Finance Secretary Carlos Dominguez III. PRESIDENTIAL PHOTO
The Department of Finance (DOF) is lukewarm to the proposal to revisit the higher net worth requirement for insurance firms, citing that industry players need to be competitive with its peers in the region.
“We want an industry that is strong and resilient, and one that can really serve the public. In the insurance business, it is always good to have healthy capitalization,” Finance Secretary Carlos G. Dominguez III told reporters when asked if the DOF was amenable to the nonlife insurance sector’s request for a review of the capitalization requirement.
Deputy Insurance Commissioner Ferdinand George A. Florendo said some nonlife firms wanted the requirement to be kept at P900 million starting next year.
Under Republic Act No. 10607 or the Amended Insurance Code, the minimum net worth of insurance companies should be increased to P900 million by the end of 2019 from P550 million at present, and again to P1.3 billion by end-2022.
Insurance Commissioner Dennis B. Funa said last month that the regulator directed a team to study the capitalization requirements across Asean upon the request of the nonlife insurance players.
“Based on our initial findings, it really appears that the Philippines has the highest net worth requirement by law… So I think having a second look at the requirement under the Amended Insurance Code is worth doing,” Funa said.
But for Dominguez, the law must be implemented and the higher capitalization requirement should be retained.
“We are also preparing for competition in Asean. How can you compete with the big boys if your capital is only $10 million? We want the industry to be competitive and strong, and that is the way to do it—to require them to have more capitalization,” Dominguez said.
Dominguez hence urged mergers or consolidation among firms that might fall short of the net worth requirement.