Philippines: Cash-hungry insurers warned about "predators"
Source: Asia Insurance Review | Jun 2016
The Philippine Insurers and Reinsurers Association (PIRA) has cautioned non-life insurance companies against forming partnerships with venture capitalists that are out to make a quick buck.
PIRA Vice Chairman Michael F Rellosa said that a large number of foreign venture capitalists are in town in search of investment opportunities, as the Insurance Commission (IC) requires insurers to increase their capital from PHP250 million (US$5.3 million) this year to PHP550 million by next year.
He said that the venture capitalists are aware of growth in the general insurance industry, given the country’s strong economy, reported the Philippine Star.
He cautioned insurers to be selective as venture capitalists have profit targets when they acquire stakes in a company. “Venture capitalists have a fixed term; they have an exit strategy (for their investment); say, in five years’ time, it should have earned this much, then they could re-sell to the owners or list it,” he said. The problem is that the required profit may not fit with the needs of the insurer and their policyholders.
With the higher capital requirements for general insurers, speculation is that the number of players in the sector could be cut to around 50 at the start of 2017 from 70 at end-2015.
In 2011, there were 84 non-life insurers. Latest data from the Insurance Commission indicates the number of local non-life insurers was 62 at the end of March.