By Herminia S. Jacinto My first column this year talked about reviewing and updating the insurance protection of our properties, especially the covers for natural perils, which cannot be predicted when they will happen. But when they do, they can cause a lot of damage, which requires huge sums of money for repairs and restoration. The insurance industry has been exerting a lot of effort to reduce the cost of these insurance covers so everyone can get adequate protection. What is not controllable, however, are the taxes that are levied on insurance. I am not referring to the income tax on net income, which is similar to the income taxes paid by other corporations. These are the tax on premiums, value-added tax, documentary stamp tax, local government tax and more. The cost of insurance or premiums is increased by 27.5 percent by these taxes. Insurance can be more affordable if these taxes are reduced. The good news is that our legislators are now reviewing the petitions submitted by the insurance industry to rationalize the taxes imposed on property insurance and other policies. There is a pending bill to reduce the documentary stamp taxes from its present rate of 12.5 percent gradually to 7.5 percent by the year 2027. The non-life companies were hoping that the final rate would have been 3 percent but welcomed the reduction just the same. To illustrate, if one has to pay a P30,000 insurance premium on his property or vehicle, the documentary stamp tax is P3,750, which will go down to P2,250, or P1,500 less. This tax, which is charged to the policyholder, will be remitted to the BIR by the insurance company. Since it is a tax on documents, the tax is considered paid even if the policy is canceled or destroyed. There were also moves to subject the gross premiums of non-life insurance companies to premium tax, which is similar to the tax for life insurance premiums. After representations made by the industry through its industry association, the Philippine Insurers and Reinsurers Association (PIRA), the legislators have agreed to retain the present procedure where the gross premiums are subject to the 12 percent value-added tax. Changing the VAT to a premium tax will result in a huge reduction of the taxes to be remitted to the government. So, VAT it is for the non-life insurance premiums. There is, however, a need for our legislators to appreciate the reinsurance transactions of non-life insurance companies. That the premiums that are paid by the direct writer or insurer are deductions from the gross premium that the insurer received from their policyholder. The VAT or value-added tax is paid on the gross amount of the premium and remitted by the insurance company to the BIR directly. There are no deductions for VAT when those premiums are ceded or paid to the reinsurer. This issue has long haunted the industry when audits by BIR occur. There is that impression that reinsurance premiums should be subject to withholding tax. The reinsurers, whether local or foreign, receive only a portion of the gross premiums, which have been subjected to the 12 percent VAT. We are happy that Section 21 of pending HB 4339 clearly provides that "premiums collected by non-life reinsurance companies on transactions where the tax on the direct premium has already been paid by the direct insurer" are exempted from the value-added tax. We request, however, that the succeeding "Provided, etc.," be deleted since these tend to confuse the ones who will implement the said section. Overall, we appreciate with gratitude the opportunity to be heard as the representatives from the industry are invited to the hearing of HB 4339 and other related Senate bills by the Senate Committee of Ways and Means today, Jan. 29, 2024, at the Senate. Thank you on behalf of the PIRA and the non-life companies! Source: manilatimes.net

We talk to Tony Gallagher CEO, Asia Pacific region for Guy Carpenter about the 1/1 renewals and what to expect at the April renewals, emerging risk in 2024 and which business lines have the most scope in the year ahead. Source: asiainsurancereview.com

Since 27 February, parts of southwestern Asia, including Pakistan, south-eastern Iran and Afghanistan, have experienced heavy precipitation that resulted in casualties and material damage, according to Aon in the 8 March edition of its "Weekly Cat Report". As of 6 March, local disaster authorities have reported at least 84 deaths, dozens of injured people and hundreds of destroyed or damaged houses, along with notable agricultural losses across the affected countries. Meteorological Recap Heavy precipitation up to 150 mm / 5.9 inches was observed in southeastern Iran, eastern Afghanistan, and central northern Pakistan during the period between 27 February and 4 March. Torrential rainfall triggered severe floods, and exposed high-elevated locations received significant amounts of snow. Weekly precipitation totals were well above long-term averages for this time of the year. Notable losses due to recent flooding were reported also in south-eastern Iran. Hundreds of thousands of people were affected across Iran’s Sistan and Baluchistan provinces, particularly in the cities of Dashtiari, Qasrqand, Nikshahr and Chabahar. Widespread flooding resulted in material damage to local infrastructure and to more than 500 houses. Agricultural losses to more than 18,000 hectares of land were also incurred. No fewer than 39 people lost their lives and over 30 others were injured across different provinces in Afghanistan as the country battles heavy snowfall and rainfall. Cities of Kandahar, Helmand, Sar-e-Pol, Badakshan, Balkh, Jawzjan, Badghis, Faryab, Herat, Ghazni, Daykundi and Ghor were among the hardest hit. Media reported more than 630 completely or partially destroyed homes and notable agricultural losses, including about 14,000 killed livestock. Financial Loss Due to a lack of reliable estimates from the affected areas, it remains too early to determine the total economic impact of this wintry and rainy episode on the region, the report says. Source: asiainsurancereview.com

