ASEAN KEY DESTINATIONS
Life insurers see growth in Asean
With the Philippines having one of the smallest insurance markets in the region, life insurers are looking at the Asean for growth with the implementation of the Asean Free Trade Agreement (AFTA) in 2015, Gregorio Mercado, vice president of the Philippine Life Insurance Association, told The Manila Times during an exclusive roundtable on Friday.
“All of us are looking at this AFTA, which will take effect in 2015. We want to know the rules of the game and I think all Filipino companies should aspire for regional expansion because penetration is higher there,” Mercado said.
The Philippines is ranked third as the smallest insurance market in terms of premiums in the East Asian region, better only than Macau and Brunei Darussalam, according to Swiss Reinsurance.
Mercado explained that under the AFTA, local life insurance companies could put up a branch in any Asean member-country, which would allow them to expand more quickly without the hassle and costs of incorporating a new business.
Filipinos are generally articulate and patient, characteristics that bode well for the insurance business, he said.
“We like to listen and carefully analyze things so we might have a pretty good chance. We are very good at adapting, thus the appeal of our overseas Filipino workers,” Mercado added.
For Philippine Prudential Life Insurance Company Inc., where Gregorio is president and chief executive officer, the company’s premium income of P890.89 million in 2010 is expected to grow by more than 10 times to as much as P11 billion, the current premium income level of leading player Philam Life & Gen. at end-December 2010.
The government had voiced out concerns that Philippine insurers may be taken over by foreign insurance firms with the implementation of the free trade agreement.
To make local insurers more competitive and stable, the government issued an order raising the minimum paid-up capital level for insurers to between P750 million and P1 billion.
At end-2011, life insurers must have a minimum paid-up capital requirement of P175 million, higher by P50 million than the P125 million required for the previous year.
It started with a Finance department order in 2006 requiring the entire industry to conduct a series of capital hikes until they reach the P250-million minimum paid-up capital level by 2015 when the AFTA is implemented.
Mercado said that the capital hike was “too big” with the increase to P250 million acceptable to only a few players, while majority of the insurers deemed the escalations should stop at P175 million.
A group of eight companies including Philippine Prudential is in talks on a consolidated approach to meet the government order, but they are yet to arrive at concrete plans.
“Regulators are afraid that other Asean countries will come and take advantage of the insurance industry. When you look at big players that came and left, they left because they can’t do business, they can’t find the right distribution channel or they are expensive,” Mercado said.
The life insurance industry has 34 players with a total premium income of P70.73 billion at end-December 2010.
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