"What could be a better proposition is a combination of the two proposals," Jose L. Cuisia Jr., president of the Philippine Life Insurance Association (PLIA) said yesterday.
Cuisia proposed that the Insurance Commission (IC), the Department of Finance (DOF), and PLIA should develop an acceptable formula for both the regulators and the industry.
"The industry is willing to increase its capital base after a longer period of time, and after we have developed a risk-based formula for the insuruance industry," he added. Insurers are also asking that the capital ceiling be reduced by half.
However, the formula for the life insurance industry would likely be different from that which would be utilized for the non-life and the reinsurance industries. A common formula would be that the more products, the higher the capital and risk issues.
Risk-based asset management is already being adopted and has been effective even with countries that have bigger populations, fewer insurers but larger capital bases than the Philippines.
Newly-appointed IC chairperson Evangeline C. Escobilla said she prefers adopting the risk management approach but remains open to increasing the paid-up capital requirement.
"I believe in the risk-based approach, and the industry, along with the IC, can formulate the right mix," Escobilla said.
The country’s insurance industry is one of the lowest capitalized in the region. It has been the general sentiment of the industry that it would be detrimental in the long run to remain under-capitalized. The last time the industry raised its minimum capital requirement was in 2002 from P10 million to P50 million.
The IC has earlier extended the timetable for the increase in paid-in capital by another year although the values remained in place.
The new timetable requires life insurance companies to increase paid up capital from P50 million to P150 million by end-2005; to P300 million by end-2006; and P600 million by end-2007.
For non-life insurers, paid-up capital should grow from P50 million to P100 million by end-2005, to P200 million by end 2006, and to P300 million by end-2007.
For reinsurers, from P75 million to P350 million by end-2005, to P450 million by end-2006, and to P900 million by end-2007.