The Treasury has started a consultation exercise on standardizing natural hazard definitions and reviewing standard cover for insurance contracts, says assistant treasurer and minister for financial services Stephen Jones. In a statement, he says that the “government is working to improve insurance affordability as more severe weather events contribute to higher costs. As these events intensify and become more frequent, it’s also important consumers know exactly what they are covered for.” The Treasury has released a consultation paper and seeks feedback on natural hazard terms that should be standardized and potential reform options for the standard cover regime. Currently, the only standardized natural hazard definition is flood. This was legislated in 2012. The Treasury will now consider standardizing definitions for three other natural hazards: fire, storm, and stormwater and rainwater runoff. Insurers’ response The Insurance Council of Australia (ICA) says that it welcomes the government’s initiative as it aligns with ongoing efforts by insurers to improve customer outcomes by improving transparency and consumer understanding of insurance. Standardized definitions would mean that all insurers use the same definition for a particular event in their insurance policies. ICA CEO Andrew Hal said, “We acknowledge there is more to be done to improve consumer understanding of policies, and standardized definitions for fire, storm and stormwater and rainwater runoff may assist with this.” Separately, the ICA has commenced discussions with insurers about the possible adoption of standardizeds definitions for maintenance and wear and tear exclusions in policies. Any adoption of standardized maintenance and wear and tear exclusion definitions by insurers through this process would be subject to obtaining required regulatory approvals. Source: asiainsurancereview.com

Was held on February 20-21, 2024 at Joy-Nostalg Hotel & Suites Manila. The aim of the workshop was to: establish content outline of medium-term insurance roadmap; discuss the options for crowding in private investments in agricultural insurance market; discuss the guidelines for linking identified insurance products (aquaculture and high-value crops) with global reinsurance market; review the proposed enhanced insurance products for aquaculture and high-value crops, as identified by the project; and agree on feedback on medium-term roadmap for PCIC and enhancement of aquaculture and high-value crop. PIRA Executive Director, Mitch Rellosa, representing the private sector attended the workshop being a member of the Technical Working Group. Day 1 Day 2

A new analysis of 36 countries/markets by Swiss Re Institute ranks the Philippines as the most economically exposed among them today, where hazard intensification is likely to occur due to climate change. The Philippines loses 3% or $12bn of its GDP because of the four weather perils – floods, tropical cyclones, and winter storms – while at the same time being exposed to hazard intensification in the future The US is second-most exposed. At $97bn (0.38% of GDP) as of today, it experiences the highest economic losses in absolute terms from weather events worldwide and at the same time, a medium probability that hazards will intensify. In general, countries with sizeable insurance protection gaps and where the establishment of loss mitigation and adaptation measures lags the rate of economic growth, are most financially at risk from hazard intensification. Fast-growing Asian economies like Thailand, China, India, and the Philippines are the most vulnerable according to the report. Indeed, among the 10 countries/markets ranked by Swiss Re Institute as most at risk of higher property damage losses from intensifying weather hazards driven by climate change, seven are in Asia (including Australia). The 10 countries/markets are: Based on findings from the Intergovernmental Panel on Climate Change (IPCC), Swiss Re Institute's new report "Changing climates: the heat is (still) on" analyses where hazards are likely to intensify and overlays it with its own estimates of economic losses resulting from the four major weather perils as of today. This provides a view of the possible direct economic implications if weather-related natural catastrophes intensify due to climate change. Mr. Jérôme Jean Haegeli, Swiss Re's group chief economist, said, "Climate change is leading to more severe weather events, resulting in increasing impact on economies. Therefore, it becomes even more crucial to take adaptation measures. Risk reduction through adaptation fosters insurability. The insurance industry is ready to play an important role by catalyzing investments in adaptation, directly as a long-term investor and indirectly through underwriting climate-supportive projects and sharing risk knowledge. The more accurately climate change risks are priced, the greater the chances that necessary investments will actually be made." Floods expected to intensify, tropical cyclones main loss driver While flood risk is projected to intensify globally, the main driver of major weather-related economic losses in the US, as well as in east and southeast Asia, are tropical cyclones. Swiss Re Institute says that the first step towards cutting losses is to reduce the loss potential through adaptation measures. Examples of adaptation actions include enforcing building codes, increasing flood protection, while keeping an eye on settlement in areas prone to natural perils. Ultimately, losses as a share of GDP of each country will depend on future adaptation, loss reduction and prevention. Source: asiainsurancereview.com

