Local insurers are no longer optimistic about a possible extension of the final tranche of increases in capital requirements beyond the current deadline of 31 December 2022.
“We are starting to see that it may not be possible. Everyone is just preparing for it,” Mr. Michael Rellosa, executive director of the Philippine Insurers and Reinsurers Association (PIRA), said.
But the industry maintains that it would continue to push for a review of the capital requirements that it views as more than adequate, according to a Philippine Star report.
PIRA says the industry is being pragmatic on the impending hike in capital requirements, according to a report in the newspaper The Philippine Star.
“We are not giving up our position. But at the same time, we are trying to be pragmatic and if the extension does not push through, then we just have to meet the requirements,” Mr. Rellosa said.
Under the Insurance Code, existing insurers must have a net worth of at least PHP1.3bn ($23m) by end-December 2022 from the current PHP900m.
Since the start of the year, PIRA and the Philippine Life Insurance Association (PLIA) have been urging the Insurance Commission (IC) to reconsider forgoing the increase, arguing that doing so would limit competition in the industry.
But the Department of Finance, the IC’s mother agency, has been firm in its position not to defer the hike.
PIRA argued that the local insurance industry is not as big as those in Southeast Asian neighbours such as Singapore or Indonesia, and yet the capital requirement would soon be the highest in the region.
Among PIRA’s members, Mr. Rellosa says about 90% are already compliant with the PHP1.3bn capitalization requirement.
A new insurance code was signed into law in the Philippines in 2013 under which capital requirements for insurers were increased every three years until 2022. The required net worth was PHP250m in 2013, PHP550m in 2016, PHP900 in 2019, and PHP 1.3bn in 2022.