The Insurance Commission (IC) of the Philippines has issued guidelines on a new policy that covers the reinsurance of outstanding policies belonging to insurance companies that have been placed under liquidation or rehabilitation.
In a circular letter, the regulator said that conservators and receivers of insurance companies under rehabilitation may opt to reinsure the outstanding policies of the companies they handle, if warranted.
Similarly, the liquidator of a company under liquidation is now required to reinsure the firm’s outstanding policies, provided their financial circumstances permit it.
“The Amended Insurance Code of the Philippines, provides that a duly appointed liquidator of an insurance company or MBA placed under liquidation shall reinsure all its outstanding policies,” the circular said.
It continued: “This commission recognizes that the duly appointed conservators and receivers of insurance companies or MBAs under conservatorship or receivership may likewise reinsure said companies’ outstanding policies as part of a rehabilitation strategy to restore said companies to financial viability.”
The IC specified that conservators, receivers, and assigned liquidators should submit a reinsurance proposal for approval in the rehabilitation plans for the companies they handle.
Alternatively, if approved by the IC, these parties may also enter into assumption reinsurance agreements with reinsurers.
The IC’s statement said: “No ARA or similar contract shall bind the conservator, receiver, or liquidator; the company under conservatorship, receivership or liquidation and its policyholders; and/or the reinsurers, unless said ARA or similar contract is duly approved by the insurance commissioner.”
The new policy comes after the IC closed the operations of five nonlife insurance companies in March 2018, placing them under conversatorship for falling short of statutory minimum net worth requirements.
Companies cannot issue new business or renew insurance business under conservatorship, and are managed by an appointed conservator who takes charge of company assets and liabilities.
