MANILA, Philippines — The government has scrapped a proposal to cap the minimum net worth requirement of local insurance players at P900 million to ensure the financial strength of the industry, according to the Insurance Commission (IC).
In a text message to The STAR, Insurance Commissioner Dennis Funa said the IC has dropped the proposed amendments to the Insurance Code, particularly on the capitalization requirement of insurance companies.
“It will not push through. We will implement as originally planned up to P1.3 billion,” Funa said.
The proposal was rejected by the Department of Finance (DOF), which remained firm on implementing the increase in net worth requirement by 2022.
“DOF believes it is better to strengthen the financial capacity of insurers and that overall, it will be better for the insurance industry in the long run,” Funa said
Earlier, Funa said the proposal to review the net worth requirements of the insurance industry was in response to the clamor of both life and non-life insurance firms.
Under Republic Act 10607 or the Insurance Code, existing insurers must have a net worth of at least P250 million by June 30, 2013, P550 million by Dec. 31, 2016, P900 million by Dec. 31, 2019 and P1.3 billion by Dec. 31, 2022.
New players in the industry are also required to have P1 billion in paid-up capital when they establish a business in the country.
Funa said earlier that proceeding with the P1.3 billion net worth hike by 2022 would make the Philippines with the highest capital requirement among Southeast Asian countries.
The Philippine Life Insurance Association said that capping the minimum net worth at P900 million should already be enough to keep the industry well-capitalized, and would enable companies to allocate their funds for other purposes.
Meanwhile, Funa said the IC has identified three insurance companies which have failed to comply with the P900 million capitalization requirement last year.
The IC chief said the three companies would be issued with a cease and desist orders.
As for those which have already complied, the IC has given them temporary regulatory relief from the quarterly compliance of the net worth requirement.
The commission also eased the regulatory intervention needed by a company based on its risk-based capital ratio.
Funa said the temporary easing of rules would allow insurance companies to better utilize their capital, and enable them to recover from the ill effects of the coronavirus pandemic.