MANILA, Philippines - The Insurance Commission (IC) said all mutual insurance companies, just like other insurance firms, are also required a minimum equity base of P550 million by end-2016.
IC commissioner Dennis Funa said Circular Letter 2017-14 clarifies the rules on the minimum members’ equity of mutual insurance companies.
“All mutual companies duly licensed by the Insurance Commission must have a total members’ equity of at least P550 million by Dec. 31, 2016,” the circular said.
It also stated mutual companies should increase their member’s equity to at least P990 million by end-2019 and P1.3 billion by end-2022.
The higher requirement for mutual companies’ capitalization would ensure these firms would be financially healthier and assure the safety of the interest of its policyholders.
Earlier, the IC issued a circular clarifying that all life and non-life insurance companies should comply with the P550-million minimum net worth requirement as provided under Republic Act 10607 or the Amended Insurance Code of the Philippines.
However, the circular did not include provisions on the minimum members’ equity requirement of mutual companies.
Mutual insurance companies are insurance firms owned entirely by its policyholders. As such, in lieu of the net worth requirement, mutual companies should achieve the minimum members’ equity requirement instead.
“Under the Insurance Code, whatever capital required for a domestic insurance company is also required for a mutual company, but the term used is members equity,” IC Non-Life Examination Division chief Julia Dueñas told The STAR.