Based on application papers filed with the Securities and Exchange Commission (SEC), the merger will make National Re the surviving entity.
A reinsurance company assists life and non-life insurance companies raise or ensure sources of funds for future claims.
National Re is a government-controlled reinsurance firm owned by the Government Service and Insurance System (GSIS) and the majority of the country’s non-life insurance companies.
UMRe, on the other hand is an alliance between Universal Re (UniRe) of the Bank of the Philippine Islands (BPI) and the Malayan Reinsurance (Malayan Re) of the Yuchengco Group.
Thus, the new National Re will have the GSIS, UniRe and Malayan Re controlling 24 percent equity each while the "old" National Re will own the remaining equity, share.
"It is a positive development for the country’s insurance industry and the economy is an indirect beneficiary," said Evangeline Escobillo, the newly-installed Insurance Commission head.
Escobillo added that it is good for the economy as premiums, especially those in US dollars, will be retained in the country instead of those handled by foreign reinsurers which has been dominating the reinsurance industry.
GSIS general manager Winston Garcia said a strong and single local reinsurer ensures that local companies including insurers will be protected from abuses by foreign reinsurers and brokers.
"It will also create an environment where rate setting becomes more stable," Garcia added.
The stockholders of the two reinsurance companies decided to merge in separate meetings held on Oct. 24 and 25, 2005 respectively.
"The merger has a very strong strategic rationale – to create the dominant Philippine reinsurance entity with greater underwriting capacity to service the requirements of domestic life and non-life insurance companies. The merger also builds added strength for likely strategic and competitive challenges in the local and Asean markets due to increasing market liberalization and greater cross-border business," UMRe said in a separate statement.
National Re will have an asset base of P5.5 billion and an equity base of P 3 billion, bringing it closer to the asset and equity levels of other national reinsurers in the region.
National Re was iformed in 1978 as a domestic professional reinsurance firm to provide life and non-life reinsurance capacity to the Philippine and neighboring insurance markets.
On the other hand, UMRe is a product of the merger in January 2004. It started as an insurance company in 1949 but was reorganized into a professional reinsurance firm in 1971. Before the merger, Malayan Reinsurance Corp was formerly Eastern General Reinsurance Corp., the oldest existing reinsurance company in the Philippines.