The Phillipines Insurers and Reinsurers Association (PIRA) said five non-life insurers will be closing down due to being unable to compy with the P1.3 billion capitalisation requirement by the end of the current administration’s term, Rappler reported.
Eight insurance companies have also announced merger plans, bringing the number of non-life insurers in the region down to 54 from 63.
The Amended Insurance Code has set out a plan for capital requirements to increase once every 3 years until 2022; a net worth of P550 million is effective by December 31 2016, P900 million by 2019, and P1.3 billion by 2022.
Antonio Cabusao, PIRA public relations and education committee member, commented that these developments represented a positive change for the industry as higher capitalisation levels will result in stronger firms.
He also pointed out that these companies are not currently insolvent, but have made a voluntary decision to close down before capitalisation requirements significantly spike.
Availability of reinsurance capital could also assist insurers in countries such as the Phillipines, as they face such solvency threats.