MANILA, Philippines — The Insurance Commission has withdrawn the temporary regulatory relief it earlier granted to insurance companies to ease their quarterly net worth requirements amid the coronavirus pandemic.
Insurance Commissioner Dennis Funa has issued IC Circular Letter 2020-103, amending CL 2020-60 and removing the provisions relieving the net worth requirement of insurers and reinsurers this year.
The previous circular exempted companies from the quarterly compliance of the minimum net worth amounting to P900 million to provide them room to recover from the ill-effects of the ongoing pandemic.
Sought for comment, Funa said the relief was removed as it was “not necessary.” “That is actually not necessary because the determination of a conclusive or clear net worth is made at year end. Quarterlies are inconclusive. And this year-end report is submitted in April of the succeeding year. So this is a corrective circular,” Funa told The STAR in a text message.
Pursuant to Republic Act 10607 or the Insurance Code, the net worth requirement of existing insurers was raised to P900 million as of Dec. 31, 2019. Insurers’ net worth are monitored on a quarterly basis.
Moreover, the IC said the grant of relief from quarterly net worth requirements runs contrary to principles of the existing risk-based capital framework.
The IC also said that a number of regulatory reliefs that have significant impact on the net worth of insurers and reinsurers have already been granted.
These include CL 2020-58, which provides regulatory relief on the admittance of premiums receivable due to the COVID-19 pandemic and CL 2020-63, which eases the exposure limit applied to the financial assistance programs of insurance companies.
With the amendment, only the temporarily rules easing the risk-based capital (RBC) of insurance firms now apply. In particular, this provision slackened the regulatory intervention needed by a company based on their RBC ratio.
Earlier, the IC said it recognizes that insurance companies may be suffering due to COVID-19 in a variety of ways, such as declining revenues, volatility in the stock market, interest rate changes, increased claims, credit risks, supply chain and service disruptions, and overall decrease in the value of assets and investments.
Funa said the regulator is eyeing a second round of survey to determine the pandemic’s impact on the financial position and overall business condition of insurance companies.
Meanwhile, the IC has scrapped the proposal to cap the minimum net worth requirement of local insurance players to P900 million to ensure that the industry remains well-capitalized. This means the commission will hike the capitalization requirement of insurers to P1.3 billion by end-2022, as scheduled.