MANILA, Philippines - The Department of Finance (DOF) has thumbed down a lower capital increase proposed by the Insurance Commission (IC) for both life and non-life isurance.
Insurance Commissioner Emmanuel L. Dooc said Finance Secretary Cesar V. Purisima has rejected the proposal which was lower than the P1-billion minimum paid up capital favored by the DOF.
“It was lowered from the P1-billion minimum capital level but more than the P500-million level,” industry sources said.
But the sources said the finance secretary was steadfast in the P1-billion capital level.
“But he agreed with the (IC) Commissioner that there should be a slight easing in the time frame, and that a number of incentives may be thrown in to make it worth the effort of consolidating,” they said.
The revised edition could extend the deadline for the full implementation from 2016 to a maximum of two additional years.
“The Commission is also considering a capital hike holiday for the consolidation or merging insurance companies,” a source said. That means life and non-life insurance companies will be exempt from the P250-million minimum paid-up capital requirement this year.
The finance department, through a draft department order (DO), increases the minimum paid-up capital from P175 million to P1 billion by end-2016.
The timetable is staggered starting from P250 million at end-2012 to P450 million the following year. Then it will be increased to P625 million by end-2014, P800 million in end-2015, and finally to P1 billion by end-2016.
Along with the draft DO, the DOF and the IC conducted a number of consultation meetings with the insurance industry to gather views on the proposed capital hike.
While majority of the industry players were against any capital increases, most of the leading life and non-life insurers were reportedly in favor of the capital hike.
“The insurance industry is a capital-intensive one. To survive in the game, we must continuously build our capital base,” one of the leading insurers said.
The pre-need industry, which is likewise under the watch of the DOF is also preparing for a capital build-up program.
Regulators want the minimum capital requirement for the pre-need industry to increase by another P200 million to ensure the protection of the investing public.
The plan is to increase the minimum capital level to P250 million for one product line, P275 million for two product lines, and P300 million for all three product lines.
The present minimum capital level stands at P50 million for one product, P75 million for two products and P100 million for the complete plantilla of three product lines. The basic pre-need products are pension, life or memorial, and education.