Insurance association assures policyholders
By Michelle Remo
Philippine Daily Inquirer
First Posted 03:06:00 09/20/2008
Filed Under: Insurance, Crisis
MANILA, Philippines—Insurance policyholders need not worry about the capability of life insurance companies in the Philippines to service claims and other obligations, the Philippine Life Insurance Association (PLIA) said.
The group stressed that insurance companies in the Philippines were not significantly affected by the ongoing US financial turmoil, which was punctuated by the bankruptcy of investment bank Lehman Brothers.
The PLIA said the liquidity position of insurance firms in the Philippines remained healthy despite the financial crisis in the world’s biggest economy.
PLIA president George Mercado said investment activities of life insurance companies in the Philippines were highly regulated and so insurance companies could hardly engage in relatively risky investments.
“Insurance companies in this country are only allowed to invest their funds in government securities, especially treasury bonds, and cash items like time deposits,” Mercado said in an interview.
If insurance companies wish to invest in instruments outside of the relatively risk-free government securities and bank deposits, they should first get approval of the Insurance Commission, he said.
“The Insurance Commission is very strict in approving investment activities of insurance firms,” he said. “Investments should be handled by fund managers that have strong financial background, as proven by three-year financial statements, and must be paying dividends.”
Mercado said the bulk of investments of insurance companies in the Philippines were in Treasury bonds. He said most of the bond holdings had maturity of 10 and 15 years.
Asked if any insurance companies in the Philippines had exposure to Lehman Brothers and other distressed US-based investment houses, Mercado said the PLIA had no such information.
“If ever there are insurance firms that invested in US banks, the investments are most probably long term. So, by the time the investments mature, the banks will have already been rehabilitated,” he said.
Mercado’s statement supported the pronouncements of Insurance Commissioner Eduardo Malinis that insurance companies in the Philippine were safe from the liquidity crisis.
Malinis earlier said most of the funds of insurance companies were invested in government securities. With editing by INQUIRER.net
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