IC expects more consolidation in insurance industry

MANILA, Philippines – The Insurance Commission (IC) is expecting the insurance industry to consolidate further with five non-life insurers planning to consolidate this year.

IC deputy commissioner Ferdinand George A. Florendo said five insurers had disclosed plans to either merge or take in new partners.

“Two are talking about a merger, and three are looking for buyers,” Florendo said.

Industry analysts said reasons for consolidation are the increase in minimum paid-up capital to P550 million by end 2016, the new risk-based capital (RBC) framework, higher pay-outs due to increased incidents of natural catastrophes and higher premiums demanded by reinsurers, among others.

Foreign re-insurers have raised the ante for Philippine insurers due to the escalating cases of damage to property and loss of lives.

While it differs from one re-insurer to another, domestic non-life insurers said the Philippines is charged the highest in Southeast Asia. Regional charges go as high as P0.70 for every P1 of reinsurance.

Out of the 70 non-life insurance players, not all players have even been able to comply with the P350-million minimum capital covering the 2015 period.

IC records also indicate nearly 15 insurers reported revenue losses while failing to surpass the P250-million required capital.

The IC earlier predicted the P550-million capitalization requirement and the RBC would reduce the non-life sector by a quarter.

The Philippine Insurers and Reinsurers Association (PIRA) said one of the reasons non-life insurers are having a hard time, is the tax burden.

Roughly 26 percent of the premiums paid on non-life insurance premiums are various tax forms such as documentary stamp tax (DST) and local government taxes.

In contrast, the life insurance sector is only burdened by a two-percent premium tax.