Government mulls hike in paid-up capital of insurance firms

MANILA, Philppines - The Aquino administration is planning to increase the minimum paid-up capital mandated on insurance firms, the country’s Insurance Commissioner, Emmanuel Dooc, told The Star in a recent interview.

Dooc said that raising the minimum paid-up capital of insurance companies would significantly reduce insolvency risk and help protect consumers.

Dooc said the target is to raise the capital to as high as P1 billion before the term of President Aquino ends. “We should go up to P750 million to P1 billion. We hope to achieve that before the current administration’s term ends,” Dooc said.

With this plan, Dooc expects mergers and consolidation in the insurance industry similar to what happened in the banking sector.

“Small players are adopting the capitalization requirement of banks and they are now considering possible consolidation. We see consolidation among small players. We have the most number of insurance companies in the region,” Dooc said.

Last March, the Insurance Commission and the Department of Finance (DOF) required companies to meet the mandated P125-million minimum paid up capital requirements for companies.

Companies who are unable to meet the minimum paid-up capital, will not be issued a certificate of authority (CA) or the license to operate for another year.

The Department of Finance (DOF) has been stressing the need to raise the insurance industry’s general capital base in lieu of the impending full adoption of the Asean Free Trade Agreement (AFTA) by 2015.

The present minimum paid-up capital requirement is P125 million and will increase to P175 million. Dooc said that by the end of 2012, this will become P250 million. “We want to reduce the insolvency risk,” Dooc said.

There are 120 insurance companies, 34 life and some 86 non-life insurance companies including a re-insurer.

In recent years, insurance plans and college insurance holders have lost their hard-earned money because companies have been forced to close their businesses because of insolvency.