THE Insurance Commission (IC) said all non-life insurance companies must adopt and implement new rates and a new rating structure for all their catastrophe risk policies starting April 2022.
Insurance Commissioner Dennis B. Funa issued Circular Letter 2021-27 dated April 12 asking the non-life industry to implement the sustainable catastrophe insurance premium rates and formally establish the Philippine Catastrophe Insurance Facility (PCIF).
He also announced a consultation with the sector to determine the rates, inviting companies to send representatives to the technical working group for the PCIF and help draw up the structure, governance and other implementation details of the facility.
“(The process will include) the commitment of the participating non-life insurance companies to adhere to the established sustainable catastrophe insurance premium rates through the compulsory cession to the PCIF,” according to the circular.
It said in surrendering the right to set rates for the facility, the industry will charge a “reasonable percentage or maximum limit” per risk and per policy as agreed by the non-life insurance sector, led by the Philippine Insurers and Reinsurers Association.
The cessions to the PCIF should start by April 2022, the IC said, in consideration of active reinsurance agreements of non-life insurers.
The facility was established to help non-life insurance companies better manage disaster-related exposure and expand the sector’s capacity to take on more risk.
It allows nonlife insurers to share the risks associated with catastrophe insurance products by pooling them in the facility.
Prior to the PCIF, insurance companies with natural disaster-related insurance products entered into reinsurance agreements overseas.
Pooling resources in the PCIF and keeping them within the country will help the nonlife sector boost its premium base and eventually expand the catastrophe insurance products these companies offer.
The Philippines is one of the most disaster-prone countries in the world, frequently hit by typhoons, flooding, landslides, volcanic eruptions and other extreme climate patterns such as El Niño and La Niña. — Beatrice M. Laforga