the provisions of RA No. 656, as amended, on the insurance and bonding of risks on insurable government assets and properties with the GIF.

3.0 Coverage

This Circular shall cover all insurable government assets and other assets such as contracts, rights of action, and other insurable risks of government agencies, departments, bureaus, boards, commissions, state universities and colleges, local government units, government-owned or controlled corporations and their subsidiaries/affiliates, including all others in which these agencies or offices have an insurable risk or an insurable interest, such as but not limited to, loss or damage of the government assets.

It is only when such property or part thereof are not acceptable to the GIF that these may be insured with a private insurance company^[1] at a cost most advantageous to the government, subject to the applicable provisions of the Revised Implementing Rules and Regulations of RA No. 9184 or the Government Procurement Reform Act.

Properties or assets, contracts or agreements, causes or rights of action, or other insurable interests of the Armed Forces of the Philippines, shall be bound by this Circular to the extent that they are acceptable to the GIF.^[2]

4.0 Definition

For purposes of this Circular, the following terms are defined as follows:

4.1 Property  includes  vessels  and  craft,  motor  vehicles,  machineries, permanent buildings, properties stored therein (i.e. furniture, fixtures, equipment, supplies and materials, etc.) or in buildings rented by the government, or properties in transit, the ownership of which had already passed to the government.

4.2 Insurable  Interests,  as  defined  in  RA  No.  10607  (PD  No.  612,  as amended), otherwise known as the Insurance Code, and Administrative Order No. 33 mean every interest in property, whether real or personal, or any relation, thereto, or liability in respect thereof, of such nature that a contemplated peril might directly damnify the insured.

4.3 Insurable Value refers to replacement cost or actual cash value of a building for which standard insurance policies provide indemnity cover. Insurable value is less than the appraised or market value of the property because it excludes the value of land on which the building stands. The formula  for  computing  the  insurable  value  is  usually  stated  in  the valuation clause of a policy document.

4.4 Market Value refers to the estimated amount for which an asset should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, where the parties had each acted knowledgeably, prudently, and without compulsion.

4.5 Appraised Value is an appraiser’s opinion of the current worth of a property based on factors such as area, location, improvements, and amenities.

4.6 Acquisition Cost is the amount paid or value given up to acquire a government asset.

5.0 Guidelines

5.1 Heads of government agencies shall direct the pertinent official under his/her supervision to:

a.    Secure directly from the GSIS GIF, all insurances or bonds covering properties, contracts, rights of action, and other insurable risks of their respective offices;

b.    Prepare the Property Inventory Form (PIF) listing of all the insurable properties and other assets, showing their latest appraised values/valuation, appraisal date, location, and other information (Annex A*);

c.    Extract from the Report on the Physical Count of Property, Plant and Equipment, as well as from the Report on the Physical Count of Inventories, prepared in accordance with the provisions of the Government Accounting Manual, the data for the PIF pertaining to the insurable assets and interest of the government (excluding impaired properties for disposal);

d.    Cause the appraisal of the insurable properties and other assets of their respective offices. For this purpose, an in-house appraisal shall be sufficient if the property or insurable interest has a value of P10 million and below. Otherwise, an independent appraisal shall be necessary;

e.    Submit the consolidated PIF to the Supervising Auditor/Audit Team Leader and the GIF, GSIS, not later than April 30 of each year;

f.    Include in the agency annual budget the amount of premiums for the general insurance covering all insurable properties and other assets and ensure its payment to the GSIS; and

g.    Ensure   centralized   payment   of   insurance   premiums   of   all assets/property, whether located in the Central/Head Office (C/HO) or Regional/District Offices, Branches and/or Operating Units (R/DOs/Bs/OUs) in order to avoid double payment. The Head of the agency    shall    issue    specific    guidelines/instructions    to    the R/DOs/Bs/OUs to submit their respective accurate and updated PIF for consolidation at the C/HO.

5.2 It shall be the responsibility of the officials of the GIF to validate/review the accuracy of the valuation of the properties reported in the PIF.

5.3 The  Head  of  Agency,  Accountant,  Property  Officer,  Administrative Officer, Cashier, Treasurer, or any government official of the National Government Agencies/Local Government Units/Government-Owned or Controlled Corporations, who are responsible for the payment of the premiums prescribed, who refuses or habitually neglects to comply within the  time  prescribed,  shall  be  held  liable  for  the  payment  of  said premiums and shall pay to GSIS a fine of two per centum (2%) per month of said premiums from their due dates until received by the GIF, as provided for under Section 6(b) of RA No. 656.

5.4 Likewise, the GSIS General Insurance Group officials and employees who neglected and failed to collect or accept payments of the said premiums or issue receipt therefor shall be liable for the said premiums and the penalty prescribed herein.

5.5 Failure on the part of the agency officials concerned and the GSIS to submit and receive, respectively, the documents and reports mentioned herein, as well as failure of the GSIS underwriting officials to assess the premium due within the timeframe herein prescribed, shall automatically cause the suspension of the payment of their salaries until they shall have complied with the requirements of RA No. 656 and its Implementing Rules and Regulations, as well as the provisions of this Circular.

5.6 No appropriation authorized in the General Appropriations Act shall be available to pay the salary of any official or employee who violates the provisions of this Circular, without prejudice to any disciplinary action that may be instituted against such official or employee.

6.0 Repealing Clause

All circulars, memoranda, and other issuances inconsistent with this Circular are hereby repealed, amended, or modified accordingly.

7.0 Effectivity

This Circular shall take effect after fifteen (15) days upon publication in a newspaper of general circulation.

(SGD) MICHAEL G. AGUINALDO Chairperson

(SGD) JOSE A. FABIA Commissioner

^[1]  As provided by Republic Act No. 656

^[2] Pursuant to Commission on Audit Decision No. 2016-290 dated October 19, 2016.