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economic slowdown and political testiness are expected
to shake the strength of the Philippines’ insurance
sector, Research and Markets Inc. (R&MI) said in a
statement.
Dublin,
Ireland-based R&MI cited its study on the performance of
the Philippine insurance sector in the second quarter of
this year as basis for its forecast.
“Nonlife
penetration is expected to be sluggish with around 0.65
percent to 0.75 percent of GDP [gross domestic
product],” the company said in the statement.
“Life
penetration is likely to perform even worse, rising from
0.85 percent to 0.94 percent over the period.”
R&MI
pinned the sluggish growth to the country’s tax
environment, as well as the slow growth of the
industry’s client base.
“Perhaps
the most significant obstacle the industry faces is the
heavy tax burden put on premiums, as it erodes corporate
profit margins and discourages new customers.”
“Combined with this, the economy is expected to continue
a slowdown and there are ongoing security and stability
concerns in the country,” the company said in the
statement.
Based on
a Philippine Insurance Commission (IC) report, life and
nonlife premiums as a percentage of GDP have dipped from
a high of 1.25 percent in 2002 to 0.92 percent in 2004.
The sector has been rising on a year-on-year average of
1.144 percent from 2001 to 2005.
The
country’s population has also grown from 77.9 million in
2001 to 85.3 million in 2005, the IC report cited.
Nominal GDP also grew from P3.6 trillion in 2001 to P5.4
trillion in 2005. R&MI said it anticipates nominal GDP
to hit $196.9 billion this year.
“Notwithstanding these general negatives, the low
penetration rates indicate that there is obviously room
for growth, in the event of improvements to the tax
regime and an eventual upturn in the economy,” R&MI
said.
The
company said it anticipates nonlife premiums to grow by
20 percent annually in peso terms and 10 percent in US
dollar terms.
On the
other hand, it forecasts life premiums to increase by 6
percent annually in local currency terms and by 9
percent in dollar terms.
“Life
density is expected to be the key driver of growth with
the envisaged rise from a miniscule $14.02 per capita in
2007 to $20 per capita in 2012.”
The
Philippines, relative to other countries in the
Asia-Pacific, is a medium-sized market, “although much
less-developed than its immediate neighbors,” R&MI said
in describing the country, using an Insurance Business
Environment Rating model. “Regionally, it equates to
Indonesia in terms of penetration and density.”
R&MI
said the Philippines’ IBER score of 51.4 “is
significantly held back by a heavy bureaucratic and tax
burden in a generally unhelpful regulatory environment.”
“The
Philippines stands out for its highly fragmented
insurance market.” |
