Insurers get capital relief

The Department of Finance (DOF) and major players in the country’s

insurance industry finally reached a compromise wherein insurers were given a four-year reprieve to build up their capital levels.

Finance Secretary Cesar Purisima has signed Department Order 15 – 2012 deferring the capital buildup program for life and non-life insurers to 2014 to 2020

instead of 2012 to 2016.

“This was the result of several consultations conducted by the DOF and the Insurance Commission with industry players,” Purisima said in a statement.

Under the new order, existing life and non-life insurers are mandated to raise their minimum paid-up capital every other year beginning 2014 starting with P250 million this year to P400 million in 2014, P600 million in 2016, P800 million in 2018, and finally to P1 billion in 2020.

The Finance Department was originally looking at a capital build-up program starting from P250 million by the end of this year as stated under DO 27-2006 to P450 million next year, P625 million by end-2014, P800 million in end-2015, and finally to P1 billion by end-2016.

“The imposition of a higher minimum paid-up capital to further supplement [DO] No. 27-06 after Dec. 31, 2012, shall ensure sufficient protection to the insuring public and further strengthen the integrity of the insurance industry,” the order stated.

The Finance chief has maintained that insurance companies in the country should raise more capital in preparation for the common Association of Southeast Asian Nation (ASEAN) market by 2015.

He said higher capitalization could be deferred for two years for merging and consolidating insurance providers or companies that meet the risk-based capital (RBC) hurdle rate of 150 percent.