This current effort of the Department of Finance and the Insurance Commission raising the capital requirements for insurance companies in anticipation for the ASEAN market integration appears to be a life threatening action to many in the industry. I would like to think there would be some way to sort each other’s needs for their mutual benefit.
From BusinessWorld Philippines
June 07, 2012
Insurers file court challenge
“There were 10 non-life insurance companies who sought for the issuance of a temporary restraining order on the implementation of the DoF (Department of Finance’s) Department Order 27-2006,” Philippine Insurers and Reinsurers Association (PIRA) spokesman Michael F. Rellosa yesterday said.
The 32-page complaint, filed on June 1 before Branch 98 of the Quezon City Regional Trial Court, was directed at Finance Secretary Cesar V. Purisima and Insurance Commissioner Emmanuel F. Dooc.
Both officials were not immediately available for comment.
The complainants are Security Pacific Assurance Corp., Visayan Surety and Insurance Corp., Finman General Assurance Corp., Milestone Guaranty and Assurance Corp., R & B Insurance Corp., Industrial Insurance Co., Philippine Phoenix Insurance and Surety Corp., Mercantile Insurance Co., Great Domestic Insurance Company of the Philippines and Insurance of the Philippine Islands Co.
“The idea of the complaint is to stop the June 30 deadline for the P175-million capitalization,” Mr. Rellosa said.
The Finance department, along with the Insurance Commission (IC), is firm on the implementation of higher capitalization requirements in DO 27-2006, which among others mandates that all insurers should have P175 million in paid-up capital by end-2011. The amount should have been deposited in banks last March and reported to the IC by the end of this month. Those that fail to comply will not be allowed to operate starting July.
As part of the capitalization hike schedule, insurance companies need to increase the amount to P250 million by the end of this year.
The 10 companies said they had complied with the paid-up capitalization requirement of P100-125 million in 2010, but claimed they were unable to comply with the P175-million requirement.
In their petition, they said: “the issuance of the temporary restraining order and writ of preliminary injunction will maintain the status quo between the parties and ensure that any judgment of this Honorable Court will not be rendered moot and academic.”
The complainants also argued that they were considered to be in “good standing” because of their capability to service clients’ claims and had the capital base needed for the sizes of their businesses.
“Apart from the arbitrary and oppressive compliance fixed capitalization requirement by Department Order 27-2006, there is no other governmental regulation or imposition that we have failed to meet,” they added.
Mr. Rellosa said the regional trial court’s first hearing would be held on June 13.
“I think the complaint will be amended because more companies want to join the complaint. They are just seeking for their board of directors’ approval, which is PIRA’s requirement to assure that they are serious on fighting the increase in paid-up capital,” he said.
The Finance department is set to issue a final order for the final paid-up capital requirement of P1 billion, originally targeted to be implemented in 2016.
The IC has submitted proposals for a deferment.
IC’s first proposal, which pegs the P1-billion paid-up capital level for 2018, keeps this year’s P250 million. The level will increase to P300 million by end-2013, P400 million by 2014, P500 million by 2015, P600 million by 2016 and P800 million by 2017.
Another proposal stretches the schedule by two more years, with P400 million targeted for 2014; P600 million by 2016; P800 million by 2018; and P1 billion by 2020.
Mr. Purisima has said his preference was to implement the P1-billion capitalization by 2018 but acknowleded that a 2020 implementation remained an option. — A. R. R. Gregorio