Over 20 non-life insurers miss deadline for hike in capital

MANILA, Philippines – More than 20 non-life insurance companies have failed to meet the March 31 deadline for submission of documentary proof they have complied with the P125-million minimum paid-up capital requirement of the Department of Finance-Insurance Commission (DOF-IC).

IC Commissioner Emanuel L. Dooc said the commission had already sent out notices to these firms, warning that failure to meet the new minimum capital requirements by June would mean suspension of their operations.

“If they still fail to comply by June when the renewal of licenses are undertaken, they are in trouble,” Dooc stressed. June is the deadline for the submission of all documentary requirements prior to the issuance of the certificate of authority (CA), which must be renewed annually.

There are 86 non-life insurers, 34 life insurance and one re-insurance firms company registered with the IC covering the period 2009-2010.

Every year, roughly the same number of non-life insurers and one or two life insurer, have consistently been delinquent on the issue of meeting capital requirements and other reportorial requirements.

That has prompted several industry players to chide the commission for failing to strictly enforce its own regulations. “There are too many players in the industry, and government knows it.”

The enforcement of the higher minimum paid-up capital requirement has likewise forced two more non-life insurance firms to initiate mergers talks.

Manila Insurance Co. Inc. and Premier Insurance & Surety Corp. are reportedly holding talks to integrate operations. The two firms were among the last 30 firms ranked in terms of paid-up capital in 2009.

Last month, CCC Insurance and Empire Insurance also informed the IC of their intentions to consolidate, with Empire as the surviving entity. In terms of assets, Empire Insurance ranked 36th CCC Insurance was ranked 61st in 2009.

Dooc, however, warned insurance companies that they must present documentary proof of the legitimacy of the merger.

“They have to show us proof that they are really going through with it. There are legal papers and documents to be submitted to the Securities and Exchange Commission (SEC),” he said.

The IC had been alerted that some insurers might use the merger “boogey” just to be able to get around the P125-million minimum paid-up capital requirement.

In late March, non-life insurance firms sought an extension of the deadline which the commission denied. The minimum paid-up capital will be raised to P175 million effective 2012.

The capital increase may reach a maximum P250 million if the industry fails to adopt a risk-based capital (RBC) formula this year. The RBC formula sets up a process of strengthening the capital and reserve base versus risk, similar to the capital adequacy ratio (CAR) in banks.