Non-life insurers say that they welcome revised rating schedules for earthquake, typhoon and flood risks that will apply to new and renewed insurance policies from 1 November 2022. The rates had previously not been reviewed for the past 30 years.
The Insurance Commission requires all non-life insurance companies and intermediaries to adopt the amended schedules, except for risks rated under motor car tariffs. The new tables set out the minimum insurance premium that is based not only in terms of rates but also in terms of construction type and risk zone. No discounts will be allowed on these minimum rates.
For example, for flood and typhoon risks, a building or structure is classified as “High grade” if erected with reinforced concrete and steel, or as “Others” if built with wood, masonry or unknown material.
The new schedules allow some savings for policyholders. The CAT rates for earthquakes in the initial phase range from 0.047% to 0.10% of the insured sum while those for typhoon and flood risks range from 0.042% to 0.10%.
All policies with issue and inception dates earlier than 1 November 2022 shall use the flat catastrophe minimum rate of 0.10% for earthquake risks and 0.05% for typhoon and flood risks.
The Philippine Insurers and Reinsurers Association (PIRA) says that the Philippines counts among countries most vulnerable to the risks of disasters. Given this scenario, a review of the outdated catastrophe rates currently in place had to be carried out as these have not been reviewed over the last 30 years, the association said.
PIRA also said, “The need to create a more risk-appropriate rating environment would in the end ensure sustainable disaster premium rates to equally support the sustainability of the insurance industry and ensure its presence and capability to service future cat peril claims, especially when it is most needed.”