Insurance companies should merge if they cannot comply with mandatory net worth requirements, Finance Secretary Carlos Dominguez 3rd said, noting the need for a stronger and more competitive domestic industry.
From a P550-million requirement — up from P250 million previously — that took effect at the end of 2016, insurers will have to increase their net worth to P900 million at the end of next year and P1.3 billion by 2022 under the amended Insurance Code.
“How can you compete with the big boys if your capital is only $10 million? So we want the industry to be competitive and be strong and that the way to do it is to require them to have more capitalization” Dominguez said.
“In other words it is required to have them merge, consolidate to come up with a more stable entity,” he added.
The Finance chief’s statements came as Deputy Insurance Commissioner George Florendo said that the Insurance Commission (IC) was studying the possibility of capping the net worth rule.
“IC Commissioner [Dennis Funa] did set a study group to see if there is a need to recommend adjustments or a cap in the increase in net worth. Again, to adjust it so that it wouldn’t be as burdensome to the local players,” Florendo told reporters.
“What we are going to do is to review if it is worthy to recommend to put a cap on the next increase only of P900 million [instead of]going up to P1.3 billion in 2022,” he added.
Most insurers have already complied with the initial P550-million requirement, Florendo said, with those that failed to do so having been served with cease and desist orders.
Seven insurance companies have voluntarily surrendered their licenses due to their inability to comply with the net worth rule, the IC announced earlier this month.