Until recently, the insurance sector in the Philippines has been governed by the outdated Insurance Code (1974), which has restricted the Insurance Commission 's ability to enforce the law and regulations, due to weak legal protection of supervisors and staff, hampered its ability to hire professionally qualified staff as a result of the salary standardization law, and thereby constrained the reorganization and upgrading of its management structure and supporting business processes. During the Aquino administration, the newly designated Insurance Commissioner, a professional actuary and former life insurance executive, has initiated the amendment to the Insurance Code and taken several major steps to achieve effective supervision by reorganizing the Insurance Commission from a functional setup with no information flow between units, to an organizational structure led by four deputy commissioners, with defined responsibility in the area of technical services, financial examination, management support services as well as legal and regulatory supervision.
As of February 2013, the Philippine Senate and House of Representatives passed the consolidated Bill amending the Insurance Code and submitted for its approval by the President. The amendments and additional provisions in the Insurance Code, include the following: (i) minimum capital / solvency requirements for insurance companies increased from P250 million by end-2012 to P1 billion by year-end 2020; (ii) the Insurance Commissioner, now appointed by Presidential Order, for a fixed term of six years, has authority over disputes of up to P5 million; (iii) license issued to insurance companies is extended to three years ; (iii) expanded the range of investment instruments / assets admitted in the computation of equity ; (v) new provisions on microinsurance, bancassurance (together with Bangko Sentral ng Pilipinas), and financial reporting framework. The Insurance Commission is preparing rules and regulations concerning the following: (i) new solvency requirement for life and non-life companies; (ii) premium deposit fund (deposit of payments); (iii) self-regulatory organization; (iv) trust business of insurance companies; (v) alternative dispute resolution (ADR) methods; (vi) increased fees, charges and fines; (viii) electronic policy forms and processes.
|Project Rationale and Linkage to Country/Regional Strategy
||To assist with the timely implementation of the Insurance Code, and strengthen the supervisory functions of the regulator, the Insurance Commissioner has identified the following areas for capacity building: (i) knowledge and skills training on the risk-based capital requirements; (ii) upgrading of the Insurance Commission's IT to support the risk-based regulatory framework consistent with international standards. The capacity building will strengthen the ability of the examination teams to systematically review the insurance sector and monitor the activities of individual companies from licensing to financial analysis. The Insurance Commissioner has also identified training requirements on (iii) supervision of self-regulating industry organizations; (iv) training on ADR which will be considered as possible, by the TA.