Macau Insurance Company (MIC), a subsidiary of Dah Sing Financial Group, is suspected of having rigged bidding processes with its competitors, according to reports by Hong Kong news outlet Apple Daily.
A recording of the company’s internal meeting last December, in which MIC’s chief executive officer appears to be requesting staff working on tenders to have ‘more under-the-table cooperation’ with other insurance companies has surfaced, sparking media attention.
Bid rigging, according to the definition by Hong Kong-based Competition Commission, occurs when two or more competitors agree not to compete with each other for tenders, without the knowledge of the person calling for the bids or requesting a tender, to allow one of the companies to “win” the tender.
According to an anonymous informant, as reported by the news outlet, bid rigging among insurance companies in the city in recent years has appeared so as to reduce inconsistencies when submitting tenders.
Oftentimes, companies offering the lowest price are more likely to get the bid, although other considerations, such as business relations and company experience are also valuable criteria in the final decision.
In the case of MIC, the publication points out, the insurance company would agree to offer a 0.35 per cent premium rate on a project costing MOP10 billion (US$1.25 billion) while a competing company offered 0.3 per cent, theoretically increasing the possibility of the company offering the lower rate to win the bid. If the company obtained the bid and earned MOP3 million, it would then have to pay back a reinsurance fee to MIC, for which the rate commonly stands at between 20 to 40 per cent. If the rate was 30 per cent, consequently MIC would receive MOP900,000 as its reinsurance fee.
The recording obtained by Apple Daily documents the CEO also mentioning “negotiations with other companies for reinsurance”.
Fidelidade Macau, China Taiping Insurance (Macau) Co., Ltd. and Asia Insurance Macau were all mentioned in the recording, notes the publication.
Bid rigging among insurance companies would place pressure on project operators in their decisions when purchasing insurance for their projects and workers.
According to Apple Daily, projects handled by MIC include the labour insurance for the Venetian Macao and MGM, and project insurance for Mong Ha social housing construction, as well as projects from Polytex Corporation Ltd., and insurance for the annual Macau Grand Prix.
Business Daily contacted Dah Sing Financial Group for a response to enquiries about the case but had not received any reply by the time this story went to press.
However, the group replied to Apply Daily’s enquiry, stating that it is currently carrying out internal investigations and follow-ups over the allegation.
The group also stressed that all businesses always act in strict compliance with regulatory and statutory requirements, adding that the group will handle the cases seriously if any irregularities are found.
Business Daily also made enquiries to MIC and the Macao Monetary Authority but responses from both parties had not been provided by the time this story went to press.