Reinsurance in the Philippines, Key Trends and Opportunities to 2016

The Philippine reinsurance segment declined in 2009 as a result of the global economic crisis, before recovering and recording annual growth of 3.6% in 2010 and 3.0% in 2011. During the review period, the Philippine reinsurance segment was dominated by National Reinsurance Corporation of the Philippines (PhilNaRe), which has been awarded a financial strength rating of “B++” and an issuer credit rating of “bbb” from AM Best. The company’s adequate capitalization, established market presence and conservative investment portfolio are major contributors to its status as the most successful reinsurer in the Philippines. Its conservative investment portfolio also allowed PhilNaRe to generate a stable investment income during the review period.

Growth in the direct insurance segments, including life, non-life, and personal accident and health insurance, is expected to drive the reinsurance segment over the forecast period. As insurance companies tend to share some proportion of their risk with reinsurers, this creates significant opportunities for reinsurance companies operating in the Philippines. The occurrence of natural disasters in the country has also compelled insurance companies to cede part of their written premium to reinsurers. The reinsurance segment in the Philippines is expected to register a CAGR of 1.9% over the forecast period. 

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Report Details:

Published: October 2012
No. of Pages: 99
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Regulatory standards expected to drive the growth of reinsurance

According to the solvency standards introduced by insurance regulatory authority the Insurance Commission, all existing incorporated insurance companies are required to maintain a minimum paid-up capital requirement of PHP175 million (US$4.0 million), PHP250 million (US$5.8 million), PHP450 million (US$10.4 million), PHP625 million (US$14.4 million), PHP800 million (US$18.5 million) and PHP1 billion (US$23.1 million) by the end of 2011, 2012, 2013, 2014, 2015 and 2016 respectively. However, new companies entering the industry will have to maintain a minimum paid-up capital of PHP1 billion (US$23.1 million).  This will lead to a larger financial burden on insurance companies.

Flexible reinsurance regulation dramatically increases the competitiveness of the segment

The absence of regulation to force insurers to spend a minimum percentage of their contract premium with the state-owned reinsurer increases the competitiveness of the Philippine reinsurance segment. Insurers can, therefore, decide whether to choose a domestic or foreign reinsurance partner. PhilNaRe is the only domestic reinsurer operating in the Philippine reinsurance segment.

Growth of various insurance segments expected to drive growth of reinsurance segment

The written premium value of the Philippine insurance industry registered a CAGR of 2.2% during the review period. In 2011, the life insurance segment accounted for 70.5% of the industry, followed by the non-life segment with a 25.1% share, and the personal accident and health segment with a 4.4% share. During the review period, the personal accident and health segment registered the highest CAGR of 16.1%.