MANILA, Philippines - Another government agency has imposed an almost impossible requirement for non-life insurance companies to offer their bond protection products.
Already wrapped in controversy, the Department of Public Works and Highways (DPWH) issued Department Order (DO) 03-2009, which categorically states that to be accredited by the department, the insurer must have a minimum paid-up capital of P500 million, and must have been in the business for at least 10 years.
That had forced the Philippine Insurance and Reinsurers Association (PIRA), trade organization of the 90 or so non-life insurance industry, to seek the assistance of the Insurance Commission (IC).
“I have asked the PIRA to formally send me a letter of request, so that I can call the attention of the DPWH,” IC Commissioner Eduardo T. Malinis said.
Similar to what the IC explained to the local government of Makati recently, the IC chief explained that strict requirements are imposed the insurance industry to ensure their profitability and reliability. “All insurers must be allowed to compete on equal footing, based on their qualification,” he added.
Malinis said that the P500-million paid-up capital requirement was too stiff. The IC requires only a minimum P75-million paid-up capital from insurers to do business in 2008. It will be increased to P100 million minimum paid-up capital this year.
There are only four of the 90 non-life insurance companies within that range. These are the Malayan Insurance Co., Standard Insurance Co. Inc., Mapfre Insular Insurance Corp., and the Government Services Insurance System (GSIS).
Non-life insurance companies issue performance bonds and surety bonds for projects involving the DPWH.
“That comprises a significant portion of our business,” PIRA spokesman Michael Rellosa said. “It will mean a huge loss in premiums for majority of the industry.”
Last month, the local government of Makati named only 15 non-life insurers as qualified to sell third party liability (TPL) insurance coverage for business and car owners, called Comprehensive General Liability (CGL) insurance in Makati. All businesses will not be issued its annual business permits without the CGL.
Based on the circular, the 15 accredited companies are Malayan Insurance, Philam Insurance, Pioneer Insurance, BPI/MS Insurance, Tokio Marine Insurance, Prudential Guarantee, Standard Insurance, UCPB General Insurance, Philippine Charter Insurance, Mapfre Insurance, PNB General Insurers, Federal Phoenix Assurance, Philippines First Insurance, Alliedbankers Insurance, and Cibeles Insurance.
After a brief dialogue with Makati Mayor Jejomar Binay, the local government official agreed to revise the ruling. However, it will only be implemented next year as all business licenses have already been renewed, and that all insurance requirements have been fulfilled.