PIRA seeks deadline extension

MANILA, Philippines - The government should hold the implementation of higher paid up capital for insurers by the end of this month and just await the passage of a new law, non-life insurers said.

“Once (the) new code is signed by President Aquino, the existing Department of Finance Order 2007-06 outlining the capitalization level becomes moot and academic,” said Emmanuel Que, chairman of the Philippine Insurers and Reinsurers Association (PIRA).

“We will appeal to the Insurance Commission (IC) to extend the deadline in consideration of this development,” he added.

PIRA is the umbrella group for non-life insurers and reinsurers. Finance and insurance officials could not be immediately reached for comment.

According to the 2006 order, insurance companies should hike their minimum paid up capital to P250 million from P175 million by this year.  The capitalization should be formalized on paper by June 30.

Any company that fails to meet the requirement will not be issued a license to operate by the Insurance Commission.

Industry sources said that 19 of the 84 licensed non-life companies have yet to comply with the P250-million minimum capital requirement.

However, as the Finance department pursues its order, amendments to the 1974 Insurance Code of the Philippines have passed the bicameral conference committee and will simply need Aquino’s signature to take effect.

Que said it would be prudent for the government to wait as there are conflicting provisions between the new code and the department order.

Among others, Que said the amendments base the capitalization of a company on its networth rather than on paid-up capital.

Networth takes into consideration not only paid up capital, but also surplus capital, retained earnings, and asset revaluation.

There is even a “transitory provision” in the new Code that says that companies with licenses expiring on June 30, 2013 shall be extended until June 30, 2015, he pointed out.

“We are hopeful that the IC will consider the plight of small companies, some of which have existed for over 50 years without any problem whatsoever,” Que said.

“These insurance companies may be small but they are very stable. They serve their clients well and their existence is only threatened by regulatory requirements like this capitalization order,” he explained. 

Prior to 2007, the minimum capital was only P50 million before it was raised to P75 million in 2009, P100 million in 2010, and P125 million 2011. The figure was raised further to P175 million last year.

The build-up will continue until it reaches P1 billion in 2016.

Under the new Code, the capital requirement—which will be based on networth—will be boosted even higher to P1.2 billion but the industry is given until 2022 to do so.