The IC also wants to put into place early next year the entire system including electronic for the issuance of the comprehensive third-party liability (CTPL).
In fact, the Department of Finance (DOF) virtually slammed the plans of the Government Service and Insurance System (GSIS) to compete with the private sector on the issuance of the CTPL.
"We would want to let the private sector take over businesses which forms part of the long-term reform program of govrnment," Finance Secretary Margarito Teves said in a press briefing yesterday at the opening of the 2005 World Congress of Financial Executives held at the Makati Shangri-La Hotel.
The global financial congress is hosted by the Financial Executives Institutite of the Philippines (Finex) and attended by financial experts from Asia-Pacific and Europe.
Meanwhile, the commission pressed that reforms in the insurance indsutry should get off the ground early next year.
"The commission would like to start the programs in January next year," Evangeline Escobillo, IC Commissioner said.
The RBC formula is generally defined as the more the risks, the more products, the more capital required.
It is differentiated from the outright capital build-up originally proposed by the IC. The last time the industry raised its capital was in 2002 from P10 million to P50 million (roughly $1 million).
The IC already received the RBC proposal of the Philippine Life Insurance Association (PLIA) representing the life insurance industry. The non-life insurance sector represented by the Philippine Insurance and Reinsurance Association (PIRA) has been given up to next week to submit their proposal.
Escobillo said that the IC has appointed a technical committee to study with industry representatives the industry proposals and submit the final draft before the end of the year.
"It should not take us too long to come out with the final version," Escobillo added.
The PLIA proposal was fashioned after models utilized by the insurance industry in the United States, Taiwan, Japan and Singapore. All the technical committee has to do is designed the formula based on the life and non-life sectors peculiarities.
PLIA president Jose Cuisia Jr. said that the life sector is prepared to make the adjustments in coordination with the IC. For their part, PIRA president Herminia S. Jacinto said that they were scheduled to meet with the IC this week.
"We have hired an actuarial consultant to draw up our proposal," Jacinto said.
The RBC formula covers asset default risk, mortality/underwrting risk, interest rate/asset-liability management risk, general business risk, premiums, admitted assets and networth.
For the non-life sector, there will be a difference in the mortality-iunderwriting risk as well as the casualty risks over mortality.
The IC expects that by 2007, the entire process of capital build-up for the entire industry would have been completed. It took Singapore almost two years.
"They have a more complex financial system, a more complex insurance industry, and it was still being tested to their industry," Escobillo said. "Our industry is not as complicated, but we need to increase the industry capital base to remain competitive in the region, and the industry is able to fulfill its duties to the public."
Early this year, the IC informed the insurance industry of plans to implement a capital building program to strengthen the industry and bring it at par with its regional counterparts.
The country’s insurance industry is one of the lowest if not the lowest capitalized in the region. The last time the industry raised its capital was in 2002 from P10 million to P50 million.
The original timetable requires life insurance companies to increase paid up capital to P600 million by end 2007. For non-life insurers, paid-up capital should grow to P300 million by 2007.