And for 2007, authorized capital requirement will be increased to P600 million for life insurers and P300 million for non-life insurers.
Unnamed commission officials said that the plan has already been forwarded to the affected industries for comment, and further discussions.
However, the same officials said that the Commission and the Department of Finance (DOF) is bent on increasing the capital base of insurers to protect the public.
At present, the minimum authorized capital for both life and non-life insurance firms is a mere P50 million.
It was raised to that level in 2002 from a mere P10 million.
IC Commissioner Benjamin S. Santos stressed that the planned increase was to ensure the financial health and viability of insurance companies. And the principal concern of the commission is the unwieldy non-life insurance companies and the competitiveness of the industry in lieu of the Asian counterparts.
"The increase in capital will come. This is a capital intensive industry responsible to millions of lives," Santos lamented.
Insurers must also increase their capital investment based on the new capital requirement.
Under Section 203 of the Insurance Code, insurers must set aside as part of the investment portfolio one-fourth of their paid-up capital in government securities. The amount is deposited with the IC as a contingency surplus much like the reserve requirement of banks deposited with the BSP.
The poorly capitalized non-life industry remains unattractive even to the local market making it vulnerable to increased presence of foreign players. The size of insurance companies in the Asian region has been growing in terms of assets and capital base, although the Philippine insurers remain among the lowest in the region.
The commission reported that Vietnam requires a minimum authorized capital of P300 million while Malaysia ensures a capital of P1.5 billion from its insurers.
"That is roughly equivalent to almost $30 million. Poor financial health has done only bad things in this industry," the commissioner said.
The proposed increase in authorized capital is part of the IC’s program of weeding out the unscrupulous or incapable insurers with emphasis on the roughly 100 non-life insurance firms.
It is also designed to encourage mergers and acquisitions (M&A). The commission is also looking at introducing incentives for M&As.
The life insurance industry is relatively healthy in terms of capital or the ability to increase to the P300-million level. It is the non-life industry that has had several problem related to capital and reserves to pay out claims.
"The non-life industry is problem-ridden, and it essentially prostituted the industry to the degree that it prejudices the insuring public," the commissioner said.