Insurance industry in the PhilippinesTen things to know

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1 The regulator

The Insurance Commission is the insurance regulator. It is a government agency under the Department of Finance.

The Commission supervises and regulates the operations of insurance and reinsurance corporations, which need to be authorised.

Pre-need companies – companies that provide pre-need contracts, being contracts for the provision of future payments or services including life, pension, education and interment – must also be licensed by the Insurance Commission.

Insurance agents, general agents, resident agents, underwriters, insurance brokers, adjusters and actuaries must be licensed.

Authorisations and licences must be renewed annually.

2 Subsidiary/Branch

Locally incorporated corporations (domestic insurer) and branches of foreign insurers and reinsurers (foreign insurer) are permitted to be licensed and carry on business in the Philippines as an insurer, reinsurer or pre-need company.

A foreign insurer, reinsurer or broker must appoint a resident agent.

3 FDI restrictions

There is no limit on foreign equity ownership in a domestic insurer. However, foreign equity affects the applicable minimum paid-up capital required for existing insurers.

Foreign equity ownership in a domestic loss adjuster company cannot exceed 40 per cent.

4 Control approvals

No person, other than an insurer authorized by the Insurance Commission, may acquire control of any domestic insurer without giving 20 days’ prior written notice to the domestic insurer, and without obtaining the prior written approval of the Insurance Commissioner.

Control means power to direct or cause the direction of the management and policies of the domestic insurer, and is presumed to exist when one person owns, controls or holds, directly or indirectly, 40 per cent or more of the voting shares of the domestic insurer.

Directors and officers must satisfy fit and proper criteria.

5 Minimum capital

For existing domestic and foreign insurers (life or non-life):

Compliance Deadline

Minimum Paid-Up Capital Required (PHP)

Existing wholly-Filipino owned Insurer

Existing Insurer with 40% or less Foreign Equity

Existing Insurer with more than 40% but less than 60% Foreign Equity

Existing Insurer with at least 60% Foreign Equity

31.12.12 250,000,000 300,000,000 350,000,000 500,000,00031.12.14 400,000,000 500,000,00031.12.16 600,000,00031.12.18 800,000,00031.12.20 1,000,000,000

Existing microinsurers (i.e. where microinsurance makes up at least 50 per cent of aggregate direct premiums): 50 per cent of the applicable minimum in the table above.

New domestic or foreign insurer must have a minimum paid up capital of:

life or non-life: PHP 1,000,000,000composite: PHP 2,000,000,000microinsurer: PHP 500,000,000

Existing domestic or foreign reinsurers must have a minimum paid up capital of:

PHP 1,00,000,000 by 31 December 2012PHP 1,200,000,000 by 31 December 2014PHP 1,400,000,000 by 31 December 2016PHP 1,700,000,000 by 31 December 2018PHP 2,000,000,000 by 31 December 2020

Norton Rose Insurance industry in the Philippines – ten things to know

Insurance industry in the Philippines*In conjunction with SyCip Salazar Hernandez & Gatmaitan

*as at 9 April 2013 NB a bill amending the Insurance Code is expected to be introduced within the year

Norton Rose Insurance industry in the Philippines – ten things to know

New domestic or foreign reinsurers must have a minimum paid up capital of PHP 2,000,000,000.

In addition to the minimum paid-up capital requirement, a foreign insurer or reinsurer is required to deposit with the Commission securities for the benefit of policyholders and creditors of the foreign insurer in the Philippines.

Pre-need Companies must have minimum paid-up capital of:

PHP 50,000,000 for companies selling a single planPHP 75,000,000 for companies selling two types of planPHP 100,000,000 for companies selling three of more types of plan

A trust fund for each category of pre-need plan category must be established.

PHP 41.18 = USD 1.00 as at 9 April 2013

6 Risk based capital

Yes: for life insurers RBC takes into account asset default risk, insurance pricing risk, interest rate risk and general business risk. For non-life insurers, RBC takes into account fixed income securities, equity securities, credit risk, loss reserves and net written premiums. Each insurance company must maintain a minimum RBC ratio of 100 per cent.

7 Group supervision

The Insurance Commissioner has rights of examination in respect of any holding company of an insurer/reinsurer and any related party transactions.

8 Policyholder protection

Each insurer contributes to a Security Fund, depending on whether it is engaged in life or non-life insurance business. The Security Fund has a Life Account and Non-Life Account. The contribution of each insurer to the Security Fund is in direct proportion to the ratio that that insurer’s net worth bears to the total net worth of the life/non-life industry. The aggregate contribution of all relevant insurers for each account is PHP 5,000,000.

9 Portfolio transfers

Portfolio transfer is permissible with prior approval of the Insurance Commissioner and of the policyholders.

10 Outsourcing

Activities regulated by the Insurance Code cannot be outsourced unless the contractor has the requisite license. Generally, “backroom activities” such as claims administration services, intermediary servicing and contact centre services, and mailing services may be outsourced.

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