No such thing as ‘ghost insurance’

When Secretary Vince Dizon remarked that “if there are ghost projects, then there are ghost insurance policies too,” many of us in the non-life insurance industry understood his frustration. The discovery of “ghost projects,” or government-funded works that exist only on paper, is a serious national concern. These fraudulent schemes waste public funds, erode trust in government, make corruption even more distasteful, and drive up the public clamor to bring the perpetrators behind bars.

But it is also important to set the record straight on the insurance aspect of these sham projects: There is no such thing as “ghost insurance.” The insurance and surety companies that issue performance bonds for government projects are, in fact, among the victims of these fraudulent activities — not the perpetrators.

Surety bonds are legal and binding financial guarantees. Under the procurement law, a winning bidder is required to obtain a performance bond and contractors’ all-risk insurance (CARI). When the project is completed, the DPWH may require a retention bond, a warranty bond, or both, to safeguard the project from defects.

In all instances, insurers require contractors to submit detailed documentation issued by DPWH, such as the Notice of Acceptance, Notice to Proceed, Certificate of Completion, and Final Acceptance. To verify the financial capacity of the contractors, insurers rely on SEC and DTI submissions, the PCAB license, and PhilGEPS membership. In other words, insurance companies act in utmost good faith, relying on authentic documents when issuing their bonds and insurance policies.

Verily, every insurance policy leaves a verifiable paper trail that is reviewed, approved, and monitored by certified underwriters under the close supervision of the Insurance Commission. Reports are likewise submitted to the IC every quarter. These represent real financial exposure on the part of the insurance companies.

Now, if a project turns out to be a sham or “ghost,” it means the insurer was also deceived by falsified project documents or misrepresentations by unscrupulous contractors and their cohorts. In such cases, insurers suffer losses too. They are left to recover claims and pursue legal action against those who abused the system. To imply that the insurance itself was “ghostly” risks unfairly tarnishing an entire industry that has long been a pillar of financial accountability in both public and private infrastructure projects.

We in the non-life insurance industry share Secretary Dizon’s goal of ensuring that every peso of public money is protected and properly spent. We welcome the administration’s drive for transparency and accountability, and we stand ready to cooperate in identifying fraudulent transactions and fake bonds that may have slipped through the cracks.

Most respectfully, it is my opinion that there are no “ghost insurers,” only real companies facing real risks. We are one with the Secretary in seeing this through, and insurance will always be a partner of the construction industry for the country’s growth and development — where every peso is spent on real progress.