When a Life insurance Company Closes, Should you Worry?

Recently the Insurance Commission announces closure of 4 insurance firms, 1 from a life insurance company and 3 from non-life.  They are still unnamed since the closure and possible mergers that can happen are still under evaluation and submission. (Business Inquirer)

When you hear this in the news, what will you do?  Will you panic?  Will you worry?

In the first place, how and why does an insurance company shuts down?

Let me tell you this:

Insurance Commission (IC) – headed by the recent commissioner Dennis B. Funa, is the government agency that heads, regulate, mandate and oversee all the insurance companies in the PH.

Previously, they are only governing the LIFE INSURANCE companies, but from year 2009, because of preneed mishaps, they also tasked to regulate the pre-need industry.

See more about this:  What is the Difference between a PRE-NEED and a LIFE INSURANCE company?

The Insurance Commission – mandates all the insurance companies to follow certain rules like the paid-up capital that is required to continue operations. 

Paid-Up Capital – from Investopedia – is the amount of money a company has received from shareholders in exchange for shares of stock.  In simple words, it is the capital the company has.

Recently, the required PAID-UP CAPITAL for this year is:

end of 2016 requirement of  P550 million under Republic Act No. 10607 or the Amended Insurance Code.  This requirement is half of the required last 2013, which is only P250M.

Meaning, in order to continue operating, a life insurance company should have at least P550M pesos as their paid-up capital.

This capitalization requirement will increase in the next few years.

By 2019 – the requirement is increase to  P900 million 

By 2022 – the requirement is P1.3 billion

This rule is made to ensure that the policy holders are protected. 

If an insurance company fails to meet this minimum amount required, they are given the opportunity get more investors, merge with other insurance companies or let other insurance companies buy them out.  They just cannot leave their policy holders hanging and say, bye for now.

Due to the increased capitalization requirements for insurance companies in the Philippines, the government is encouraging mergers and consolidations, not only to ensure that the claims of policyholders would be paid promptly, but also to make local insurance companies competitive in the expected stiffer competition when the Asean economic integration starts in 2016. (BusinessMirror)

At the end of the day, the purpose of the increased capitalization requirement will be – beneficial to the policy holders and insuring public.  To make sure that the insurance companies will be paying their promises to the insuring public, when there would be valid claims.

Let me give examples of Mergers and Acquisitions that happened in the LIFE INSURANCE INDUSTRY over the years:

2001

Pru Life UK Acquired All State Life Philippines (Philstar)

2002

Manulife Philippines Confirms Acquisition of CMG Life Insurance Co. Inc. (Philstar)

Manulife Philippines Acquires orphaned policies of Defunct Metlife Philippines (Philstar)

Prulife UK Acquires ING Life Philippines (Philstar)

2003

Manulife Philippines acquired Zurich Life Philippines, Inc.  (Bloomberg)

2009

AIA Group Completes Acquisition of Philamlife, a former AIG unit (ABSCBN)

2011

Sunlife buys 49% of Grepalife (Inquirer)

2012

Tanco group (Philippine Life Financial Assurance Corporation) Acquire Asian Life Financial (Philstar)

2016

BDO life acquires full control of Generali Pilipinas Holding Inc. (GPHC) (Manila Times)

IC approves Allianz’s PNB Life Acquisition (Manila Times)

Axa Philippines Acquires Charter Ping An Insurance (a nonlife insurance business) – (Business Insurance)

Finally, if you want to know if your life insurance company is one of those who are still accredited and active until today (2017) by the insurance commission, here’s the list:

LIST OF INSURANCE COMPANIES WHOSE CERTIFICATES OF AUTHORITITY WHERE RENEWED FOR LICENSE YEAR 2016-2018

COMPOSITE (Life and Non-Life) – Alphabetical order

1. AsianLife and General Assurance Corporation (Formerly: Air Professional Life Assurance)
2. CLIMBS Life and General Insurance Cooperative
3. Paramount Life and General Insurance Company
4. Philippine American Life and General Insurance Company

LIFE INSURANCE COMPANIES

1. Allianz PNB Life lnsurance, lnc. (Formerly: PNB Life lnsurance, lnc.-as of 7 December 2016)
2. BDO Life Assurance Company, lnc. (Formerly: Generali Pilipinas Life Assurance Company, lnc.-as of 30 June 2016 )
3. BPI-Philam Life Assurance Corporation
4. Beneficial Life lnsurance Company, lnc.
5. CAP Life lnsurance Corporation
6. Caritas Life Insurance Corporation
7. Cooperative lnsurance System of the Philippines
8. Country Bankers Life lnsurance Corporation
9. East West Ageas Life lnsurance Corporation
10. FWD Life lnsurance Corporation
11. First Life Financial Company, lnc. (Formerly: First Guarantee Life Assurance Co.-as of 2007 )
12. Fortune Life lnsurance Company, lnc.
13. Generali Life Assurance Philippines, lnc.
14. lnsular Life Assurance Company, Ltd.,
15. The Manila Bankers Life lnsurance Corporation
16. Manulife Chinabank Life Assurance Corporation (Formerly: The Pramerica Life lnsurance Co., lnc.)
17. Manufacturers Life lnsurance Company (Phils.), lnc., (Manulife Philippines)
18. Philam Equitable Life Assurance Company, lnc.
19. Philippine AXA Life lnsurance Corporation
20. Philippine Life Financial Assurance Corporation (Formerly: Asian Life Financial Assurance Corporation)
21. Philippines lnternational Life lnsurance Company, lnc.
22. Pioneer Life lnc. Pru Life lnsurance Corporation of U.K.
23. Sun Life Grepa Financial, lnc.
24. Sun Life of Canada (Philippines), lnc.
25. United Coconut Planters Life Assurance Corporation
26. United Life Assurance Corporation

Here’s the link to IC’s PDF File

In a nutshell, should you worry if a life insurance company in the Philippines goes down?

My answer is: 

“No.  As long as your life insurance company is licensed, legitimate and listed in the Insurance Commission (IC) website, whatever the name your insurance company is, it cannot fold without other company helping them out with guidance of IC.

The company that acquires the folded company will honor whatever the policy contracts the former insurance company gives to their policy holders.  The policies will remain in their present form and will be fully honored notwithstanding the change in ownership.”  That is the rule not only in the Philippines but being implemented worldwide.

I hope I was able to help and educate you.  So, worry-not, your life insurance will never falter.

If you want to get the perfect life insurance plan for you, let me help you with that.  Contact me here.

Be informed,

Read More:

• What is the Difference Between a PRE-NEED and LIFE INSURANCE?
• Top 10 Life Insurance Companies in the Philippines 2015
• 7 Life Insurance Riders You Need to Know that could Save Your Life
• TERM Life insurance, the Cheapest Life insurance Ever!
• 3 Genius Reasons Behind VUL (Variable Unit Linked) Insurance

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Pinky De Leon-Intal, MD, RFC

Doc Pinky is a licensed Medical Physician, Internationally Registered Financial Consultant, Certified Investment Solicitor and Associate Wealth Planner and Estate Planner of the Philippines. She loves to educate and spread financial literacy. She is a Lactation Consultant. She loves to travel. She is a devoted wife and mother.

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