KUALA LUMPUR, Nov 9 -- AM Best believes local companies in the Philippine insurance industry will still face significant pressure on underwriting growth and profitability amid the ongoing COVID-19 pandemic with the recent rejection of a proposal to relax minimum capital requirements.
The new Best’s Commentary titled, ‘Philippine Insurance: Dropped Proposal to Amend Minimum Capital Rule May Have Mixed Impact,’ notes that the government has stood firm on the capitalisation requirement, which is to be met by 2022.
According to the commentary, the requirement not only prompted capital injections in the market to strengthen the insurers’ capitalisation, but also led to increased merger and acquisition (M&A) activity in the Philippines’ highly fragmented insurance market.
However, in view of the economic fallout from COVID-19, AM Best notes there is a possibility that M&A momentum and the impetus to shore up capital positions may falter over the near term.
Many small and medium-sized companies will need to bolster their capital bases to comply with the increasing minimum net worth requirements.
Given the remaining time period, the global credit rating agency, AM Best expects that this will likely be achieved through capital raised with new/existing shareholders, rather than through internal capital generation.
More details at www.ambest.com.
-- BERNAMA
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