Several insurers still to comply with higher capital requirement

MANILA, Philippines — A number of insurance companies in the country are still far from achieving the P900 million net worth requirement for insurance players which should be implemented by the end of 2019, the Insurance Commission (IC) said yesterday.

In his speech during the IC’s 70th Anniversary celebration in Manila, Insurance Commissioner Dennis Funa said the insurance industry is facing the challenge of complying with regulatory capitalization standards.

“Perhaps the most difficult of those challenges that we face today is compliance with the statutory and regulatory solvency requirements, especially regards the minimum net worth and risk-based capital ratios,” Funa said.

Funa then disclosed later in an interview with reporters that he was particularly concerned about the number of insurance companies which are still far from reaching the paid-up capital of at least P900 million, the level required under the Insurance Code effective Dec. 31, 2019.

“What I’m concerned about are those companies that are still far off from the P900 million,” Funa said.

“Let’s say from 54 non-life (firms), about 20 something are still a bit far from the P900 million (requirement). In the life (insurance industry), there’s not much because if you look at the overall insurance industry, 80 percent are in the life business and only 20 percent are in non-life,” he said.

To help them raise the needed capital, Funa said some insurance firms are now searching for potential investors. Some are also discussing possible mergers.

While he is hopeful that players in the industry would comply with the new requirement, Funa still expressed concern that some may not be able to do so in the end.

“I’m hopeful that all of them will be able to come up with the P900 million. But of course you have to be realistic that at the end of the day, some of them will not be able to comply with the P900 million net worth (requirement),” Funa said.

But the IC chief assured that the regulator would give companies more flexibility in terms of the deadline for compliance, particularly if they are already in discussions with potential investors or partners.

Under Republic Act (RA) 10607 or the Amended Insurance Code of the Philippines, new players in the industry are required to have P1 billion in paid-up capital when they establish their business in the country.

Existing insurers, for their part, must have a paid-up capital of at least P250 million by June 2013, P550 million by December 2016, P900 million by December 2019 and P1.3 billion by December 2022.

Since the implementation of the P550 million requirement in 2016, Funa earlier said six non-life insurance firms and one life insurance company have voluntarily surrendered their licenses to engage in the insurance business.

He said the IC also issued cease and desist orders against five more companies. Meanwhile four other companies have decided to merge their operations and combine their assets, enabling them to comply with the capitalization requirement.