Under this amended Insurance Code, capital requirements for both life and non-life insurance firms will increase every three years until 2020 in order to provide more resilience during financial crisis and to protect the money of policyholders. This law also requires new life and non-life insurance companies to have P1 billion in paid-up capital meanwhile for existing insurance companies, a net worth of P250 million by June 30, 2013; P550 million by December 31, 2016; P900 million by December 31, 2019; and, P1.3 billion by December 31, 2022
Increased capital requirement provide substantial benefits to both the company and the policyholders. These include buffers during economic crisis, investment losses and defaults. Other than this, having large capital requirement will also increase the liquidity of the company. Thus, they can more or less weather their finances even during slowdown periods.
However, some insurers resist this because they said it would create an unequal playing field against multinational companies. For life insurance industry alone, 25 out of the 33 industry member-companies “would either find difficulty convincing shareholders to put up additional capital or be forced to fold up in the event of such an increase”.
The passage of this law will definitely impact the insurance industry in both ways: positively, for policyholders since their money is more protected as well as for multinational companies which are capable of meeting the huge capital requirements, and negatively, for some Filipino-owned insurance firms that will find it difficult to raise the money to be the demand of this new law.
Escarnuela, Kristine Rose