According to the commission, there were at least 15 insurers unable to meet the deadline but are "half-way there."
In the IC proposal, the deadline would be moved to end September wherein the insurance company must have at least a paid-up capital of P30-million. By December, the insurer should have moved this up to P50-million.
Insurance Commissioner (IC) Eduardo T. Malinis said that more than half of those unable to meet the July 1 deadline are close to achieving the P30-million level. Malinis made it clear however, that those who fail to meet the Sept. deadline will be issued a cease-and-desist order (CDO) and its certificate of authority will be revoked.
The financé department wants to ensure the ability of insurers to pay claims but there are conditions that seem to have stalled the insurers. "The capitalization of P10-million today is small," the finance department said in its earlier circular.
However, Malinis said that government has no choice but to dropped the axe on erring insurers if it fails to meet the capitalization requirement. "It is better to close a company in September or October rather than in December," he added.
The Department of Finance (DOF) has increased the paid-up capital requirement to P50-million for life and non-life insurance companies effective end June. Presently, insurance companies only need P10-million as paid-up capital to operate.
As per Department Order 31-01, life and non-life insurance companies will not be issued a license to operate or to renew their expiring licenses on June this year unless to show evidence of an increase in capital.
The finance department order is also perceived to be motivated by the desire of government to encourage the consolidation of the insurance industry. The size of insurance companies in the Asian region has been growing in terms of assets and capital base, although the Philippine insurers remain among the lowest in the region.
"To remain competitive with our Asian neighbors, the industry‘s resources should be increased and one way of achieving this is through mergers or acquisitions," Malinis said. – Ted P. Torres