PNoy signs new Insurance Code

by Genalyn Kabiling August 28, 2013

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A measure strengthening the countrys insurance industry has been signed into law by President Benigno S. Aquino III. Republic Act No. 10607, signed last August 15, amended the 38-year-old Presidential Decree No. 612 or The Insurance Code in a bid to better supervise the industry. Introduced in the amended Insurance Code is the increase of capital requirements for life and non-life insurance firms every three years until 2022 to make the sector more resilient as well as protect the money of policyholders. The new law has required new life and non-life insurance companies to have P1 billion in paid-up capital. Existing insurers, on the other hand, must have a net worth of P250 million by June 30, 2013; P550 million by December 31, 2016; P900 million by December 31, 2019; and, P1.3 billion by December 31, 2022. The minimum paid-up capital and net worth requirement must remain unimpaired for the continuance of the license, the law read. The Secretary of the Department of Finance has also been authorized to increase the minimum paid-up capital stock or cash assets requirement to an amount that would reasonably assure the safety of the interests of the policyholders and the public. The solvency requirements of the insurance companies must also be based on internationally accepted standards. Another amendment to the Insurance Code is the establishment of bancassurance, or the sale of insurance products within banks. To engage in bancassurance arrangement, a bank is not required to have equity ownership of the insurance company. Government employees will also be allowed to acquire insurance by payment of premiums through salary deductions. Other amendments include provision for fair protection to insurers from fraud, institution of changes in company and agent licensing process, and grant of a fixed six-year term of the insurance commissioner.