Insurance companies that fall short of the minimum P550-million capitalization requirement imposed by the amended Insurance Code have until April this year to reach the threshold, the Insurance Commission said Tuesday.
Insurance Commissioner Dennis Funa said insurance companies technically had over four months to comply with the minimum paid-up capital pending the submission of their 2016 annual audited financial report on April.
“From there, it will be determined accurately how much was their net worth. (There’s always a) tail-end, and (it) is much later,” Funa told Manila Standard.
Earlier, Funa disclosed four pairs of non-life insurance companies were planning merger to meet the higher capital requirement.
Funa said companies that had submitted plans for merger but were unable to meet the April 30 deadline would still be given ample time by the regulator because of the due diligence process in pursuing the transaction.
Life and and non-life insurers should have a net worth of P250 million at the end of 2013 and P550 million by the end of 2016. The net worth should increase to P900 million in 2019 and P1.3 billion by the end of 2022.
Meanwhile, the IC said it expects the insurance industry to grow this year on the back of the higher capitalization requirement.
“Due to the increase in confidence in the current Duterte administration, purchasing power and the middle class, the Philippine economy is expected to continue its expansion. This would benefit the different industries, translate into a considerable amount of potential to the insurance industry and would address the challenges brought about by the Asean integration,” said Funa.
IC data from 2011-2015 show that the insurance density—which represents the average amount spent on insurance by each individual in the country—grew expanded 84 percent to P2,286 in 2015 from P1,241.5 in 2011.
Within the same period, the insurance penetration, or the ratio of insurance premium to gross domestic product or the contribution of the insurance sector to the economy—also improved by 45.8 percent from 1.02 percent in 2011 to 1.75 percent in 2015.
The market penetration rate (ratio of individuals with life insurance coverage to population) increased by 125.64 percent from 18.29 percent of the population of 94.2 million (or 17.2 million) in 2011 to 41.27 percent of the population of 101.6 million (or 41.9 million) in 2015.
Despite the steady increase in density, the insurance penetration and penetration rates in the Philippines, is still considered low compared to with other countries in Southeast Asia, ASEAN countries, the IC said.
Funa said the IC would implement regulatory reforms to address these challenges.
He cited the recent mandatory increase in the minimum capitalization requirement of insurance companies from P250 million to P550 million.
“One of the important drivers in the growth of the insurance industry is the higher capitalization requirements of insurance companies leading to increase in the public’s confidence in insurance,” he said.