YEARENDER: Insurance industry ends 2015 strong

MANILA, Philippines - The country’s life insurance sector ended 2015 on a high note with the possibility of returning to 2013’s record highs.

Insurance Commissioner Emmanuel Dooc expected 2015 to be a record year for the industry after a moderate decline a year earlier.

In the nine months to September last year, the Philippine insurance industry generated over P172.4 billion in total premium income, up 29.7 percent from P132.87 billion in the same period a year ago.

Given the sector’s upward trajectory, insurance firms predicted a repeat of the record 2013 performance.

In 2013, the combined premiums from life and non-life insurance sectors reached an all-time high of P198.1 billion while total premiums dipped 4.63 percent to P188.9 billion in 2014.

Industry net income, however, steadily increased in the past two years, from P14.6 billion in 2013 to P16.4 billion the following year.

Total assets grew from P891.8 billion in 2013 to a record P1.06 trillion in 2014.

Dooc said profitability was not the issue for the industry in general, but rather the growth in premiums for both life and non-life.

After all, the regulator’s target is to hit more than P500 billion in combined total premium income by 2019.

The positive outlook is anchored on the consistent growth of the Philippine economy.

In the past five years, the country’s gross domestic product (GDP) grew by an average 6.3 percent, the highest growth rate in the past decades. That growth rate has kicked upward the gross per capita income to $3,000.

“It would result in greater excess revenues for individuals and higher insurance sales or a penetration rate of three percent,” Dooc said.

The Philippines has a market penetration rate of 34.27 percent of the country’s almost 100 million population in 2014, or a little over one percent of GDP.

The country’s employed population has constantly increased, and the quality of employment is promising. In fact, the country’s demographics show a large population aged 15 to 45.

Over the past years, new players entered the industry, reflecting continued interest in the multi-billion-peso sector.  These include Ageas Insurance International Life of Belgium and Allianz AG of Germany, one of the world’s biggest insurance and financial institutions.

Ageas formed a bancassurance joint venture company with EastWest Banking Corp. called EastWest Ageas Life.

Allianz, on the other hand, acquired 51 percent of PNB Life Insurance Inc. The deal also called for a 15-year exclusive distribution partnership.

The joint venture company will operate under the name of Allianz PNB Life Insurance Inc.

Those still on the hunt for either an acquisition or a local partner in the Philippines are Samsung Life of Korea, Fubon Life of Taiwan, Zurish Life, several  Japanese insurers, and other players in the region.

Life insurers are constantly introducing products to sustain momentum from traditional protection to variable unit linked (investment-laced), from dollar-denominated to fund-of-funds and feeder funds in a bid to expand investments from overseas markets.

Other players have introduced health insurance products while others offered health insurance through riders.

Non-life insurers are now introducing products addressing climate change and the El Nino phenomenon.

But the biggest gain so far has been the failure of the Land Transportation Office (LTO) to implement the Reformed Comprehensive Third Party Liability insurance for vehicle registration.

Auto insurance is one of the biggest sellers for the non-life insurance industry, accounting for over 40 percent in premium sales.

The new measure requires an administrator, which insurers said would eventually turn out as the insurer, resulting in the non-life insurance industry becoming mere reinsurers.

This year, the IC will enforce the  new risk-based capital formula and a minimum capital requirement of P550 million for all insurers. The new capital requirement is higher than current minimum capitalization of P350 million.

Dooc said these reforms would lead to industry consolidation and stronger and healthier players, as well as prepare the industry for the full blown ASEAN Economic Community (AEC).

The Philippine insurance industry is the second most prepared for integration next to Singapore, according to Milliman, a global provider of actuarial and related products and services.

The global provider established the Milliman Asean Liberalization Index’ (MALI), a way to measure the openness of life insurance regulatory regimes in the 10 Asean countries, having regard to their alignment with international standards.

A score of 100 indicates a perfectly liberal market while low scores indicate more tightly controlled industries, with typically less exposure to foreign participation.

The eight features covered in MALI are: product development, distribution, investment, sophistication of capital regime, policyholder protection, foreign ownership, new licences and talent mobility.

The Philippines received a score of 58, the second best among the 10 ASEAN nations.