The Insurance Commission (IC) has extended regulatory relief on insurers’ net worth, but only to those already compliant with the end-2019 requirement of P900 million.
In Circular Letter No. 2020-60 issued on May 15, Insurance Commissioner Dennis B. Funa said the insurance industry requested for temporary relief on the implementation of net-worth requirements and risk-based capital requirements for calendar year 2020 so that insurance companies could better use their capital as they continue to work on their recovery.
“[The IC] recognizes that with the COVID-19 crisis still unfolding, there will definitely be an impact on policyholders, counterparties, and vendors; and insurance companies may be affected in a variety of ways, such as exposure to declining revenues, unprecedented volatility in the stock market, interest rate changes, increased claims, credit risks, supply chain and service disruptions, and the overall decrease in the value of assets of investments. These events could depress the solvency position of insurance companies,” Funa said.
To keep insurers afloat, Funa said all badly hit insurers that had complied with the end-2019 net-worth requirement prior to the lockdown would be relieved of the quarterly compliance with the mandatory P900-million level.
However, “all insurance companies which are not compliant with the net-worth requirements as provided in the Amended Insurance Code before the declaration of the enhanced community quarantine (ECQ) are required to fulfill their respective commitments to the IC to put up additional funds to cover the net-worth deficiency before availing [themselves of] the relief,” Funa said.
Following the imposition of ECQ in Luzon and other parts of the country to contain the spread of COVID-19 in mid-March, the IC granted temporary reprieve to insurers that failed to meet the mandatory end-2019 capitalization.
Funa earlier told the Inquirer that to date, only six insurers remained noncomplaint with Republic Act No. 10607 or the Amended Insurance Code, which mandated all life and nonlife companies in the country to have at least P900 million in net worth as of Dec. 31, 2019.
“The six noncomplaint were in the process of complying before the lockdown. But now, we cannot evaluate their compliance because of the lockdown. That is the reason for suspending the show-cause orders issued” against them, Funa explained.
The IC had given undercapitalized firms until end-February to comply, but those that still failed were served show-cause orders for failure to jack up their capital investment. INQ