The Philippine Insurance Commission (IC) has directed all IC-regulated entities (ICREs) to implement the measures under Circular Letter (CL) No. 2025-21 in localities placed under a state of calamity following the magnitude 7.8 earthquake that struck several provinces in Mindanao on June 9, 2026. The directive, issued June 17, applies wherever a national or local calamity has been declared in the earthquake’s aftermath.
CL No. 2025-21 is a standing framework that takes effect upon any calamity declaration. Its activation requires ICREs to carry out five specific obligations toward affected policyholders:
Insurance Commissioner Reynaldo A. Regalado framed the directive in terms of both regulatory duty and the sector’s broader responsibility to disaster-affected communities. “The Commission reminds all regulated entities that prompt claims settlement is not only a regulatory obligation but also a vital means of providing immediate financial assistance to communities, especially those that need to rebuild after a disastrous calamity. Let us ensure that affected policyholders receive the support they need without any delay,” Regalado said.
The Philippine Insurers and Reinsurers Association, Inc. (PIRA) – whose 55 member companies collectively account for all domestic non-life insurance sold in the Philippines – said on June 8 that it was too early to determine the scale of insured losses. Field reports had already indicated damage to covered assets, but a reliable damage figure would take several weeks to establish. PIRA said its member companies were prepared to process and settle valid claims as they came in.
PIRA executive director Michael Ferre Rellosa situated the earthquake within a broader pattern of converging nat-cat exposures that gives the IC’s directive added urgency. “This tragedy underscores why being adequately insured against catastrophic perils is not a luxury but a necessity. Our country sits squarely on the Pacific Ring of Fire, and Nat Cat risk here is not confined to earthquakes – it extends to typhoons, floods, and storm surge. We are presently seeing a flurry of seismic and volcanic activity even as a strong La Niña is set to exacerbate the coming typhoon season. The industry exists precisely for moments like these – to help our people absorb the shock, rebuild, and recover,” he said.
In a commentary published June 9, global ratings firm AM Best said insured losses from the earthquake are expected to be limited and a small fraction of total economic damage – a pattern it attributed to the Philippines’ catastrophe protection gap. Under the current market structure, the primary layer of insured losses is expected to be distributed between direct insurers and the Philippine Catastrophe Insurance Facility (PCIF), a domestic risk-pooling mechanism for catastrophe coverage, with international reinsurers absorbing a share of exposure beyond that layer.
AM Best also noted in the same commentary that domestic insurers have been increasing their net retention of catastrophe risks in recent years – a deliberate response to reinsurance costs – which has heightened balance-sheet sensitivity to events of this scale. “An increase in net retention of catastrophe risks in recent years by primary Philippine insurers is a strategic response to balance high reinsurance costs with profitability targets. Consequently, this shift has heightened sensitivity to climate risks and exposed inaccuracies in traditional risk models due to the inherent uncertainty associated with climate change, could lead to elevated underwriting volatility,” said Susan Tan, senior financial analyst, AM Best.
AM Best further noted that while gross written premiums have risen consistently across the market in recent years, the average combined ratio has climbed alongside them, meaning claims volatility and higher administrative costs risk offsetting premium gains. The Mindanao event is expected to weigh on second-half 2026 results.
In the same commentary, AM Best senior director analytics Victoria Ohorodnyk said the gap between insured and economic losses from this event points to a wider need for structured disaster financing in the region, and identified a scenario that would test the market more severely than the current event. “The earthquake and the difference in insured and economic losses makes the case for disaster financing for the region to build up resilience to such events. The event underscores the importance of catastrophe risk management for insurers – a greater risk for insurers would be if an event happens in one of the more commercial centers in the country, such as Manila,” she said.
The IC directive arrives as the Philippine general insurance market records sustained premium growth that has yet to close the gap between economic exposure and insured loss. According to GlobalData’s Insurance Database, the sector is projected to expand from PHP161.4 billion (US$2.8 billion) in 2026 to PHP229.2 billion (US$3.9 billion) by 2030, a compound annual growth rate of 9.2%. Property insurance – the line most directly exposed to seismic events – was the leading class in 2025 at 36% of general insurance gross written premium, with a projected CAGR of 8.0% through 2030.
Aon’s January 2026 report cited by Manila Bulletin showed total insurance penetration at 1.85% of GDP in the third quarter of 2025, up from 1.74% a year earlier, with non-life accounting for 1.1 percentage points of that figure and non-life premiums growing 13% year-on-year to over $1 billion in the same period. Those gains have not yet translated into materially deeper catastrophe coverage. Aon’s data shows that since 2000, only 12% of economic losses from flooding and tropical cyclones across Southeast Asia have been covered by insurance – a protection gap of 88% across a region that relies heavily on self-funding or government assistance for disaster recovery.
That gap is precisely what the IC’s directive is designed to address at the claims end: ensuring that where coverage does exist, it reaches policyholders without procedural delay. For Philippine non-life insurers, the circular sets the compliance floor for the industry’s response to the Mindanao earthquake. How the sector manages the convergence of claims pressure, higher retention, and an active weather season in the months ahead will be a more consequential test.
