Insurance industry enjoys robust growth
“According to preliminary reports, insurers were able to grow their total premium income significantly in the first quarter,” Insurance Commissioner Emmanuel F. Dooc said at the sidelines of the United Nations forum on the Principles for Sustainable Insurance last Thursday.
With the economy doing well, business is on the rise, he explained.
The gross domestic product grew by a robust 6.6% in 2012, beating the government’s target of 5-6% and outpacing the rest of Southeast Asia.
This year, the economy is expected to expand by 6-7%.
The markets are also awash with cash since interest rates are at record lows, he added.
The central bank slashed policy rates by 100 basis points to 3.5% and 5.5% for overnight borrowing and lending, respectively.
“We are very optimistic about this year. The only barrier to growth that I see is the uncertainty about capitalization,” Mr. Dooc said.
A temporary restraining order (TRO) was imposed on the Department Order 15-2012, issued last July, which stated the new capitalization requirements for all insurers. It mandated all existing life and non-life insurance companies to raise their minimum paid-up capital to P250 million in 2012, P400 million in 2014, P600 million in 2016, P800 million in 2018 and P1 billion in 2020.
The Insurance Commission (IC) maintains, though, that the TRO only stops the latest issuance.
An earlier issuance, Department Order 27-2006, required all insurers to hike their minimum paid-up capital of P250 million by 2012. The case is ongoing. Another growth opportunity for the insurance industry is the impending approval of the amendments to the Insurance Code.
The amendments have already been ratified by both houses of Congress, but the measure has not yet been signed by Senate President Juan Ponce Enrile and House Speaker Feliciano R. Belmonte, Jr.
“I already approached [Mr. Enrile] to ask for his support so the bill can already be fast-tracked and transmitted to Malacañang for the signature of [President Benigno S.C. Aquino III,” Mr. Dooc said.
The IC hopes to get the necessary signatures from legislators by Tuesday so that Malacañang can approve it in May. The 15th Congress closes on June 7.
A key amendment to the Insurance Code will be the expansion of the products that insurers can invest in, such as a variety of loans and real estate, Mr. Dooc said.
He explained that this will prove beneficial for the industry especially since most investment instruments have seen their yields drop recently.
In particular, the central bank has taken down the interest rates on special deposit accounts (SDA) -- one of the facilities regularly tapped by insurers -- to 2% last week from a little over 3.5% at the start of the year. “The industry needs alternative investment opportunities to get better yields. In previous years, SDAs provided higher yields but with the continuing cuts, one good source of interest income has virtually been removed,” Mr. Dooc said.“We need to identify other investment instruments. The Insurance Code amendments has opened up new opportunities for insurers.”