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FOR IMMEDIATE RELEASE
HONG KONG - APRIL 21, 2014 01:29 PM (EDT)
The Philippine non-life insurance sector is going through a transition as it scales up to meet higher capital requirements under a new regulatory code. Challenging market conditions, with little driving momentum in the industry, have left many insurers feeling pressured as they cope with capital hikes, according to a new report from A.M. Best.
This special report, titled "Philippines' Non-Life Sector Takes the Lead as Insurance Industry Faces Capital Challenge," states the stronger capital requirements under the amended Insurance Code, which was passed into law in August 2013, has led to industry consolidation. As a result, the number of non-life insurers is shrinking. The new capital requirements focus on the level of net worth instead of paid-up capital.
"Market consolidation is inevitable as the number of players continues to shrink due to merger activity and license withdrawals," said A.M. Best Associate Director Jeff Yeung. Nevertheless, a gradual increase in capital requirements should help to reduce inefficiencies and enhance profitability given the existing poor economies of scale and high operating cost.
Additionally, Typhoon Haiyan, which caused devastating damage in Philippines' central provinces in 2013, has not resulted in high insured losses due to low insurance penetration in the region; however, the event prompted government and industry action for a national natural catastrophe insurance scheme. Microinsurance is a key priority in the Philippines, where the country's demographic structure, with a heavily rural and low-income population, highlights the potential for further growth.
To access a complimentary copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=223543 .
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.