IC provides regulatory relief to insurance

MANILA, Philippines — The Insurance Commission (IC) has temporarily relaxed the rules on the insurance industry’s net worth and risk-based capital (RBC) requirements to provide relief to companies amid the coronavirus disease 2019 or COVID-19 outbreak.

Pursuant to IC Circular Letter 2020-60, dated May 15, Insurance Commissioner Dennis Funa said the IC has granted regulatory relief to insurance companies to provide them room to recover from the ill effects of the   pandemic.

“The insurance industry requests for temporary relief on the implementation of the net worth requirements and risk-based capital requirements for calendar year 2020 in order for insurance companies to better utilize their capital as they continue to work on their recovery vis-a-vis the Philippine economy,” he said.

In line with this, the IC said insurance companies are relieved from the quarterly compliance of the net worth requirement amounting to P900 million.

However, this relief is only available to insurance companies who have already met the net worth requirements by the end of last year, but have suffered due to the pandemic.

Under Republic Act 10607 or the Insurance Code, existing insurers must have a net worth of at least P900 million by Dec. 31, 2019.

Those who failed to comply with the requirement before the declaration of the enhanced community quarantine can avail of the relief once they have fulfilled their commitment to the IC to put up additional funds to cover their net worth deficiency.

Meanwhile, the IC said insurance companies compliant with the new net worth requirement are required to comply with IC Circular Letter 2016-68 or the amended risk-based capital framework.

The IC also eased the regulatory intervention needed by a company based on their RBC ratio.

Insurers with a RBC ratio of 100 percent and above will no longer need any regulatory action. The IC will be authorized to issue corrective orders to companies with a RBC ratio of 25 percent to 49 percent, instead of the previous range of 50 percent to 74 percent.

The commission said it would take over a company with a RBC ratio of less than 25 percent, instead of the original level of less than 50 percent.

The IC said companies are once again required to submit quarterly reports on their risk-based capital position after the first-quarter reports were waived.

According to Funa, the IC recognizes that insurance companies may be suffering due to COVID-19 in a variety of ways, such as declining revenues, volatility in the stock market, interest rate changes, increased claims, credit risks, supply chain and service disruptions, and overall decrease in the value of assets and investments.

“These events could depress the solvency position of insurance companies,” he said.

Funa said there is a need to provide relief to insurance companies and help them stay in business “as they provide as a primary source of financial protection to the society and economy.”