Covering the fiscal year 2003-2004, the IC issued licenses to four composite insurers and 34 life insurers. The licenses expired last June. "We were expecting your compliance officers to come and get their renewed CAS," IC Deputy Commissioner Vida Chiong told the insurers during the recent anniversary annual convention of the Philippine Life Insurance Association (PLIA).
Chiong criticized the insurers for taking their sweet time in claiming their licenses while reminded others of completing all requirements before their licenses can be renewed. "But there are a few CAS still with us because they are not just being claimed."
In the same venue, the deputy commissioner forewarned insurers that there would be requirements for an accredited auditor similar to what the banking system is practicing, and that the use of risk-based capital approach to supervision and margin of solvency determination "are matters that the IC are presently considering."
In the middle of July, the Bangko Sentral ng Pilipinas (BSP), the Securities and Exchange Commission (SEC), the Philippine Insurance Deposit Corp. (PDIC), and the IC formed the Financial Sector Forum (FSF). It will serve as the coordinating body for the facilitation of exchange of information broader consultation and harmonization of rules and procedures for supervision and regulation.
Chiong said that the three areas of immediate concern are supervision and regulatory methodology, consumer protection, and information exchange and dissemination.
For the insurance industry, capital adequacy, margins of solvency, risk management and corporate governance are of immediate interest.
"The increasing complexity and volatility of investments combined with the quality of business taken in, require insurers to properly identify the risks, quantify them, and introduce measures to control, if not totally eliminate them," she warned.
Risk management becomes the first line of defense for situations that may undermine the stability of insurers.
But the deputy commissioner warned about risks that "cannot be quantified" due to absence of relevant models or data.
Thus internal control including risk mitigation and transfer mechanisms becomes paramount for overall risk management efficiency.
Meanwhile, a capital adequacy framework requires enough capital funds to support risks assured, asset structure, and business mix leading to operation flexibility.
Chiong stressed, however, that capital adequacy must be supported by sound corporate governance standards and consumer protection framework.
"We are familiar with the collapse of conglomerates attributed to poor corporate governance standards and practices which only proves that risk management should be considered in conjunction with good corporate governance practices," she added.