By Beatrice M. Laforga
INSURANCE COMPANIES are asking the Insurance Commission (IC) to “ease up” on some regulatory requirements to temper the impact of the coronavirus pandemic on the industry.
Philippine Insurers and Reinsurers Association (PIRA) Executive Director Michael F. Rellosa told BusinessWorld member companies have sought the relief to help them cope with the economic fallout.
Investments have declined due to coronavirus-driven volatility in financial markets, while sales have slumped as Luzon and other parts of the country were placed under lockdown since mid-March.
“We think we can survive this, but we have to ease up also on the regulatory regime. Since everybody felt the hit, can they go easy on us first so that we can continue doing what we are doing to help spur the economy,” Mr. Rellosa said in a Zoom call on Friday.
He said the IC should suspend or lower the minimum net worth requirement of P900 million for this year and 2021 after the value of insurers’ assets were eroded by market volatility.
“Investments namin bumagsak (our investments plunged), at the same time, may capital buildup program. So can we put a moratorium on the capital buildup program or can we peg it at specific level, and the RBC or the risk-based capitalization regime that we are also under, pwede bang (can they) i-relax naman nila ’yung levels,” Mr. Rellosa said.
“Marami kaming hinihingi sa regulatory relief (we are asking for a lot in terms of regulatory relief).”
Under Republic Act No. 10607 or the Insurance Code, insurers must have a net worth of at least P900 million by Dec. 31, 2019 and P1.3 billion by Dec. 31, 2022. New players must have at least P1 billion in paid-up capital.
Most insurers complied with the minimum net worth requirement last year, but considering weaker market conditions and the bleak economic outlook, Mr. Rellosa warned the number of nonlife insurance companies could be halved by yearend.
“If they are going to continue with the current levels of requirements, such as net worth requirements, RBC, kung lahat ’yan ipagpapatuloy medyo mahihirapan kami, siguro kalahati mawawala, out of 57, siguro mga 30 na lang maiiwan (if those will continue, it might be difficult for us to comply and around 30 out of our 57 nonlife insurance members could be gone),” he said.
However, he said PIRA still has to consolidate the inputs of its 57 members before submitting a formal appeal to the IC.
In mid-April, the insurance regulator conducted a survey to measure the impact of the coronavirus pandemic on insurance firms. Insurers were scheduled to submit the forms by May 8 and results were not yet available to the media as of writing.
IC chief Dennis B. Funa has said insurance companies are “well-capitalized” to weather the risks of the coronavirus crisis, but their investments and sales will be hurt.
Mr. Rellosa said sales of nonlife insurance companies have declined since most firms were not used to adopting work-from-home schemes, as well as depressed demand for their products.
Despite lower revenues from the business disruptions, he noted companies continued to pay for their usual expenses such as rental costs, utilities and salaries.
“Bagsak ’yung new business nila and ’yung renewals medyo nangalahati (New business is down and the renewals were halved). For different classes of insurance, iba iba ’yung effect but on a whole, medyo masama (the effect varies, but overall, it’s pretty bad). Sales went down,” Mr. Rellosa said.
Meanwhile, Philippine Life Insurance Association, Inc. (PLIA) President Benedicto C. Sison has said life insurers expect their assets to suffer “some drag” due to local equity sell-offs, although equities only make up a small portion of their total assets.
Sales of life insurance products also took a hit in the first month of the lockdown as the mobility of their financial advisors were restricted.
Even with the online availability of some products, Mr. Sison said online sales still could not match the volume sold through licensed financial advisors as most clients still prefer face-to-face meetings before getting a policy.
Mr. Sison noted an uptick in online sales of life insurance products, as more people wanted to get protection amid the coronavirus pandemic.
Sales picked up after the IC allowed advisors to conduct “digitally enabled face-to-face selling” according to Mr. Sison. He added they expect sales to bounce back to their pre-pandemic numbers in the coming months as more Filipinos realize the benefit of life insurance.
As of writing, the IC has not responded to queries on possible regulatory relief.
IC has extended the deadline for submission of audited financial statements for its regulated entities, including life and nonlife insurance firms, to June 30 from the original May 31 deadline.
The regulator also ordered insurance firms and health maintenance organizations (HMOs) to extend for at least 30 days current policies and agreements expiring during the lockdown period.
Meanwhile, several life and nonlife insurance companies have adopted general relief measures for policyholders, such as grace periods for premium payments and the inclusion of COVID-19 under the critical illnesses covered.
The insurance industry’s premiums jumped 2.76% to P224.97 billion as of end-September 2019 from P218.91 billion posted in the comparable nine months in 2018.
The life insurance sector accounted for P172.05 billion of net premiums written in the period, while the nonlife sector contributed 19.56% or P44.02 billion.