Financial IQ: Health of Philippines Life Insurance companies

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How are philippine life insurers doing, especially in light of pre-need scandals?


I always enjoy reading your columns. How are Philippine life insurance companies doing now, are they doing well? In recent years, due to the pre-need scandals, I almost withdrew some of my existing life insurance policies like that with Prudential Life, but didn’t.  


Rene S. Tayag, seafood processing entrepreneur, 37 years old, owner of TGL Food Group in Clark Freeport


Answer


In general, the Philippine life industry is still quite healthy despite all the ongoing financial turmoil. The general good health of the life industry can be attributed to the prudent management of the life companies, as well as the strict regulation by the Insurance Commission. For instance, the IC requires prior approval of all insurance products as well as investments of the life company outside of bank deposits and government securities. The IC actuaries test all new products to ensure that the product features conform to acceptable standards and assumptions. 


In 2007, the Department of Finance issued Department Order 27-06 that requires a capital buildup to P500 million and P1 billion for 100-percent-Filipino and 100-percent-foreign-owned life companies, respectively, by 2011. Subsequently, the IC introduced the Risk-Based Capital (RBC) adequacy ratio baselines, similar to the capital adequacy ratio required of the banks. This RBC requirement is over and above the existing minimum solvency requirement. 


Like in most businesses, the 80-20 Pareto Principle also applies to the life insurance industry. The top 20 percent life companies, which includes third largest Insular Life, accounts for 80 percent of the total industry premium income. Insular Life has high marks in solvency with total assets and capital of P60 billion and P15 billion, respectively, liquidity with cash and near cash of over P1.6 billion and profitability with net income at P2.2 billion in 2007.  

http://www.philstar.com/Article.aspx?articleId=627946&publicationSubCategoryId=82