HONG KONG, Philippines – The Philippine insurance industry is ripe for consolidation as it faces tougher challenges in terms of increasing demand for capital, better services on claims, threats of worsening climate change, and intense competition.
In a briefing here, Pioneer Insurance and Surety Corp. president and chief executive officer David Coyukiat said there are now too many players in the country’s non-life insurance industry servicing a relatively limited market.
There are 88 non-life insurance companies in the Philippines competing for a market which registered premiums worth P20 billion in 2009. Of the total premiums written last year, the top 10 players accounted for roughly 80 percent of the business while of the total assets of P108 billion in 2009, the top 20 players accounted for over 50 percent.
To ensure the health of the industry, the Insurance Commission has required all insurers, both life and non-life, to increase minimum paid-up capital from P100 million in 2009 to P500 million by 2015.
“The higher capital requirement will force the industry to consolidate,” Coyukiat noted.
In fact, the entire Asian region is going through a consolidation phase, according to global financial publication Euromoney.
In a discussion yesterday, Euromoney associate publisher William Powell said the region is also undergoing consolidation.
“The global capital requirements are trimming down the players (in the region), while the new and more sophisticated players are adding pressure to the existing players,” Powell said.
Global insurance players are entering the Asian market, thus putting pressure on domestic players. But majority of these players are finding it more sustainable to forge alliances with strong and well-capitalized local players. Domestic players that fail to increase capital and reserves, professionalize and introduce innovative products will be waylaid.
Powell said that major mergers and acquisition (M&A) may not occur in the immediate future but definitely consolidation is occurring.
The country’s non-life insurance industry expanded to over a hundred players but has been steadily shrinking as the Philippine economy weakened and the demand for capital increased.
The life insurance industry likewise has shrunk from over 40 foreign anddomestic players to just 32 active insurers.
Over the past two years, industry players have been asking the Insurance Commission to firmly enforce the minimum capital requirements as well as the risk-based capital formula.
The International Association of Insurance Supervisors (IAIS) is also introducing accounting standards that would affect all insurers worldwide. It is likened to the capital and accounting standards introduced by the Bank for International Settlements (BIS) on the global banking community, through its Basel I, II and III frameworks.
Insurers said a year after the destruction brought about by typhoons Ondoy and Pepeng, not all insurance claims have been addressed.
Powell was in Hong Kong to award the Pioneer Group as Asia’s best insurer based on its third annual insurance survey. The survey was conducted online with over 400 chief finance officers representing some of the world’s largest corporations.
Aside from the regional insurer award, Pioneer was also named best insurer in the general property and casualty in Asia and the best insurer for employer liability in Asia.
The Pioneer Group is composed of Pioneer Life Inc. and Pioneer Insurance and Surety Corp. Pioneer Insurance is one of the top five non-life players offering coverage for businesses in the aviation, marine, cargo, and construction industries, as well as businesses, individuals and their properties in case of fire, general accident, theft and other adverse circumstances.
Pioneer Insurance serves clients from 16 branches nationwide. Its office in Hong Kong makes it the only Filipino non-life insurance company actively writing business in China’s Special Administrative Region.
In 2009, Pioneer Insurance generated gross premiums of close to P2.2 billion. Backed by equity of almost P6 billion and managed assets of nearly P10 billion, Pioneer’s market leadership is highlighted by its strong position across all non-life insurance lines.
Pioneer Life Inc. has gross written premiums of close to P700 million, with a net worth of P516 million and managed assets of P3.7 billion in 2009.