THE INSURANCE Commission (IC) has shut down five non-life insurers for failing to meet the minimum net worth requirement.

In a statement on Wednesday, IC said it shuttered the operations of five insurance firms, namely First Integrated Bonding & Insurance Co., Inc., Investors Assurance Corp., Metropolitan Insurance Company, Inc., Plaridel Surety & Insurance Co., and Premier Insurance & Surety Corp., and were put under conservatorship.

As a consequence, these companies are no longer permitted to write new insurance policies. The commission will then appoint a conservator for each of these insurers mandated to take charge of the management of the companies and their assets and liabilities.

Insurance Commissioner Dennis B. Funa said the regulatory body ceased the operations of these insurers after they failed to comply with the P550-million minimum net worth requirement set by the agency.

“These companies are not operating on net losses. Based on the respective 2016 annual statements of these companies, all have positive net worth but short of the minimum amount required under the Insurance Code,” Mr. Funa was quoted as saying in the statement.

However, Mr. Funa clarified that the insurers will continue to process and pay claims of their policy holders.

“This means all insurance contracts issued before the conservatorship order remain valid and the obligation of the company towards its policyholders still exists until the expiration of their policies.”

The insurance commissioner explained that the purpose of placing the insurers under conservatorship is “ to preserve the going concern value of the company, returning it to health or ultimately resulting in a receivership.”

“There are several routes that may result in the lifting of the conservatorship order including entering in a merger or consolidation with an existing insurer or a purchase and assumption agreement with an investor,” Mr. Funa said, adding that existing shareholders or new investors may infuse additional capital to meet the minimum net worth requirement.

Last month, seven insurers — six non-life and one life insurance firm — voluntarily surrendered their licenses to the IC for failing to meet the P550-million minimum net worth requirement, and were issued individual servicing licenses for the orderly run-off of their businesses.

As a result, the previous 66 non-life insurers in 2016 is now reduced to 55.

Under the amended Insurance Code, the minimum net worth of insurance companies shall increase every three years.

From the previous P250-million minimum net worth, IC required the insurers to have P550 million net worth effective end-2016.

The capitalization requirement will again increase to P900 million in 2019 and P1.3 billion in 2022.

In preparation for the next increase in net worth requirement, the commission will be requiring all insurers to submit their respective capital build-up plan.

Meanwhile, Mr. Funa assured the insuring public of the financial strength of the insurers despite their decrease in number. — Karl Angelo N. Vidal

RELATED ARTICLESMORE FROM AUTHOR