Compulsory insurance for private assets taking shape
Key players in the insurance industry, including the government regulator, are planning to seek Congress’ nod to make it mandatory to insure privately-owned assets against quakes, storms and flooding.
At the Insurance Commission’s 71st anniversary celebration on Tuesday (Jan. 28), the agency signed a memo of understanding with the Philippine Insurers and Reinsurers Association (Pira) and National Reinsurance Corp of the Phils (NatRe) to put in place a Philippine catastrophe insurance facility.
Pira is a group of companies offering non-life insurance.
“With this, we aim to provide the framework for greater financial resilience to the vulnerable sectors of our society,” said IC head Dennis B. Funa in a speech during the anniversary party.
“We want our target crowd to appreciate the importance of property insurance as a risk-transfer mechanism in the event of disaster,” Funa said. “And in a country such as ours that is beset by a host of disasters, the desired output
of the MOU is a most-welcome development,” Funa said.
Funa later told reporters that the proposed private sector-led insurance facility will be “a pool of non-life insurance with a reinsurance facility to be provided by NatRe.”
“Pira can handle that with the support of the IC,” Funa said.
Since the facility will insure private property, Funa said the pool would be bigger than the planned P1-trillion national indemnity program of the state-run Government Service Insurance System (GSIS) covering public assets.
Given the country’s exposure to frequent typhoons, flooding and earthquakes, Funa said he and the insurance groups would seek legislation to compel
purchase of insurance cover for private assets.
“If it’s not compulsory or mandatory, ordinary citizens will not buy insurance voluntarily, so that’s the missing link,” Funa said.
“There’s no compulsion to buy earthquake insurance… If it’s mandatory, it has to be by law,” Funa added.
In a separate interview, Pira executive director Michael F. Rellosa told reporters that the proposed facility will be designed with individuals as well as small and medium enterprises (SMEs) in mind.
Since local non-life insurers will create the pool, the sector will be able to “maximize retentions of individual companies to put them all together, and that way we don’t have to pay foreigners—we’ll keep our premiums within the country,” Rellosa said.
“So that way, we’ll grow our premium base and then we’ll also create capacity for our countrymen,” Rellosa added.
Rellosa expressed optimism that the proponents could finalize the details of the Philippine catastrophe insurance facility as soon as possible for launching within 2020.
