IC to insurance providers: Raise capital to P250 million

MANILA, Philippines - The Insurance Commission (IC) has reminded all insurance companies to raise their minimum paid-up capital to P250 million by the end of the year or face a possible suspension of their operating license.

In an advisory released Nov. 22, the IC warned industry players that “by Dec. 31, 2012, the paid-up capital must at least be equal to be amount previously scheduled for Dec. 31, 2011.”

IC Commissioner Emmanuel F. Dooc likewise stressed that life insurers, life- non-life and reinsurers, must show proof of capital build-up compliance and structure “not later than March 31, 2013.”

At the end of 2011, the IC issued licenses to operate to 32 life insurers, 83 non-life insurers and one re-insurer. These companies were allowed to operate due to their ability to raise their minimum paid up capital to P175 million.

Under Department Order (DO) 27-06, the mandatory minimum paid-up capital for all life, non-life and reinsurance companies by end 2011 should have been P250 million.

However its full implementation was delayed by a year to end-2012.

Before DO 27-06, the minimum paid up capital was just P50 million. It was moved up to P100 million in 2006 and accelerated to P125 million in 2009 to P175 million by 2010.

The one-year delay forced the deadline to be moved to 2011.

For insurance companies that reflect foreign ownership of at least 60 percent, the end-2012 minimum capital would be P500 million.

Industry leaders said the P250-million level will impact on one or two life insurers but more than 10 non-life insurers may not be able to meet the minimum amount.

Already four non-life players are in the process of consolidation leading to the emergence of two “new” non-life insurance companies. More are expected to follow suit.

The International Finance Corp. (IFC) have indicated that they are prepared to assist insurers seeking the merger and acquisition (M&A) or consolidation route.

“We have the expertise from similar activities in countries where we operate, and we are prepared to share our knowledge on this matter,” an IFC specialist said.