The Insurance Commission (IC) on Wednesday announced that it has shut down the operations of five nonlife insurance firms and placed them under conservatorship for failure to meet the statutory capital requirement.
The companies placed under conservatorship were First Integrated Bonding & Insurance Co. Inc., Investors Assurance Corp., Metropolitan Insurance Co., Inc., Plaridel Surety & Insurance Co. and Premier Insurance & Surety Corp.
Insurance Commissioner Dennis B. Funa said the regulatory action to close down the five nonlife companies came following their failure to comply with the statutory minimum net worth requirement.
The five insurance companies were ordered to cease from issuing new and renewing any kind or character of insurance business and were placed under conservatorship after the Commission’s verification that they failed to comply with the mandated increase in net woarth requirement of P550 million.
“These companies are not operating on net losses. Based on their respective 2016 annual statements, these companies have positive net worth but short of the minimum amount required under the Insurance Code,” Funa said.
Funa appointed a conservator for each of the companies. Every conservator has a mandate to take charge of the management of the company and its assets and liabilities.
“The process of placing a company under conservatorship is primarily aimed at restoring the viability of the company and allowing the Commission, through the appointed conservator, to be more directly involved in the management of the company. To achieve this objective, a conservator is empowered by law to exercise all powers necessary to preserve the assets of the company,” he added.
Funa clarified that placing these companies under conservatorship does not necessarily mean they will close shop.
“Under the regime of conservatorship, the operations of the company will be business as usual under the management of the IC-appointed conservatorship, including the processing of claims and payment of valid claims, except that it cannot sell new insurance business. This means all insurance contracts issued before the conservatorship order remain valid, and the obligation of the company toward its policyholders still exists until the expiration of their policies,” he said.
Earlier, six nonlife companies were issued individual Servicing Licenses by the IC as a consequence of their voluntary surrender of licenses due to their inability to comply with the P550-million minimum net-worth requirement.
Under the Insurance Code, existing insurance companies are required to have a minimum net worth of P550 million, from the previous P250 million, by the end of 2016. The capitalization requirement will again increase to P900 million in 2019, and further jump to P1.3 billion by 2022.
“This does not also prevent the company from infusing fresh capital either from its existing shareholders or from a new investor in order to meet the minimum net-worth requirement,” Funa said.