Non-life insurance industry outperforms in 2015

MANILA, Philippines – The country’s non-life insurance industry is confident it has outperformed in terms of net earnings and premiums written last year but sees this year as more challenging as the industry faces capital buildup issues and losses resulting from El Niño weather phenomenon.

Philippine Insurers and Reinsurers Association (PIRA) chairman Augusto P. Hidalgo said 2014 was a difficult year for the industry (also known as property and casualty or P&C) due to huge claims as a result of the large number of natural catastrophes in 2013, notably Typhoon Yolanda.

“Loss payments from claims in 2013 fell in 2014,” Hidalgo, who is also president and chief executive officer of National Reinsurance Corporation of the Philippines (PhilNaRe), told reporters.

However, the industry experienced fewer and weaker natural and man-made catastrophes in 2015, thus protecting gains from the normal flow of business.

In the first nine months of 2015, net income grew 122 percent to P3.62 billion from P1.63 billion in 2014.

Total net premiums written (NPW) reached P26.92 billion from January to September 2015, a 13.97 percent growth from P23.62 billion in the same period in 2014.

Net worth grew 13.33 percent to P71.83 billion while assets increased 2.26 percent to P167.94 billion.

“2015 will prove to be a better performer than the prior year,” Hidalgo said.

But 2016 would be a mix of positive external factors being countered by capital buildup requirements that may temper what otherwise could be another strong year for the 67-strong non-life insurers.

The PIRA chairman said expanding property and real estate sector bodes well for positive premium growth.

Demand for office space continues to be driven by the aggressive and expanding business process outsourcing (BPO) industry while the residential sector offers a wide array of options even in areas outside Metro Manila.

The industrial sector is looking for more sites as the manufacturing sector has consistently been a strong performer in 2015.

“There are still a lot of activity in government’s public-private partnership (PPP) projects pipeline, and a lot of property development and infrastructure included,” Hidalgo said.

The national elections is likewise a positive factor for excess flow of cash, some of which may end up as insurance premiums.

However, concerns were expressed as the insurance industry prepares to fulfill capital buildup regulatory requirements.

By the end of this year, the insurers must reflect a minimum paid-up capital of P550 million, or risk-based capital approximately showing the same amount. Minimum capital is presently pegged at P350 million.

Regulators and industry players estimate between five and 15 non-life insurers will drop out of the roster. Already the Insurance Commission (IC) revealed up to seven insurers are in the process of either a merger, seeking a buyer, or prepared to surrender its operating license and revert to a broker status.

Hidalgo said aside from capital issues, cutthroat competition in the auto insurance business might likewise force other insurers to surrender their licenses.