RP INSURANCE FIRMS MUST RAISE THEIR CAPITAL TO REMAIN COMPETITIVE
MANILA, NOVEMBER 9, 2006 (STAR) By Ted P. Torres - Even with the temporary suspension of the mandated capital Increase to be imposed by the Insurance Commission (IC), the countryís life insurance industry still needs to raise its capital base level to bring it up to competitive levels in the region.
The IC recently agreed to temporarily defer the increase in the capital base of insurance firms to P500 million by 2010. However, adjustments to the risk-based capital (RBC) framework will remain.
"Ultimately, the capital base must be increased if the Philippine insurance system wants to remain at par with our regional counterparts," George T. Tiu, president and chief operating officer of the Paramount Life and General Insurance Corp. (Paramount), said during the firmís launching of its travel and medical assistance product called Global Travel Protect (GTP).
Paramountís GTP is an alliance with Mapfre Asistencia of Spain. It is a travel protection package that covers emergency medical care incuding hospitalization, surgery, medical fees, and pharmaceuticals.
It also has a 24-hour global hotline that can organize services as emergency dental care, and medicine delivery, medical referrals, repatriation and emergency expensed in case of death while traveling, emergency paymentsw and even car rentals.
A look at some of the countryís Asian counterparts show that the dominant trend is increasing the capital base and adoption of the RBC formula.
Malaysia imposed a minimum paid-up capital of $25 million as against the proposed $2 million by the IC, with full implementation of the RBC formula by 2008.
For new entrants, Malaysia requires a paid-up capital of roughly $25 million compared with the proposed P1 billion (roughly $20 million) by the IC.
In Vietnam, it is $10 million; $1.3 million for Thailand; and $20 million in India.
Industry estimates that more than 70 percent of the 34 life insurers and 50 percent of the 98 non-life insurers will not find it hard to increase its net worth capital base to over P100 million.
The remaining 30 percent of the life insurers and half of the non-life insurers have an option of consolidating or merging with other players, or closing shop after selling its policies to better capitalized players.
Regulators were firm in its position that there were too many players in the non-life sector and that "a reduction in number coupled with a firm regulatory environment should result in more financially-stable insurers with better products to protect the insuring public."
Both the Department of Finance and the IC stressed that all the financial sectors in the region were consolidating, and the Philippines should not be an exception.
The full implementation of the RBC within the next two years will determine the healthy players, and government hopes that the weak or the undeserving will be weeded out for the benefit of the insuring public.
Paramount Life and General Insurance Corp. (Paramount) is a composite life and non-life insurance company with a network of over 60 branches and service offices nationwide.
Chief News Editor: Sol Jose Vanzi
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