The government is planning to revise the capitalisation requirement imposed on local insurance companies to align it with those in other ASEAN countries, according to the Insurance Commission (IC).
Insurance Commissioner Dennis Funa said that the IC would revisit the net worth requirements of local insurance firms following a study it had conducted on insurers' capitalisation in the Southeast Asian region. He said this in an interview with Philippine Star.
Based on the study, Mr Funa said that the Philippines appears to have the highest net worth requirement for insurers in ASEAN.
“And on top of that, you have the RBC (risk-based capital) system, so I think having a second look at the net worth requirement under the amended Insurance Code is worth doing,” he said.
He said that the proposed adjustment in net worth requirements was first proposed by non-life insurance firms.
Under the insurance law, new players in the industry are required to have a minimum of PHP1 billion (US$19.4 million) in net worth. For existing insurers, the minimum has been increased in phases since 2013 and is set to be PHP900 million by December 2019 and PHP1.3 billion by December 2022. It currently stands at PHP550 million.
In addition, the IC last year implemented an improved risk-based capital system, dubbed RBC 2 to strengthen the insurance industry.
Since the minimum net worth requirement reached PHP550 million in December 2016, at least five non-life insurance players have voluntarily exited the business due to their inability to meet the new measure. The IC has also issued a cease and desist order against five more companies. Also, four insurers have decided to merge, to comply with the capitalisation requirement.