The ASEAN Reinsurance Programme is back in 2024 with one of the most important topics facing the ASEAN Insurance Industry today, i.e., the adoption of the IFRS 17.With the implementation of IFRS 17 in most ASEAN member states in 2025, more professional insurers are in need of this training. When: 24-26 April 2024 Where: Online Course (Virtual) - 11.30 a.m. to 5.30 p.m. (Singapore Time) Who should take this course: Actuaries, Accountants and Financial Reporting Professionals, Reinsurance Professionals, Risk Managers, Regulatory Compliance Officers, Legal Advisors and Consultants, Senior Management and Board Members, Auditors and External Reviewers. Also suitable for professionals seeking to navigate the complexities of IFRS 17 within the reinsurance context and those who aspire to lead their organizations through the transition smoothly and efficiently, ensuring compliance, optimizing reporting processes, and leveraging the standard for strategic advantage. A unique highlight of the course is the presentation by Malaysian Re, titled “IFRS 17 - The Malaysian Re Implementation Journey”, scheduled on the final day of the programme. Register Now! Registration link:  Course Detail || SCI (scicollege.org.sg) If you need more information, check this out: eBrochure

The Insurance Commission (IC) is planning to grant incentives to new microinsurance players to boost financial inclusion in the Philippines. Insurance Commissioner Reynaldo A Regalado said this at a recent industry forum, reported BusinessWorld. While the microinsurance industry has grown in the past years, the sector still lacks major players as there are only 49 companies selling microinsurance, Mr. Regalado noted. He said, “In the Philippines, microinsurance sells itself. The only thing we have to do is expose them to everyone. In terms of policies to boost this, we’re looking at incentives and we’re looking at the way we have been checking them.“ Microinsurance MBA Association of the Philippines chairman emeritus Jaime Aristotle B. Alip said that lowering taxes or a tax credit scheme could encourage more insurers to go into microinsurance. At present, microinsurance covers around 56m people in the Philippines which has a population of around 120m. Source: asiainsurancereview.com

The lnsurance Commission (IC) has revised the death indemnity limit for third-party liability for all Compulsory Motor Vehicle Liability lnsurance (CMVLI) coverage to PHP200,000 ($3,558) each for all types of motor vehicles. The regulator announced this in an insurance memorandum circular released on its website yesterday but dated 7 February. The circular will take effect 15 days after its publication in the Official Gazette. The limit is currently PHP100,000 each for all types of motor vehicles with PHP70,000 for death immunity and PHP30,000 for funeral and burial expenses. There is an additional PHP100,000 for passenger liability if the motor vehicle is used as a public utility vehicle. These limits were announced in 2006. The IC says that there is a need to improve/increase the benefits and insurance coverages under the CMVLI policy to make it more responsive to the welfare and development needs of the individuals who are victims of vehicular incidents or mishaps. The circular also includes a Schedule of lndemnities relating to compensation for death, bodily injuries, professional fees and hospital charges for services rendered to traffic incident victims under the CMVLI policy. The maximum allowable fees or charges (other than death benefits) remain unchanged from 2006. No fault indemnity The circular also said, “Any claim for death or bodily injuries sustained by a passenger or third party shall be paid without necessity of proving fault or negligence of any kind provided the total indemnity in respect of any person shall be PHP30,000.00 (since 2006: PHP15,000) for all motor vehicles. Motor tariffs unchanged in the meanwhile The circular says that premium rates for one-year and three-year CMVLl coverage set out in 2006 shall remain in force and effect. Premium adjustments arising from the increase in benefits as provided in the latest circular shall be subject to study once sufficient data are gathered during the implementation of this circular. Source: asiainsurancereview.com

The Insurance Commission (IC) and the Actuarial Society of the Philippines (ASP) have agreed to conduct the country's first industry-wide morbidity study based on the claims experience of health maintenance organizations (HMOs) and insurance companies. Director Art Trinidad, Officer-In-Charge of IC’s Technical Services Group, Insurance Commissioner Rey Regalado, ASP President Allan Santos, and ASP Vice President Honesto Franz A. Nuqui, Jr. The study aims to produce benchmarks for evaluating the reasonableness of premium rates, reserve valuations, and capitalization requirements of HMOs and insurance companies. As a framework for the study and other technical assistance programmes, IC and ASP signed a memorandum of agreement during the IC's 75th anniversary in January 2024. “The study will not only promote a sound health insurance and HMO market but also encourage product innovation and attract foreign investments. Ultimately, the study aims to bridge the health protection gap among Filipinos and enhance financial inclusion,” the IC said in a statement. Other areas of cooperation between IC and ASP under the signed agreement include technical cooperation on revising standards on risk-based capitalization, valuation and product pricing. The agreement was signed by Insurance Commissioner Reynaldo Regalado and ASP president Allan Santos.