LOCAL INSURERS have been consolidating amid a continued increase in capital requirements.

Only 85 insurance companies were left as of end-2018 after 15 direct insurers shut down in the past five years, according to the National Reinsurance Corp. of the Philippines (NRCP).

The minimum net worth requirement for insurance companies will increase from P550 million to P900 million by year-end.

Despite fewer players, the higher capital requirement has led to stiffer competition especially for non-life insurers, NRCP President and Chief Executive Officer Allan R. Santos said in an article published in Singapore and filed with the Philippine Stock Exchange.

“The average profit margin of non-life direct insurers has been slowly decreasing annually since 2015, dipping to 6.9% in 2018,” he said. “While this is a vast improvement from the 3.2% average in 2013, it is just half of the life profit margin of 12.6%,” he added, noting that taxes on non-life insurance products were also among the highest in the region.

“Such high taxes make non-life insurance products less affordable,” Mr. Santos said. “Coupled with low awareness and cultural attitudes towards insurance, this makes increasing insurance penetration more challenging.”

Meanwhile, Mr. Santos said the Insurance Commission and the industry have formed a task force to look into possible changes to the Insurance Code. These include changing the minimum net worth requirements hard-coded in the law and the proposed fourth package of the Tax Reform for Acceleration and Inclusion Act.

The local insurance industry’s total premium income jumped 11.67% to P290.15 billion as of end-2018 from P259.82 billion, according to data from the commission.

The bulk of the industry’s premium income came from the life insurance industry at P228.61 billion, 12.89% higher than a year earlier. — Luz Wendy T. Noble