Philippine insurers have sought Congress’ help in convincing the Department of Finance (DoF) to defer the implementation of the planned hike in the minimum paid-up capital requirement on industry players.
The call was made by the Philippine Insurers and Reinsurers Association (PIRA), the umbrella organization of 85 non-life insurance companies in the Philippines.
“Small players in the non-life insurance industry face a major crisis if the Insurance Commission will continue to implement the DOF’s Department Order No. 27-06,” PIRA chairman Pedro P. Benedicto Jr. told the House of Representatives and the Senate.
Benedicto was referring to an order that requires Filipino-owned insurance companies to have a minimum paid-up capital of P250 million by the end of this year.
Signed on Sept. 1, 2006, the order laid down different schedules for different types of non-life insurers—classified by the ownership structure, whether fully or partially Filipino-owned—to raise their capitalization yearly from 2006 to 2011.
For fully local non-life insurer—as well as life insurers—the order required an increase in paid-up capital to P50 million by the end of 2006, P75 million by end-2007, P100 million by end-2008, P125 million by end-P2009, P175 million by end-2010 and P250 million by end-2011.
This is accompanied by the requirement for the same firms to attain a net worth of at least P100 million in 2006, P150 million in 2007, P200 million in P2008, P250 million in 2009, P350 million in 2010 and P500 million in 2011.
For both criteria, there are separate schedules for non-life insurers with foreign equity of 40 percent or less; more than 40 percent but less than 60 percent; and more than 60 percent, as well as other companies that do not fall under those categories.
The DoF order explained that these rules were needed because previous minimum capitalization requirements were not enough for the companies to ensure better service and expand their market penetration.
Also, the DoF said the previous requirements did not provided enough allowance for “increased business volatility and for mitigating market imperfections.”