The Philippine Insurers and Reinsurers Association (PIRA) has urged its member companies to strengthen their capital reserves in order to meet the new regulatory requirements that will take effect on January 1, 2018.
PIRA chairman Augusto Hidalgo, who spoke at the PIRA Forum held on Wednesday in Manila, said that the organisation commissioned an actuarial study, which found that its member companies were getting quite close to meeting the requirements set by law.
“We are right above 75% at this time,” he said.
However, Hidalgo, who is also president of the National Reinsurance Corporation of the Philippines (NCRP), said that there still remains a PHP8 billion (US$155.25 million) gap in reserves.
“[This] represents more than 60% of industry premiums and claims,” he explained, describing the study as a “wake-up call” and advising companies to step up their efforts.
Hidalgo added that the new reserve requirements could translate to an additional 20% expense on insurers’ invested liabilities.
The Insurance Commission, the country’s insurance regulator, has raised the risk-based capital (RBC) requirements, also known known as RBC 2, to a minimum RBC ratio of 100% for insurance companies, according to a report by state media arm Philippine News Agency.
Data from PIRA showed that as of end-2016, general insurers’ gross premiums reached PHP81.02 billion (US$1.57 billion), or 7.66% higher from the previous year. Meanwhile, losses incurred were at PHP16.89 billion (US$327.6 million), a 27.8% year-on-year increase.
The loss ratio for 2016 was 37.37%, slightly higher than the previous year’s 36.95%.
Most of the losses were due to motor insurance, followed by fire insurance in second place and combined marine and aviation insurance in third.
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