Driven by increased risk exposures to natural calamities because of climate change, reinsurance rates in the Philippines have surged by 50%, making nonlife products more costly.
Officials of Malayan Insurance said that premiums for nonlife policies have been rising largely due to the hardening of the reinsurance market as well as the abysmal risk rating of the Philippines.
In a report from the Philippine Star, Malayan Insurance senior vice president and chief underwriting officer Eden Tesoro said that the rise in cost hit the Philippines harder as it is a catastrophe-exposed country. The pandemic’s continued ripples as well as global geopolitical tensions also continue to pile on the uptick.
“Reinsurers have done mainly two things: withdraw from the market or continue to give support but at a limited amount,” Tesoro said. “Now, they have priced it much more than what it was before. And when you have a key ingredient that increases its cost, that also increases the price of non-life products.”
Tesoro also noted that while the industry has gotten away with limited increases in the past few decades, the rise has been sudden and significant this time around. She said that such a huge increase would likely stay the same for another year as reinsurers do not just look at past instances but also pricing for exposure and potential hit.
Echoing the sentiment made by another insurance boss a few months back, Tesoro said that various national and local government taxes and fees are adding to the burden being presented by the current reinsurance situation.
“We are not saying that we should not be taxed. But to review where we are if we compare ourselves to our Southeast Asian peers,” Tesoro said.
Currently, the insurance market in the Philippines pays out 24%-25% in combined taxes compared to the 7%-12% for its neighbours.
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