IC: Only 2 insurers remain undercapitalized
Two insurers remained noncompliant with the mandatory end-2019 net worth requirement, such that one would be sold and another placed under conservatorship, Insurance Commissioner Dennis Funa said on Monday.
Two other previously undercapitalized insurance firms, which were given up to October to comply “were able to infuse cash to increase their net worth,” Funa told the Inquirer. He, however, refused to name these two firms “because of reputational implications.”
Under Republic Act No. 10607 or the Amended Insurance Code, all life and nonlife insurance players in the country must have at least P900 million in net worth by Dec. 31, 2019.
In April, Funa said a total of six noncompliant companies at the start of the year had been in the process of complying before the COVID-19 lockdown was imposed in mid-March. As such, the Insurance Commission (IC) had suspended the show-cause orders earlier on issued to these undercapitalized insurers. To date, four out of the six have already complied.
As for the two others still undercapitalized, Funa said one would be acquired by an investor, with the sale to be completed between January and March next year.
Funa also declined to name the insurance company up for acquisition, saying that it would be named only after the sale was completed.
The other one had been placed under conservatorship, Funa said but he also refused to name this company. However, at least three industry sources told the Inquirer that the firm placed under conservatorship by the IC was Empire Insurance Co.
Funa earlier explained that “the purpose of placing a company under conservatorship is to preserve the going concern value of the company, returning it to health or ultimately resulting in a receivership.”
“There are several routes that may result in the lifting of the conservatorship order, including entering in a merger or consolidation with an existing insurer or a purchase and assumption agreement with an investor. This does not also prevent the company from infusing fresh capital from either existing shareholders or a new investor in order to meet the minimum net worth requirement,” Funa had explained.
As of the first half, there were 134 insurers operating in the Philippines—32 life companies, 67 nonlife firms and 35 mutual benefit associations.
By end-2022, an insurers’ net worth must further rise to P1.3 billion under RA 10607—a provision that the Department of Finance had said should be followed to keep the insurance sector well-capitalized, hence rejecting proposals to maintain the current minimum capitalization threshold.