Reinsurance companies that are not licensed to operate in the Philippines but seek to reinsure risks from the Philippines have to be mindful of capitalisation requirements applicable to their Philippine counterparts as they may have to comply with them as well.
IC-licensed resident agent
The Insurance Commission of the Philippines (“IC”) recently issued Insurance Circular Letter No. 2015-16 which provides guidelines for a non-Philippine resident foreign reinsurer in relation to an application for registration with the IC of its resident agent.
These are in addition to the requirements set out under the Insurance Code of the Philippines, as amended, and other IC issuances on the regulations governing the cession of Philippine licensed insurers of risks to non-resident foreign reinsurers. Having an IC-licensed resident agent makes a non-resident foreign reinsurer eligible to reinsure risks from local insurers.
A resident agent of a non-resident foreign reinsurer is a natural or juridical person who is a Philippine resident and who is authorised to receive notices, summons, and other communication on behalf of the reinsurer in relation to claims or suits in the Philippines against the reinsurer.
To apply for a license with the IC, the resident agent has to submit, among others, an application form, its income tax return, its power of attorney from the reinsurer, the audited financial statements of the reinsurer for the last three years, and the license of the reinsurer to operate in its jurisdiction.
Establishing the reinsurer’s capitalisation
Pursuant to Insurance Circular Letter No. 2015-16, the applicant now also has to establish that the reinsurer’s capitalisation is at least equal to the minimum paid-up capital required of its local counterpart, depending on whether the non-resident foreign reinsurer is licensed as an insurer or as a professional reinsurer in its home country.
In case the non-resident foreign reinsurer does not meet the applicable capitalisation requirement, its resident agent may instead submit to the IC proof that the reinsurer’s financial strength is as follows:
Non-resident foreign reinsurance brokers
Cession to a non-resident foreign reinsurer may also be done by a local insurer through a non-resident foreign reinsurance broker. Similar to the requirement on a reinsurer, such broker has to have a resident agent in the Philippines that is licensed by the IC.
Insurance Circular Letter No. 2015-2016 applies as well to an applicant for registration as a resident of a non-resident foreign reinsurance broker. The resident agent of such broker has to submit to the IC a copy of the current errors and omissions policy of the broker along with other application requirements.
If the IC approves the application, the license of the resident agent of a non-resident foreign reinsurer or reinsurance broker is valid until 31 December of the third year following its issuance, and may be renewed.