DOF wants insurance to grow into a P4-T industry

MANILA, Philippines - The Department of Finance wants the local insurance industry to grow at a fast pace and turn into a P4 trillion industry or half of the banking sector’s total resources over the next 10 years.

Finance Secretary Cesar Purisima noted the industry’s untapped potential, saying insurance penetration in the country remains low compared to other countries. 

Purisima said the insurance industry has aggregate resources of around P600 billion or just less than five percent of the banks’ total assets of over P8 trillion. 

“We want to increase the insurance industry’s asset size, hopefully at least half of the banking industry’s total resources, in the long-term or say 10 years. This is an aggressive target because the banking industry continues to grow,” Purisima said.

Purisima believes that the industry has ample room for growth as only 18.29 percent of Filipinos are covered by life insurance.

He noted that a large proportion of the population would reach levels of per capita income that will significantly boost  the demand for risk and savings-type products.

He likewise noted that the asset management industry is growing significantly as more people are parking their funds in mutual funds for savings appreciation.

With the passage of the new Insurance Code, Purisima believes that more Filipinos will avail themselves of insurance products.

The measure, which strengthens the country’s insurance industry, prescribes a higher capital requirement for life and non-life insurance firms every three years until 2022 as well as safeguard the interest of policyholders.

Under the new law, new insurance companies must have a paid-up capital of at least P1 billion while existing insurers must have a networth of P250 million by June this year, P550 million by 2016, P900 million by  2019 and P1.3 billion by 2022.

The new code aims to bolster insurance firms’ financial position ahead of the liberalization of the Asean financial sector by 2015.

“With stronger and better capitalized firms, they can have the resources to develop more products and build more extensive network.  They should also be able to increase their penetration of the market,” Purisima said.

The new law allows insurance companies to invest in more financial instruments as opposed to only government securities previously.