Nonlife insurers want to keep the P900-million capital requirement under a pending Senate bill aimed at amending the law jacking up the minimum to P1.3 billion by end-2022.
In a Jan. 19 letter to Sen. Grace Poe, who chairs the Senate committee on banks, financial institutions and currencies, the industry group Philippine Insurers and Reinsurers Association (Pira) noted that the current minimum net worth required among insurance players was “sufficient” to maintain their solvency.
Also, the P900-million requirement in place since 2019 was already among the highest in the region, Pira chair Edgardo Rosario said.
Pira wrote Poe to support Senate Bill No. 2411 filed by Sen. Lito Lapid last year, that would amend Republic Act No. 10607 or the Amended Insurance Code, which since 2013 gradually hiked firms’ required capital.
Stringent requirements
In the bill’s explanatory note, Lapid said “the final increase in the required capitalization by December 31, 2022 would make the Philippine requirement the highest in the region considering our market size.”
Also, “our net worth requirements are more stringent than the fixed paid-up capital required in other Asean (Association of Southeast Asian Nations) countries,” Lapid added.
Pira told Poe that nonlife companies in Vietnam had a net worth requirement of an equivalent to at least P667.9 million; P517.7 million in Indonesia; P480 million in Thailand; and P363.4 million in Singapore. The Philippines also had a higher minimum required capitalization than in India, Japan, Mexico, Peru and the US state of California, Pira said.
The group said the prevailing net worth level was “more than sufficient as [it acts] as buffer or early warning signal before a company shall be unable to pay its claims and liabilities to policyholders and creditors.”
“The amount of liabilities and reserves that the insurance company should set up in its financial statements are determined annually and reports are being made quarterly thus allowing the regulator to project and track the deficiency. Moreover, non-life insurance companies generally have an annual or short-term coverage of insurance contracts so that its liabilities can easily be determined after one or two years as the operation could show losses and income during the preceding year,” Pira said.
The Philippine Life Insurance Association, which groups the bigger life players, was also crafting its comment on the proposed law amendment, its general manager George Mina said last week. INQ