THE Insurance Commission (IC) believes some non-life insurance companies may not be able to meet the increased statutory solvency requirements by the end of the year, and encouraged such firms to seek investors or merge with other companies.
In a speech during the IC anniversary banquet on Friday, Insurance Commissioner Dennis B. Funa said that compliance with the statutory and regulatory solvency requirements is the “the most difficult of those challenges” the industry is currently facing, especially in regard to minimum net worth and risk-based capital ratios.
He said he is “concerned” that some non-life insurers are “still far off” from the P900-million minimum required capital which was upgraded this year.
“The numbers are still significant, so [there is a] sizeable number of insurance companies still far from the P900 million,” he told reporters in an interview.
He estimated that out of the 54 non-life insurers in operation, “20 something” are still far from meeting the increased solvency requirements.
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. Funa added that insurers would have until the end of the first quarter of 2020 to comply with the increased minimum net worth requirements, as their full-year financial statements will still be subject to review by that time.
“I don’t want to speculate. I’m hopeful that all of them will be able to come up with the P900 million… But of course, you have to be realistic that… some of them will not be able to comply with the [minimum] P900 million net worth.”
“We are encouraging them to find investors and I think that is what most of them are doing now,” Mr. Funa said.
“So far, there are those who are merging and some are in talks,” he added, although he noted that very few insurers are currently in merger talks.
Despite this, the IC said there will be some flexibility in terms of implementing the statutory requirements, especially if the companies indicate that there are plans for a merger or capital infusion.
“We will not be ironclad strict that on this day and time, we will shut down the insurers, because if we place them under conservatorship, we will have to determine if they can be rehabilitated or not,” the commissioner said.
Last year, the regulator shut down the operations of five non-life insurance firms: First lntegrated Bonding & lnsurance Co., Inc., Investors Assurance Corp., Metropolitan lnsurance Co., lnc., Plaridel Surety & lnsurance Co., and Premier lnsurance & Surety Corp., after the firmsfailed to comply with with the 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. — Karl Angelo N. Vidal