Insurers struggle to meet new capital requirement

MANILA, Philippines – Four insurance companies are still struggling to raise the mandated P125-million minimum paid up capital required by the Insurance Commission (IC) and the Department of Finance (DOF). The reportorial deadline expired last March.

If by end-June an insurer fails to meet the minimum paid-up capital, it will not be issued a certificate of authority (CA) or the license to operate for another year.

Reports also indicate that another non-life insurance company has expressed willingness to cease operations in the absence of the so-called “white knight” or a buyer of its assets.

IC officials revealed that of the remaining four delinquent insurers, one has still to raise P1 million to be fully compliant.

“The other insurer is half complied while the third delinquent insurer is already half compliant. It is presenting a host of properties that are being presently evaluated,” officials said.

The fourth case is unique in that it has pending discussions with the Securities and Exchange Commission (SEC) regarding its classification.

The problem being settled with the SEC is that 60-percent equity of the said insurance company is foreign-owned but it was incorporated in the Philippines.

If it is declared foreign-owned, the capital requirements are much higher, or as high as P500-million minimum paid up under Department Order (DO) 27-2006.

Meanwhile, industry sources said non-life insurance firm Equitable Insurance Corp. informed the IC of its willingness to cease operations or to sell its assets to an interested buyer.

Equitable Insurance is not connected with the Banco de Oro Unibank Inc. (BDO) group which owns a significant stake in Generali Pilipinas. Generali holds a composite license allowing its to operate as a life and non-life insurance firm.

“It does not have the ability to raise the required capital nor is it willing to do so. Equitable Insurance is seeking the aid of the commission (IC) to look for a white knight. It is also willing to close shop in the event that no one is interested,” they added.

Earlier this year, Empire Insurance Co. and CCC Insurance Corp. informed the IC of plans to consolidate. CCC Insurance is presently undergoing due diligence.

Like Equitable Insurance, the two non-life insurance companies believe that meeting the minimum paid up capital of P175 million for the 2011-2012 period would be too strenuous, and futile.

Both the DOF and the IC are urging the country’s insurance industry to increase its general capital base in lieu of the impending full adoption of the Asean Free Trade Agreement (AFTA) in 2015.

The accord opens the doors for all regional players to enter the market on equal footing. However, government fears that the more capitalized and sophisticated regional players would merely overwhelm local players. –Ted P. Torres (The Philippine Star)