By Chino S. Leyco
Less than a year before the deadline, the Insurance Commission disclosed yesterday that many non-life insurers remain way below the government’s minimum capital requirement.
Dennis B. Funa
On the sidelines of the agency’s 70th anniversary, Insurance Commissioner Dennis B. Funa said that a “sizeable number” of non-life insurance companies are still failing to meet the P900-million minimum paid-up capital requirement by December this year.
“What I’m concerned about are those companies that are still far off from the P900 million and the numbers are significant — a quite sizeable number of insurance companies — that are still far from the P900 million,” Funa told reporters.
Under Republic Act (RA) 10607 or the Amended Insurance Code of the Philippines signed in August 2013, new life and non-life insurance firms must have P1 billion in paid-up capital when they set up shop in the country.
However, those insurance firms that are already existing must have a paid-up capital of P900 million by December 2019 and P1.3 billion by December 2022.
Funa estimated that about 20 companies of the 54 non-life insurers are still below the required paid-up capital.
“We are just being hopeful that all of them , 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,” he said.
To address their regulatory issues, he reiterated his recommendation that insurance firms find new investors that can help them build up their capital.
Asked if the commission would strictly penalize the companies that failed to meet the requirement by December, Funa said there will be “some flexibility.”
“There will be some flexibility in it,” Funa said. “We will not be ironclad strict on this day and time because if we put them under the conservatorship division, we will still have to determine if we can rehabilitate it or not.”
The more stringent capital requirements were pushed to make the insurance industry stronger and more resilient to shocks, thus safeguarding the money entrusted by policyholders.
Likewise, the higher capital requirement was set up to put the local insurance companies at par with their neighbors in the region ahead of the full financial integration by the Association of Southeast Asian Nations (ASEAN) in 2020.
Earlier, Finance Secretary Carlos G. Dominguez III said that the government was determined to implement the current law governing the capital requirements for insurance companies despite the appeal from the industry to review the country’s insurance code.
Dominguez said the series of increases in capital requirements for life- and non-life insurance companies should proceed as programmed. “We want an industry that is strong, resilient, and an industry that can really serve the public, so in the insurance business it is always good to have a healthy capitalization,” Dominguez said.
“We are also preparing for competition for ASEAN so how can you compete with the big boys if your capital is only $10 million,” he added. Instead of suspending the law’s implementation, Dominguez suggested that insurance companies should consolidate or merge if they cannot meet the minimum capital requirement.
For 2017, the commission reported that it had been another banner year for the industry, with all sectors posting growth.
Based on unaudited statistics submitted quarterly by life, nonlife and mutual benefit associations (MBAs), the industry posted total assets of P1.5 trillion in 2017, which was 18 percent higher than in 2017 amounting to only P1.3 trillion.
Total premiums earned reached P259.6 billion for 2017, or growth of 11.9 percent, from only P231.8 billion in 2016.