Non-life insurers see recovery this year

MANILA, Philippines — Non-life insurers are bullish about their recovery prospects for this year as they expect an increase in the demand for insurance and protection products.

In a document shared to The STAR, the Philippine Insurers and Reinsurers Association Inc. (PIRA) said the expected recovery of the Philippine economy this year bodes well for the non-life insurance industry.

Economic managers expect the economy growing between 6.5 and 7.5 percent this year, a reversal of the 8.5 to 9.5 percent projected contraction in 2020.

“The non-life insurance industry is expected to rebound and grow along with the Philippine economy in 2021,” PIRA said.

In particular, PIRA said a rebound in the construction sector – from a projected contraction of 10 percent in 2020 to an estimated growth of 9.5 percent this year – could lead to higher demand for property and engineering insurance.

Moreover, non-life insurers are banking on the public’s improved awareness of the need for protection against unforeseen events.

“The events in 2020, such as the COVID-19 pandemic, the Taal volcano eruption, Typhoons Ulysses and Rolly have also increased the public’s awareness and the importance of insurance protection,” PIRA said.

Last year, non-life insurers suffered from a decline in sales due to the lockdowns to slow the spread of COVID-19. Companies also saw an erosion in their income due to the pandemic-induced volatility in the financial markets in 2020.

While it remains upbeat for the industry’s growth opportunities this year, PIRA also sees some issues that may pose a challenge for industry players.

For one, PIRA said failure to control the spread of the COVID-19 virus could derail the recovery of the   economy and the insurance industry.

Insurers are also faced with the challenge of strengthening their financial strength amid the pandemic, in preparation for the scheduled increase in the minimum net worth requirement by the end of next year.

Earlier, the Insurance Commission said it had   scrapped the proposal to stop the hike in capital requirement under the Insurance Code. The law states that existing insurers must have a net worth of at least P1.3 billion by Dec. 31, 2022.

“The non-life insurance industry is expected to remain strong given the insurance companies’ high risk-based capital ratios, although we could see some consolidation due to the industry’s increased minimum capital requirements,” PIRA said.

The industry group said taxes imposed on non-life insurance products would also remain to be the highest in Asia, even if the proposed bill seeking their reduction pending in Congress is passed.

Hence, PIRA is calling on the government and the Insurance Commission to reconsider the proposals on capital requirements and insurance taxes.

“Favorable actions will increase affordability of insurance to the buying public which will eventually reduce the protection gap as well as the burden of catastrophes on government, and increase the country’s disaster resilience,” the group said.

PIRA said there was also a need to strengthen the country’s disaster resilience, with emphasis on the role of insurance protection as one of the solutions.