Malayan Re chief executive Matias Simbulan said the "merger of equals" would result in the surviving entity, after completion of the detailed talks as well as fulfillment of government requirements, known as the Universal Malayan Reinsurance Corp.
Unofficial estimates place the merged reinsurers’ resources of over P1 billion.
However, this would place it behind industry leader National Reinsurance Corp. (National Re), which has resources of reportedly over P1 billion. Universal Re, the reinsurance subsidiary of the Ayala Group of Companies, had a premium base of nearly P800 million while Malayan Re of the Yuchengco group had over P250 million as of end-2002.
The merger has shrunk the local reinsurance business to only two players, including National Re, which is a quasi-government reinsurer as its biggest stakeholder is the Government Service Insurance System (GSIS). The rest of the stakeholders are private sector insurance companies.
GSIS controls 19-percent equity in National Re. But the merger of Universal Re and the Malayan Re would gain them a combined stake in National Re of also 19 percent.
Prior to the merger, Malayan Re held 12- percent equity while the Bank of the Philippine Islands (BPI) group controlled seven percent.
Universal Re officials said that there is a possibility they would increase their stake in National Re, resulting in its dominance in the local reinsurance market.
However, the local insurance industry will continue to rely on foreign reinsurance for protection since the local industry cannot grow any bigger or control larger resources. It is normal for local business to tap the local reinsurers who, in turn, tap the foreign reinsurance market. Others, especially the big corporates, go directly to the foreign reinsurers.