MANILA, Philippines — The Philippines’ high exposure to natural disasters and strong economic growth are expected to support insurance demand in the country, Moody’s Investors Service said.
The Philippines is visited by about 20 typhoons each year. It is also located in the Pacific "Ring of Fire," where earthquakes and volcanic activity are common.
In a November 1 report, the global debt watcher said the Philippines’ proneness to natural disasters has fuelled demand for catastrophic loss coverage.
Moody’s explained that the Philippines’ insurance market is expected to get a boost from the government’s proposal to launch a P10-billion catastrophe-risk insurance program.
The plan, which will be implemented by the state-run Government Service Insurance System, seeks to cover losses for the national government and 25 provinces for damage related to typhoons and earthquakes.
Volatile
According to Moody’s, life insurance premium growth in the country has been strong but volatile because of the high proportion of investment-linked products.
Meanwhile, the Duterte administration’s multi-trillion peso infrastructure program may drive non-life premium expansion, the credit rater also said.
The country’s robust economic growth is also expected to stimulate appetite for insurance, it added.
“Investment-linked policies dominate product mix, while growth in traditional life policies, which typically contain more protection elements than variable life policies, have been virtually flat,” Moody’s said.
“This suggests the industry is still lagging in expanding its core protection function,” it added.
Data provided by Moody’s show foreign firms dominate the Philippines' life insurance market. But the number of insurers has decreased because of regulations that promote market consolidation, thereby reducing competition in the industry.
In Southeast Asia, Moody's said insurance growth prospects are supported by strong socio-economic fundamentals including urbanization, a growing middle class, low insurance penetration and lack of a sufficiently funded welfare system. — Ian Nicolas Cigaral