By Karl Angelo N. Vidal
THE PHILIPPINE Insurers and Reinsurers Association (PIRA) said two pairs of non-life insurance firms are expected to merge to meet the increased capital requirement that takes effect by yearend.
In an interview, PIRA Chairman Allan R. Santos said four non-life insurers are in talks for mergers to meet the P900-million minimum capital requirement set by the Insurance Commission (IC).
“With the minimum capital requirement being increased to P900 million by the end of this year, these companies will have to show that amount of capital. We know that currently, separately they don’t,” Mr. Santos said on the sidelines of the 15th Philippine Insurance Summit held last week in Makati.
“Obviously I can’t name those companies — we just hear this from the market. So we expect that those companies before the end of the year will have completed their mergers.”
According to Republic Act No. 10607, insurance companies are required to increase their net worth to P900 million by the end of 2019 from the current P550 million.
This will be further increased to P1.3 billion by the end of 2022.
Mr. Santos added that “there are still a lot” of insurers currently unable to meet the statutory capital of the IC.
“When you go to the IC website and just look at the net worth of the companies maybe as of 2017, you’ll see a quite number of them — probably 15-20 — are still below the P900 million,” said Mr. Santos, who is also the president and chief executive officer of National Reinsurance Corp. of the Philippines.
The official added that some insurers may “just give up their license” completely as they are far from meeting the required capital.
“Others may just give up their license, especially if they don’t have enough business to support that amount of capital that’s needed.”
In January, Insurance Commissioner Dennis B. Funa said there is a “sizeable” number of insurance companies still far from meeting the increased solvency requirements.
He added that there will be some flexibility in terms of implementing the requirement, especially if the companies indicate that there are plans for a merger or capital infusion.
With the expected mergers ahead of the end-2019 deadline, Mr. Santos said stiffer competition will ensue among companies.
“Companies now with higher capitals will look for ways to deploy that capital, make use of those capital. Therefore, they will try to get as much business as they can. So it could further intensify the competition,” he said.
“It could stimulate innovation, develop new products and target new segments and really to make use of the capital.”
Last year, the regulator shut down the operations of five non-life insurance firms — : First Integrated Bonding & Insurance Co., Inc., Investors Assurance Corp., Metropolitan Insurance Co., lnc., Plaridel Surety & Insurance Co., and Premier Insurance & Surety Corp. — after they failed to comply with the IC’s capital requirements.
The five firms were placed under conservatorship, which means that these companies are not allowed to sell new insurance products but will continue to process and pay for valid claims.