The Insurance Commission placed five non-life insurance companies under conservatorship for their failure to meet the statutory capital requirement of P550 million.
The insurance firms that were put under conservatorship were First Integrated Bonding & Insurance Co. Inc., Investors Assurance Corp., Metropolitan Insurance Co. Inc., Plaridel Surety & Insurance Co. and Premier Insurance & Surety Corp.
Insurance Commissioner Dennis Funa said the companies were ordered to cease from issuing new insurance business and renewing any kind or character of insurance.
“These companies are not operating on net losses. Based on the respective 2016 annual statements of these companies, all have positive net worth but short of the minimum amount required under the Insurance Code,” Funa said in a statement Wednesday.
Funa appointed a conservator for each of the companies who were mandated to take charge of the management of the company and its assets and liabilities.
“The process of placing a company under conservatorship is primarily aimed at restoring the viability of the company and allows the commission, through the appointed conservator, to become more directly involved in the management of the company. To achieve this objective, a conservator is empowered by law to exercise all powers necessary to preserve the assets of the company,” he said.
Funa said under a conservatorship regime, the operations of a company would be business as usual under the management of the IC-appointed conservatorship, including the processing of claims and payment of valid claims, except that it could not sell new insurance business.
This means all insurance contracts issued before the conservatorship order remain valid and the obligation of the company towards its policyholders still exists until the expiration of their policies.
Funa said placing these companies under conservatorship would not necessarily mean that they would close shop soon.
“The purpose of placing a company under conservatorship is to preserve the going concern value of the company returning it to health or ultimately resulting in a receivership. There are several routes that may result in the lifting of the conservatorship order including entering in a merger or consolidation with an existing insurer or a purchase and assumption agreement with an investor,” he said.
“This does not also prevent the company from infusing fresh capital either from its existing shareholders or from a new investor in order to meet the minimum net worth requirement,” he said.
Six non-life insurers were earlier issued with individual servicing licenses as a consequence of the voluntary surrender of their licenses due to their inability to comply with the P550-million minimum net worth requirement.
As a result of the placing of the five insurers under conservatorship and the approval of the conversion of the regular license of six non-life insurers to servicing licenses, the previous 66 non-life insurers in 2016 was reduced to 55.
Under the Insurance Code, existing insurance companies are required to have a minimum net worth of P550 million, up from the previous P250 million, by the end of 2016. The capitalization requirement will again increase to P900 million by 2019, and to P1.3 billion by 2022.
The commission said that in preparation for the next tranche of increase in net worth requirement for existing insurance companies by end of 2019, it would again be requiring all insurers to submit their respective capital build-up plan.
Funa said that despite the decrease in the number of insurance industry players, the insuring public could be assured of the financial strength of the insurance providers for the protection of the policyholders.