Proposal to hike capital requirements on insurers revived

The Insurance Commission is reviving previous proposals to increase the capitalization requirements on the country’s insurers to levels at par with the rest in the Asia-Pacific region.

Commissioner Emmanuel Dooc, appointed in December last year, said raising the capitalization requirement would encourage the merger of small industry players.

He said it was high time the proposed capitalization hike was implemented to make the country’s insurance industry competitive vis-a-vis its counterparts in the region.

“We [the Philippines] have the smallest capitalization requirement in the region. Increasing capital will reduce risks, improve payments capability and enhance competitiveness,” Dooc said.

Under the existing schedule of capitalization, embodied under Department Order 27-2006 by the Department of Finance, Filipino-owned insurance companies should have a capital of at least P175 million. By the end of this year, the requirement increases to at least P250 million.

Dooc said the existing capitalization schedule was inadequate to make the country’s insurers competitive.

“We want to compete with the rest of the insurance world,” the insurance commissioner said.

Taking into consideration the prevailing capitalization requirement in the region, he said the ideal level could be between P500 million and P1 billion.

Dooc said officials of the Insurance Commission had been meeting with industry players, particularly small insurers, to reiterate the need to raise the capitalization requirement and the need for the industry’s consolidation.

The proposal to raise the capitalization requirement had been brought up in the past leaderships of the Insurance Commission, but it did not materialize due to opposition from some industry players, especially those that did not want to be acquired or those that could not find investors.

Dooc, however, said increasing the capital requirement should be done if the industry wanted to develop and be as competitive as their counterparts in the region.