Asia Insurance Review
Eight life insurers in the Philippines are jointly seeking a permanent solution to their capitalisation problem which is to increase their minimum paid-up capital to PHP125 million (US$2.95 million) each as required by a ruling of the Insurance Commission and the Department of Finance.
To meet this target, these insurers are considering forming a "super brokerage", according to the Philippine Star. While the "super brokerage" will be a single entity, the individual stakeholders will still write their own policies. Another option is to consolidate through mergers and acquisition (M&A) among two or three insurers.
The eight insurers comprise one major player ranked between sixth and 10th in the industry in terms of premium income last year, two medium sized life insurers ranked from 11th to 20th, and five smaller companies.
The stakes for them will rise further because by the end of the year, the minimum paid-up capital requirement for an insurer will be PHP175 million. The capital increase programme started in 2006 and will culminate in a PHP250 million minimum paid-up capital level by 2015. By then, the Asean Free Trade Agreement (AFTA) will take effect, breaking down barriers for doing business among Asean member nations.
At present, Philippine insurers are seen as being at a possible disadvantage because they rank second lowest, if not the lowest, among their Asean counterparts in terms of capital. Of the 32 players in the Philippine life insurance industry, the top 10 players, which are mostly foreign-controlled and account for nearly 80% of total premiums, have already exceeded PHP1 billion in terms of capital.
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