Life insurers vow to comply with 2008 capital requirement

Jan	07
2009

Life insurers vow to comply with 2008 capital requirement

abs-cbnNEWS.com | 11/21/2008 5:35 PM

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Life insurance companies are committed to fully comply with the government's minimum paid-up capital requirement by the end of the year, said the Philippine Life Insurance Association (PLIA) on Friday.

In a one-page letter to Insurance Commissioner Eduardo Malinis, PLIA president Gregorio Mercado said the group's member firms would beef up their paid-up capitalization to P75 million by end 2008 in an effort to boost the confidence of consumers amid the global financial crisis.

"The member-companies of PLIA, fully cognizant of the need to demonstrate before our existing clientele and the markets we wish to serve, hereby declare and make the commitment that by year-end of 2008, each company will have a minimum paid-up capital of P75 million," Mercado said.

In 2006, the Finance Department issued Department Order No. 27-2006, which mandates all local insurers to increase capitalization to be at par with counterparts in neighboring countries.

Under the capitalization order, Filipino-owned life and non-life insurance companies would have to increase their minimum paid-up capital from P50 million and a minimum statutory net worth of P100 million in 2007 to a paid-up capital of P250 million and net worth of P500 million by 2011.

Life and non-life insurance providers are required to beef up their minimum paid-up capital to P75 million and their net worth to P150 million by the end of 2008 from the current level of P50 million worth of paid-up capital and a net worth of P100 million.

Mercado said reforms in the insurance sector are being done to help boost the confidence of the insuring public, given the financial meltdown in the US brought about by the collapse of insurance giant American International Group and other financial institutions.

"We wish to affirm the financial stability and strength of the life insurance industry to weather the storms of this current crisis," he added.

Statistics from the Insurance Commission showed that assets of life insurance providers amounted to P366.9 billion while the industry’s net worth stood at P73.1 billion in 2007. It has also written P76.2 billion worth of gross premiums from traditional and variable unit linked products.

Insurance providers, particularly those engaged in the non-life sector, have asked the Finance Department for more time to comply with the minimum capitalization as well as the removal of the provision on statutory net worth.