In a current poor environment created by weak economies and bad weather, the Philippine insurance industry still sees further growth based on this article.
From BusinessWorld Philippines
2. January 2012
Insurers bullish on prospects
LOCAL insurers are bullish about industry growth this year despite a gloomy global outlook that could drag down the domestic economy’s momentum.
Life and non-life insurers said a higher gross domestic product (GDP) growth, fueled by remittances and public-private partnership (PPP) projects, would translate to more take-up of insurance policies, and consequently, higher premiums.
“Barring any major negative developments abroad, with GDP growth for 2012 projected slightly higher this year and given the financial system’s liquidity, we aim to sustain the industry’s premium growth at close to 2011 levels,” said Mayo Jose B. Ongsingco, president of the Philippine Life Insurance Association (PLIA) in an e-mail last week.
“Total life insurance premiums were expected to grow by around 20 to 25% in 2011, with growth mainly driven by first-year business that was projected to grow by 40 to 45%,” he said.
Premium data for 2011 would be available later this year. In 2010, life insurers’ premiums rose by 23.56% to P70.727 billion. Their first-year premiums — an indicator of new policies sold — surged by 59.38% to P34.28 billion.
Mr. Ongsingco said the key driver for this year would be the domestic economy’s continued expansion despite the crises in Europe and the United States.
“The main economic growth drivers, OFW remittances and BPO business, will remain strong in 2012,” he said.
Money sent home by Filipinos living and working overseas climbed by 7% to $16.534 billion as of October. Remittances, which fuel consumer spending, are expected to rise by 5% this year.
The business process outsourcing industry, meanwhile, said the number of seats was expected rise to 800,000 this year from 640,000 in 2011.
The continued growth of the high-turnover BPO industry, Mr. Ongsingco also noted, means more group insurance, pointing out that “providing insurance for employees helps companies retain their people.”
The government targets a 5.5-6.5% GDP growth this year, but forecasts 5-6% owing to the economy’s tepid growth in 2011.
The country’s GDP grew by only 3.6% as of September, well below the government’s 5-6% target and its 4.5-5.5% estimate.
Mr. Ongsingco added that the launch of Personal Equity and Retirement Account or PERA products, the proposed expansion of the mandatory migrant workers’ insurance coverage and rollout of microinsurance in the country” would boost life insurance sales.
Non-life insurers, meanwhile, are anticipating the rollout of the government’s PPP projects.
“If the government is able to roll out its infrastructure projects this year, that will have a positive impact on the non-life industry,” said Pedro P. Benedicto, Jr., Philippine Insurers and Reinsurers Association (PIRA) chairman in a phone interview yesterday.
“If the economy gains, there would be more asssets to protect,” he said.
A challenge for the non-life insurance industry, he said, is the government’s paid-up capitalization requirement.
Regulators want insurers to have P250 million in paid-up capital by the end of this year.
Insurers are now planning on consolidating to comply. Mr. Benedicto said some are family-owned and may have a hard time giving up control of their business.
Catastrophes are another challenge, he said.
Mr. Ongsingco said the low-interest environment would put pressure on insurers’ interest income.
“On the investment side, the slide in interest rates is a major challenge… But, substantial secondary sources of income of life companies such as dividends from core stock investments and rentals from real estate can compensate for the decline in interest income,” he said.