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Global insurance giant Sun Life of Canada is on the lookout for acquisition opportunities in the Philippines, as rising capital requirement is seen prompting more consolidation in the local insurance industry.

Sun Life Financial Philippines president Riza Mantaring, in an interview with Inquirer, said the increase in the minimum capital requirement set by the Insurance Commission to P1 billion by 2020 would likely prompt consolidation among players.

“Some will probably decide to consolidate instead of infusing additional capital,” she said.

The P1-billion capital requirement was originally scheduled to take effect in 2016 but this was pushed back to 2020 to give the industry more time to prepare.  The association of life insurers has vehemently opposed the mandated capital hike.

“The insurance business is really long term. You have to have deep pockets because in the initial years, the more you sell the more you lose. You have to have big capital,” she said.

Mantaring said SLFP was “definitely” on the lookout for prospective acquisitions.

SLFP is the country’s leading insurance firm in terms of premium, based on 2011 figures.

“We have to assess the acquisition carefully. It has to make sense for us. We won’t acquire for the sake of acquiring,” she said.

In 2011, SLFP acquired a 49-percent stake in the Yuchengcos’ Grepa Financial. The deal, which gave SLFP management control of Grepa, paved the way for a bancassurance partnership between SLFP-Grepa and Rizal Commercial Banking Corp.

“Any other future acquisition would be considered relative to the alternative of using the same money to fund organic growth,” Mantaring said, noting that SLFP’s 33 branches were “extremely” productive.

On the outlook for 2013, Mantaring said industry prospects were still positive given a rosy macroeconomic and demographic backdrop.

“We are very optimistic.  The insurance industry has been growing tremendously—30 percent a year in the past three years. We think that will continue,” she said.

There is also an increasing indication that life insurance is no longer difficult to sell in the country, she said, noting that people are now calling SLFP offices expressing interest to buy.

Mantaring said the insurance penetration rate in the Philippines remained very low, with the industry accounting for only 0.7 to 0.8 percent of gross domestic product compared to Indonesia’s 1 percent, Thailand’s 2.7 percent, Malaysia’s 3.2 percent, Singapore’s 4.6 percent and Hong Kong’s 10 percent.  But Mantaring believed there was a big room for growth.

She said the insurance industry would likely benefit from the increasing base of young people reaching working age in the country.