DOF bucks cancelation of insurance capital hike

MANILA, Philippines — The Department of Finance (DOF) is opposing a legislative proposal canceling the capital buildup for life and non-life insurance providers to P1.3 billion within the year.

Finance Secretary Carlos Dominguez III said insurance firms have to raise their capitalization to reduce their exposure from financial threats given that their line of work involves handling investments from clients.

The finance department, Dominguez said, is convincing Sen. Lito Lapid to withdraw a bill canceling the calendared hike of P400 million in capitalization of life and non-life insurers.

“We will discuss it with Sen. Lapid. To improve the protection to the public, the capitalization has to really go up just like in banking. They [insurers] should really go up because it is really for the protection of the public. I think we have to explain that to the senator,” Dominguez said.

The Insurance Commission (IC) has reminded regulated entities that the capitalization hike to P1.3 billion by December will protect them from economic risks in the long run.

IC Commissioner Dennis Funa said insurers facing difficulties in generating the additional P400 million could look for new investors who could be interested in bringing in fresh funds.

Funa pointed out that more than half of the insurance industry has complied with the P1.3-billion capitalization even before the deadline, although he confirmed that some of the players seem to be challenged by the task of piling up new investments.

“There are remedies for that (like) get new investors and get new stockholders. There’s always a way to raise capital. Some companies would be willing, some might not. It would depend on the board of directors but if it’s a policy, then I guess they have no choice but to follow,” Funa said.

Under the Insurance Code, insurers are mandated to put up a capitalization of P250 million in 2013. Afterward, they were required to raise that amount to P550 million in 2016, then to P900 million in 2019 and then to P1.3 billion this year.

However, Lapid’s Senate Bill 2411 proposed that the final increase in insurance capitalization be repealed, a legislation that gained the support of insurer groups like the Philippine Insurers and Reinsurers Association (PIRA).

Lapid said the concluding hike would only make the Philippines the most expensive country in Southeast Asia for insurers, warning that this will not only pressure existing investors but may also discourage potential ones.