Home Banking & Finance Non-life insurers to lobby vs minimum capital hike
Non-life insurers to lobby vs minimum capital hike
THE NON-LIFE industry will lobby to prevent the increase of insurance firms’ minimum capital requirement to P1.3 billion by the end of 2022, the Philippine Insurers and Reinsurers Association (PIRA) said.
PIRA chairman Allan R. Santos said in a mobile phone interview that the non-life insurance sector will push to keep the minimum net worth requirement at P900 million and not increase it further to P1.3 billion.
“The P1.3 billion will be one of the highest requirement in the ASEAN (Association of Southeast Asian Nations) region,” Mr. Santos told BusinessWorld on Monday.
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 said the next increase in minimum capital requirements will bring down the number of insurance companies in the country and eventually reduce consumer choices and competition.
“With regard to ensuring financial strength and stability, the Insurance Commission (IC) has already implemented an enhanced Risk-Based Capital framework which will require a larger net worth from companies who have larger or riskier portfolios,” he added.
In January, Insurance Commissioner Dennis B. Funa said there is a “sizeable” number of insurers still far from meeting the increased capital requirement of at least P900 million by the end of the year.
He estimated that out of the 54 non-life insurers in operation, there are “20-something” still far from meeting the increased solvency requirements.
With the impending increase in statutory capital, insurers in limbo are encouraged by the IC to look for investors or merge with other companies to meet the requirement.
Mr. Santos said there are two pairs of non-life insurance firms in the process of merging, adding that other companies might follow suit.
“[T]here could be other non-life companies who belong to the same group or parent that might also merge but no indication on this yet,” he said.
Last year, the regulatory agency shut down the operations of five non-life insurance, namely First lntegrated Bonding & lnsurance Co., Inc., lnvestors Assurance Corp., Metropolitan lnsurance Co., lnc., Plaridel Surety & lnsurance Co., and Premier lnsurance & Surety Corp., after the insurers failed to comply 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.
Mr. Funa and the Philippine Life Insurance Association, Inc. were sought for comment but had not replied as of press time. — Karl Angelo N. Vidal