Insurance companies in the Philippines that fail to meet the PHP500 million (US$11 million) minimum capital requirement stated by the Amended Insurance Code will be given until April to reach it, according to the Insurance Commission (IC).
According to Insurance Commissioner Dennis Funa, insurers have technically over four months to comply, as they have until April to submit their 2016 annual audited financial reports.
Earlier, Funa revealed that four insurance companies are planning to cease operations, while eight are looking at mergers to meet the capital requirement. He added that companies who apply for a merger but fail to finalize it before the April 30 deadline will be given more time, owing to the due diligence process in pursuing the transaction.
The IC said that the country’s insurance industry is set to grow, partly due to 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,” Funa told the Manila Standard
. “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.”
Insurance density, or the average amount spent on insurance per capita, grew from PHP1,241 (US$25) in 2011 to PHP2,286 (US$46) in 2015, an 84% increase. In the same period, insurance penetration went up from 1.02% to 1.75%, marking a 46% increase.
Despite these increases, insurance penetration in the Philippine market remains low compared to its neighbors in ASEAN, said the IC.
“One of the important drivers in the growth of the insurance industry is the higher capitalization requirements of insurance companies leading to an increase in the public’s confidence in insurance,” Funa concluded.
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