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Philippines: Insurers give up on capitalization rules extension
MANILA, Philippines — Local insurers are no longer optimistic on the possible extension of the final tranche of increase in capital requirement by yearend, but the industry maintained it would continue to push for its review.
During the briefing for the Coop Climate Summit 2022 yesterday, the Philippine Insurers and Reinsurers Association (PIRA) said the industry is being pragmatic on the impending hike in capital requirements of firms.
PIRA, however, said it is not giving up on its stand that the current requirement is more than adequate.
PIRA is the umbrella organization representing the collective interests of the non-life insurance industry in the country.
“It is an ongoing advocacy, but we are starting to see that it may not be possible. Everyone is just preparing for it,” PIRA executive director Michael Rellosa said.
“We are not giving up our position. But at the same time, we are trying to be pragmatic and if the extension does not push through, then we just have to meet,” he said.
Under the Insurance Code, existing insurers must have a net worth of at least P1.3 billion by end-December from the current P900 million.
Since the start of the year, PIRA and the Philippine Life Insurance Association (PLIA) have been urging the Insurance Commission (IC) to reconsider forgoing the increase, arguing that doing so would just limit competition in the industry.
But the Department of Finance, IC’s mother agency, has been firm in its position not to extend the requirement hike.
Rellosa said PIRA would continue to push for the review, as well as reasoning out with the DOF through its position paper.
“Even with the existing law, there could still be a review. Every time there’s a new administration, we have to explain our position to them again. But we are still maintaining it, that hopefully the P900 million will be more than adequate,” Rellosa said.
“We will just be relying more on the review once it takes effect. We will try to show that we have complied, that we are trying, but it’s difficult for us,” he said.
PIRA argued that the local insurance industry is not as big as those in Southeast Asian neighbors such as Singapore or Indonesia, and yet the capitalization requirement would soon be the highest in the region.
Rellosa also underscored the impact of the pandemic that decreased the net worth of insurance firms.
Of PIRA’s members, Rellosa said about 90 percent are already compliant with the P1.3 billion capitalization requirement.
Source: https://www.philstar.com/business/2022/11/24/2225956/insurers-give-capitalization-rules-extension