IC to review net worth requirement of insurance firms

The government is planning to review the capitalization requirement imposed on local insurance companies to align it with peer countries in the region, according to the Insurance Commission (IC).

In an interview, Insurance commissioner Dennis Funa said the IC would revisit the net worth requirements of local insurance firms after a study it conducted on the capitalization system in the Southeast Asian region.

Based on the study of the commission, Funa said the Philippines appears to have the highest net worth requirement for insurance industries among the member-economies of the Association of Southeast Asian Nations.

“And on top of that, you have the RBC (risk-based capitalization) system, so I think having a second look at the net worth requirement under the amended Insurance Code is worth doing,” he said.

Funa said the adjustment in net worth requirement was first proposed by the non-life insurance firms.

Under Republic Act (RA) 10607 or the Amended Insurance Code of the Philippines, new players in the industry are required to have P1 billion in paid-up capital when they establish their business in the country.

Existing insurers, for their part, must have a net worth of at least P250 million by June 2013, P550 million by December 2016, P900 million by December 2019 and P1.3 billion by December 2022.

In addition, the IC last year implemented an improved risk-based capital system, dubbed as RBC 2 to further strengthen the financial health of the insurance industry.

This system measures the capital needed by an insurance company considering its size and risk profile.

Ever since the adjustment in net worth requirements to P550 million in December 2016, IC said about six non-life insurance players have voluntarily exited the business due to their inability to comply with the new measure.

He said the IC has also issued a cease and desist order against five more companies.

About four companies, Funa said, have decided to merge to combine their assets and be able to comply with the capitalization requirement.

“Things are still moving, some things are changing on a daily basis,” he said.

According to unaudited statistics from the IC, the insurance industry as a whole recorded a total net worth of P315.44 billion in 2017, up 16.32 percent from the 2016 level.