seal or reveal?

35 insurance firms face closure

by VG Cabuag (Businessmirror, 10.21.08)

By the end of this year all insurance companies must have a capitalization of at least P100 million, but about 35 firms of the roughly 70 insurance companies, mostly small players, have not complied with the Insurance Commission (IC) and face being shut down. Who these companies are have not been disclosed by IC Deputy Commissioner Vida Chiong, who said on Monday, “We will issue a cease-and-desist order to them if they have not complied.” She added that owners of most of these noncompliant companies already have the requisite funds to comply but continue to hold out. She did not say why. The order to increase capitalization was issued in 2006 by then- commissioner Evangeline Escobillo, who said everyone must have P100 million in capital that year for a start and add P25 million a year thereafter until their capital reaches P250 million. “Current minimum capitalization requirements are inadequate relative to the needed business infrastructures and quality management team that will ensure better service to all stakeholders and expand market penetration,” the order said. “Capital bases must be rebuilt because low capitalization levels have resulted in low retention ratios and heavy reliance on reinsurance,” it added. The other aim was when the time was ripe, that P250 million would be raised to P500 million and then P1 billion to place them on a par with regional insurance firms and assure policyholders a stable company. Apart from raising the capital requirement, the IC has also embarked on implementing a risk-based capitalization framework that would display the company’s transparency, integrity and professionalism in relation to their actuaries and external auditors.