MANILA, Philippines - The Insurance Commission (IC) has released a new circular to guide domestic mutual life insurance firms on the process of converting into a publicly held company, a move aimed at protecting the welfare of their existing policyholders.
Insurance commissioner Dennis Funa signed Circular Letter 6, series of 2017, on Jan. 23, which lays out the three basic types of demutualization and the process to be undertaken by a company seeking more investors through this method.
Demutualization is the process of converting a mutual life insurance company, which is owned by its policyholders, into a publicly traded stock company owned by shareholders who may or may not be policyholders.
Funa said the three types of conversion are full demutualization, sponsored demutualization through a mutual holding company, or a combination of both.
“Demutualization through variation of methods may also be employed, with the approval of the Commission,” he said in a statement.
The commissioner emphasized that the entire process of demutualization must be transparent and publicly disclosed to inform all policyholders and members of the company. “It is the policy of the IC to afford full protection to policyholders, ensure fair and equitable treatment of members, and protect the interest of the converting company,” Funa said.
The IC assured that it would stay on top of the entire demutualization process, with the assistance of IC-accredited independent actuary and other relevant experts.
Under the new circular, the insurance regulator will also have the power to conduct public hearings or consultations to hear out the concerns of existing policyholders and members.
Demutualized insurance companies have the advantage of having access to new investors and sources of capital.
With this, they would be more in position to comply with the required increase in minimum paid-up capital of P550 million for insurance companies starting this year.
Sun Life Assurance Co. Of Canada and Manufacturers Life Insurance Co. are subsidiaries of Canada-based insurers which have demutualized before and are now listed on Philippine Stock Exchange.
Insular Life Insurance Assurance Co. Ltd. is the only remaining domestic mutual life insurer in the Philippines.