MANILA, Philippines - Four life insurance companies are in consolidation talks to beat the June deadline for the increase in minimum paid-up capital to P175 million.
BF Life Insurance Corp., CAP Life Insurance Corp., Caritas Life Insurance Corp., and Manila Bankers Life Insurance Corp., are pushing through with the merger talks, with the latter reportedly the leading party to the consolidation efforts, sources said.
Failure to raise the amount will result in the non-issuance of the certificate of authority to operate (CA), which means the insurer will be prohibited from selling or writing new policies . They are, however, required to service existing policyholders and pay claims.
The four insurers had a combined premium income of nearly P350 million, based on the 2010 records of the Insurance Commission (IC). In the same period, total premium income of the entire life insurance industry stood at P70.7 billion.
While data show that Caritas Life already had a minimum paid-up capital of P300 million entering 2011, sources said the remaining three barely made the P125-million requirement in the same period.
MB Life chief executive Mabini L. Juan said in an earlier interview that they are looking at a cooperative-type of consolidation similar to the Rabo Group of the Netherlands.
Two complementary yet independent boards – the executive board and the supervisory board – govern the cooperative-styled institution.
The executive board is responsible for the day-to-day management of Rabobank and its affiliates, and develops policy and strategy. The supervisory board oversees and advises the executive board. It is also responsible for appointing executive board members and for their remuneration.
The two-tier structure ensures the proper checks and balances in place within its cooperative business system.
Insurance Commission head Emmanuel F. Dooc “the respective board of directors of the four insurers must pass a resolution stating their intent. “It would also be better if the four insurers sign a memorandum of agreement or understanding,” he said.
The consolidation talks started in the second semester of 2011.
There are 33 life insurance companies licensed for the period 2011-2012 that should be reflecting a minimum paid-up capital of P175 million. Next fiscal year 2012-2013, all insurance companies must reflect a P250-million minimum paid up capital before they are issued a license to operate.
Industry sources estimated that only the top 25 life insurers would likely meet the P250-million level.