Insurance Commission releases guidelines on insurersâ dividends
According to data from the Insurance Commission, the insurance industry was able to book a total premium income of P141.91 billion in the first half of the year, 2.64 percent lower than the P145.76 billion reported in the same period last year.
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Insurance Commission releases guidelines on insurers’ dividends

Mary Grace Padin (The Philippine Star) - November 5, 2019 - 12:00am

MANILA,Philippines — The Insurance Commission (IC) has warned insurance companies that it cannot declare or distribute dividends unless they remain in good financial condition, and have complied with the paid-up capital and net worth requirements for players in the industry.

This is pursuant to IC Circular Letter 2019-60, issued by Insurance Commissioner Dennis Funa on Oct. 30, 2019, providing the guidelines on insurance companies’ declaration and distribution of dividends, including cash, property or stock dividends.

While the circular does not require insurance firms to get prior approval or clearance from the IC for the release of dividends, Funa said they must be in good financial standing before they can distribute dividends to stockholders.

“No domestic insurance company shall declare or distribute any dividend on its outstanding stocks unless it has met the minimum paid-up capital and net worth requirements under Section 194 (of the Insurance Code),” the circular read.

In addition, Funa said the insurance firms must also have sufficient earnings after retaining an unimpaired paid-up capital stock; complying with solvency requirements and the legal reserve fund; and setting aside sufficient funds to pay for all net losses reported or liabilities.

To ensure compliance of the industry, the circular directs insurers who declared dividends to submit a report to the IC within one month from the dividend distribution.

“A domestic insurance company which has declared or distributed dividend shall report the same to the Insurance Commission, through the Investment Services Division within 30 days after such declaration or distribution,” the circular stated.

The circular, which takes effect immediately, stated that companies who violate these rules may have their operations ceased by the commission.

“If the commissioner finds that any such corporation has declared or distributed any such dividend in violation of this circular letter, he may order such corporation to cease and desist from doing business, upon the recommendation of the deputy commissioner for Technical Services Group, until the amount of such dividend, or the portion thereof in excess of the amount allowed under this circular letter, has been restored to said corporation,” it said.

According to data from the IC, the insurance industry was able to book a total premium income of P141.91 billion in the first half of the year, 2.64 percent lower than the P145.76 billion reported in the same period last year.

Funa attributed this to the decline in the sales of variable life insurance products amid uncertainties in the global market.

On the other hand, IC data showed that the insurance industry’s asset base grew by 11.79 percent to P1.72 trillion as of end-June 2019 from P1.54 trillion in the same month of last year.

The industry’s investment portfolio as of June 30 likewise expanded by 19.59 percent to P1.52 trillion from P1.27 trillion.

IC INSURANCE COMMISSION
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