The Insurance Commission on Friday said eight non-life insurers were working out a merger to comply with the minimum paid-up capital requirement of P550 million.
Newly-appointed Insurance Commissioner Dennis Funa said four companies will also cease operations due to the higher capital.
Life and and non-life insurers should have a recorded net worth of P250 million at the end of 2013 and P550 million at the end of 2016. The level is to increase to P900 million in 2019 and P1.3 billion by the end of 2022.
Funa said three non-life insurers and one life insurer formally expressed their intention to voluntary stop operations.
Four pairs of non-life insurers have taken the merger and acquisition route, while two non-life companies plan to bringing in new investors who will acquire control over their firms.
“We are now reviewing their formal proposals. However, we can only reveal their identities upon approval of their application for voluntary cessation or plan for merger/consolidation,” Funa said.
He said several companies planned to invite new investors in order to comply with the mandatory increase in the capitalization requirement. Some companies are now conducting due diligence.
The Philippines at the end of 2016 had four life and non-life insurers, 66 non-life insurers and 27 life insurers.
IC said the results of the audit conducted on the 2015 financial statements of insurance companies showed that 24 life insurance companies and 13 non-life insurance companies were compliant with the P550 million-requirement.
Less than 10 non-life insurance companies, meanwhile, need a negligible amount to meet the existing capitalization requirement.
“Despite the expected decrease in the number of industry players, the IC remains optimistic of its robust growth backed-up by the mandatory increase in capitalization requirement, among others,” the regulator said.
Total assets of insurance industry as of end of the third quarter of 2016 amounted to P1.32 trillion, up 21 percent from P1.08 trillion posted in the same period in 2015.
Funa said the imposition of higher capitalization requirement would be beneficial to the insuring public and enable the country’s insurance industry to compete with their Asean counterparts.
“In light of the increased financial stability in the insurance industry, better protection for and strengthened confidence from the insuring public is expected. Furthermore, with the increase in the required minimum capitalization requirement, the continued phenomenal growth of our country’s insurance industry is likewise expected,” he said.