Ten non-life insurance companies have asked the court to stop the Department of Finance (DoF) from further implementing a 2006 order raising the minimum capitalization requirement on the insurers.
In a 32-page motion filed with the Quezon City Regional Trial Court, the group said that the DoF order, if not suspended, would put them out of business as the required increases were “way beyond what the market could support.”
The 10 insurers are Security Pacific Assurance Corp., Visayan Surety and Insurance Corp., Finman General Assurance Corp., Milestone Guaranty and Assurance Corp., R&B Insurance Corp., Industrial Insurance Co., Philippine Phoenix Insurance and Surety Corp., Mercantile Insurance Co., Great Domestic Insurance Co. of the Philippines, and Insurance of the Philippine Islands Co.
These are Filipino-owned reinsurers that were required by the DoF, under Department Order No. 27-2006, to increase their paid-up capital yearly starting with an additional P50 million by the end of 2006 to P175 million in 2010 and P250 million in 2011.
The insurers were able to meet the required increases up to 2009 but the 2010 requirement was pushed to June 30, 2012, in view of the strong lobbying by industry players against further increases in the required minimum capitalization.
Earlier this year, Finance Secretary Cesar V. Purisima—citing the need for strong, well-funded insurance companies—hinted at plans to further jack up the required capitalization to P500 million by 2015 and P1 billion by 2016.
Citing data from the Insurance Commission, the companies said they each have paid-up capitalization of between P100 million and P125 million.
They claimed that they were no longer capable of further raising their capital to P175 million or higher. The failure of the insurers to meet the requirement by the end of this month would result in the non-issuance of their license to operate.
In their motion, the 10 companies insisted that they had been in the insurance business for decades and had not been remiss in paying their obligations to their customers. They also said that their current respective paid-up capital was more than enough for the size of their market.