100% foreign equity allowed in financing sector

Greater competition is expected in the local financial industry as a law that allows foreigners to take full ownership of lending and financing companies, investment houses and insurance claim adjustment firms comes into force next week.

The measure—Republic Act No. 10881 titled “An Act Amending Investment Restrictions in Specific Laws Governing Adjustment Companies, Lending Companies, Financing Companies and Investment Houses Cited In The Foreign Investment Negative List And For Other Purposes”—lapsed into law without the signature of former President Aquino last July 17.

In a press statement, Insurance Commissioner Emmanual Dooc said the liberalization of foreign ownership in adjustment companies, one of the sectors affected by the measure, would encourage best practices in the insurance loss adjustment.

“Another positive effect is that it will compel local players to shape up considering the competitive business climate, which will ultimately inure to the benefit of the insuring public,” he said.

Prior to the new law, foreigners were allowed to own up to 60 percent of investment houses, finance companies and lending firms and up to 40 percent for insurance adjustment firms. At the same time, however, the law sets a P10-million minimum requirement for paid up capital for finance companies located in Metro Manila, P5 million for cities outside the metropolis and P2.5 million in municipalities.

“During the deliberations before both houses of the 16th Congress, the Insurance Commission expressed its full support to the lifting of foreign equity restriction with respect to adjustment companies as part of the country’s compliance with our commitments to the Asean Economic Community to open certain sectors of the economy,” Dooc said.

“It is important to note the business of adjustment companies is the only activity under the Insurance Code which has a foreign-equity limitation,” he added.

The Insurance Commission chief welcomed the new law, adding that with its passage, the insurance adjustment industry—whose members are in charge of validating insurance claims and determines the amount of liability—would become more attractive to foreign investors.  Daxim L. Lucas